Next Week

June 19, 2009

Central Banks will command a strong presence in the coming week, anchored by the Fed’s two-day FOMC meeting on Tuesday and Wednesday.  The late June meeting holds special significance because it hammers out the forecast that the Chairman will present at the July semi-annual testimony before Congress, also known as the Humphrey-Hawkins hearings.  In addition, the Fed Funds rate target was changed at the late June meetings in four of the six years from 2001 to 2006.  The controversial 17-meeting string of rate hikes from 1% to 5.25% began in June 2004 and ended in June 2006.  With hindsight, it is now clear that officials tightened far too slowly, fanning the excesses that sank the world economy into its worst economic slump in 70 years.  The Fed no longer has any room to cut its target interest rate, which has been at 0-0.25% since December, but is expected to allay fears that a rate hike might be around the corner.  Several central banks, for example Canada, have pre-announced no tightening for at least a year unless inflation suddenly takes off.  Markets will be watching for clues to the Fed’s quantitative easing and will be surprised if anything incremental is announced in light of a planted WSJ story that U.S. monetary officials would rather let long-term rates drift up.

Central bank policy meetings are also scheduled in South Africa, the Czech Republic, Poland, Israel, Hungary and Taiwan.  The last three of these are not presumed likely to cut rates, but the Reserve Bank of South Africa is a definite candidate for easing.  The others lean toward reductions.  Where rates are not already low, the global bias remains skewed toward easing, signs that the glass remains half empty and that extended recession is a more pressing problem than rising inflation.  This past week saw 50-basis point cuts by central banks in Turkey, Chile, Mexico, and Colombia.  Monetary officials met but did not cut rates in Switzerland whose target is already at 0.25% or in Japan where the overnight money target has been at 0.1% since December.

This is a rare week also in which the top officials from the Fed, European Central Bank, Bank of Japan, Bank of England, and Swiss National Bank all have public speaking engagements.  Four other ECB officials will be speaking publicly in the week ahead as well.

On the data front, the U.S. will release existing and new home sales, revised national income accounts, personal income and spending, durable goods orders and the U. Michigan gauge of consumer sentiment.  The Richmond and Kansas City Fed monthly surveys also get published.  Finally, the usual assortment of weekly figures for such things as jobless insurance claims, consumer confidence, chain store sales, mortgage applications and energy inventories will hold interest, too.

Euro zone scheduled figures are led by the flash PMI readings for the whole Bloc of nations as well as Germany and France.  The group also reports data for the current account and industrial orders.  German consumer prices, import prices, consumer confidence and, most importantly, IFO index of business conditions and expectations arrive next week.  So does French business sentiment, consumer spending on manufactured goods, consumer confidence, GDP and producer prices.  From Italy arrives industrial orders, consumer confidence, retail sales and business sentiment, and Belgium and the Netherlands chime in with business sentiment indices.

It’s a light week for British data — just the Rightmove and Nationwide house price indices, the service sector index, and the CBI monthly survey of retailers.

Sweden reports consumer and business confidence, producer prices, and trades.  Norway and Switzerland release unemployment and leaders, respectively.

Japan’s Ministry of Finance will release its quarterly business sentiment index, which can provide insight into the more widely followed Bank of Japan Tankan survey, which is not due until July 1.  Other Japanese data releases next week include the tertiary and all-industry indices, consumer prices for Tokyo (June) and the whole nation (May), corporate service prices, customs clearance trade, and the index of leading economic indicators.

This will be a light week for Australia (car sales), but New Zealand releases current account, GDP, and consumer confidence.

Canada has a tiny schedule, securities transactions, while Mexico reports trade data and retail sales.

In South Africa, one of the economies holding a monetary policy meeting, consumer prices are due.  Hong Kong and Singapore also report CPI numbers.  Hong Kong will release trade and current account data as well, while Singapore industrial production and Taiwanese unemployment are on the schedule, too.

After next week, just two working days will be left in the second quarter.  Then just a half year will remain of a decade that began with the Y2K scare, never really earned a name.  It’s been quite a ten-year period, including the 9/11 attacks, several drawn-out wars, the worst economic downturn since the Great Depression, and the most severe breakdown of financial market functionality in almost a century.

Copyright Larry Greenberg 2009.  All rights reserved.  No secondary distribution without express permission.


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