Monday Morning Cheat Sheet: 3 Stories Moving Markets
Overseas exchanges were quiet overnight. Major markets in China, Hong Kong, and Taiwan were closed on Monday to observe the Lunar New Year, and will be re-opening throughout the week. Japan’s Nikkei was closed in observance of National Foundation Day, and will re-open on Tuesday. The S&P/ASX 200, which was still open for trading, fell 0.24 percent.
European markets overcame early losses and were trading in positive territory heading into the opening bell in New York. London’s FTSE 100 was up 0.35 percent, Germany’s DAX was up 0.08 percent, and the STOXX 50 was up 0.28 percent.
U.S. futures at 8:15 a.m.: DJIA: +0.20%, S&P 500: +0.19%, NASDAQ: +0.16%.
1) President Barack Obama will deliver his State of the Union address this Tuesday, and market participants will be keen to hear what the President’s economic game plan looks like. With his second term secured, the President faces the task of guiding a divided Congress to a consensus on how best to simultaneously reduce the deficit and spur economic growth.
Previewing his speech to party members, the President reportedly indicated infrastructure, clean energy, and education as key aspects of his plan to stimulate a beleaguered economy. However, GOP leaders have voiced concerns about where the funding would come from for new spending. On the table is a fundamental disagreement in how best to lead America back to prosperity. While both parties have competent solutions, investors know all too well that indecision, one way or another, is counterproductive.
2) A round of economic data from the euro zone to be released this week will help investors get a gauge on how the region’s recovery is progressing. Economists are expecting that gross domestic product will have shrunk by 0.4 percent across the region in the fourth quarter, which would be the biggest fall since 2009, immediately following the financial crisis. This contraction would be due not just to continued weakness in struggling economies like Spain and Greece, but a slowdown in France and Germany, which have been relied on to bolster their neighbors.
3) China is now the biggest trading nation in the world, according to official data released late last week and compiled by Bloomberg. While the U.S. remains the largest economy, the value of Chinese imports and exports reached $3.87 trillion in 2012, edging out the U.S. at $3.85 trillion.
The milestone was not unexpected, and throughout the global economic crisis the markets have indicated that China’s economy will be critical to growth and recovery. China is currently the biggest energy user, has the biggest new car market, and the largest foreign currency reserves. However, much of China’s economic activity centers around importing raw materials and parts to be assembled into finished products, which are then re-exported. This type of activity only adds a modest amount of value to trade activity.
The OECD recently published a report examining trade activity measured by the foreign value-added coming from imports that are then embodied in exports.