Monday Morning Cheat Sheet: 3 Stories Moving Markets
Markets were mixed in Asia on Monday. Japan’s Nikkei fell 3.32 percent to a four-week low of 13,661.1 as the yen strengthened to 97.8750 against the dollar and corporate earnings underwhelmed traders. The Hang Seng fell 0.54 percent and the Shanghai Composite fell 1.72 percent ahead of manufacturing data due Wednesday that is expected to show the sector contracted in July. In Australia, the S&P/ASX 200 edged up 0.09 percent.
European markets advanced in midday trading. Germany’s DAX was up 0.31 percent, London’s FTSE 100 was up 0.35 percent, and the STOXX 50 index was up 0.26 percent. U.S. stock futures edged lower.
At 8:45 a.m.: DJIA: -0.17%, S&P 500: -0.18%, NASDAQ: -0.15%.
Here are three stories to keep an eye on.
1) U.S. Economic Growth: On Wednesday, the U.S. Bureau of Economic Analysis will release its advance estimate of second-quarter GDP growth. On average, economists are expecting real GDP to have grown 1.1 percent on the quarter, down from 1.8 percent in the first quarter. First-quarter GDP growth was unexpectedly and significantly revised down from 2.4 percent with the last report. Most of the reduction came from personal consumption, which accounts for the lion’s share of overall economic activity.
On the bright side, the most recent reading of Thomson Reuters/University of Michigan’s consumer sentiment index was 85.1, up from 84.1 in June and its highest reading since July 2007. However, other measures of consumer confidence — like the most recent McClatchy-Marist Poll — suggest that for much of Main Street, the recession still hasn’t ended.
Here are the most recent GDP forecasts made by the governors of the U.S. Federal Reserve. Most are looking at fairly modest growth in 2013.
2) This Week in Monetary Policy: It’s a big week for monetary policy around the world. On Tuesday in the United States, the Federal Reserve Open Market Committee will begin a two-day policy meeting that many observers expect will set the stage for the tapering of asset purchases later in the year. Federal Reserve Chairman Ben Bernanke will hold a press conference Wednesday afternoon to discuss Fed thinking. The Fed will hold its meeting just as markets get a battery of labor market reports, including the monthly Employment Situation report from the Bureau of Labor Statistics on Friday. On average, economists are expecting the headline unemployment rate to edge down from 7.6 to 7.5 percent.
On Thursday, the European Central Bank will make a monetary policy announcement. The announcement will follow a manufacturing report on the same day and punctuate the European Union’s unemployment report and a flash reading of the inflation index. The ECB is reportedly considering taking a page from the Fed playbook and publishing the minutes from its policy meeting, a practice that the Bank of England adopted in order to increase transparency and communication.
“Transparency is important for the effectiveness of monetary policy and for trust in the central bank,” Benoît Cœuré, a member of the ECB executive board, said in an interview conducted by Andrea Rexer and Jean-Pierre Robin. “There was a time when the ECB was ahead of the curve in its communications and transparency as first central bank with regular press conferences by its president. Now the ECB is the only large central bank that does not publish its minutes of meetings. There is a demand in society for transparency and accountability. Therefore, I personally think that the ECB should start publishing its meeting minutes soon.”
3) Suit Up, a Bumper Market Week Awaits: This will be a huge week for major U.S markets after a quiet, mixed performance in the week just ended.
The Dow Jones Industrial Average (NYSEARCA:DIA) finished in the green for the week ended July 26 with a gain of 0.1 percent. The S&P 500 (NYSEARCA:SPY) finished mostly flat for the week, declining 0.03 percent, while the Nasdaq Composite (NASDAQ:QQQ) added 0.7 percent for the week. The Russell 2000 (NYSEARCA:IWM) declined 0.2 percent.
Earnings reports were the big newsmakers, with some significant misses from major bellwether companies as well as fireworks from high-profile names like Facebook (NASDAQ:FB), which exploded 30 percent higher on Thursday; Zynga (NASDAQ:ZNGA), meanwhile, lost 14 percent on Friday. Other high-profile companies had mixed results: Apple (NASDAQ:AAPL), Ford (NYSE:F), and Boeing (NYSE:BA) beat expectations, while Caterpillar (NYSE:CAT), UPS (NYSE:UPS), and Amazon (NASDAQ:AMZN) missed… (Read more.)