Weekly Economic Indicators: European Uncertainty Driving Markets

Deutsch: 45. Münchner Sicherheitskonferenz 200...

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The full announcement schedule for the week of December 5th, is as follows:

  • Monday:  Factory Orders and ISM Non-Mfg Index
  • Tuesday:  None
  • Wednesday:  Consumer Credit     
  • Thursday:  Jobless Claims, Wholesale Trade, and Fed Balance Sheet 
  • Friday:  International Trade and Consumer Sentiment


Click this link for the full economic calendar for the week.

Over the next week, Arthur Cashin, Managing Director of Floor Operations at UBS Financial Services and frequent CNBC commentator, said investors will continue to concentrate on Europe and the systemic risk of the prolonged financial crisis. Both the recent coordinated announcement by global central banks and China’s simultaneous announcement lowering their bank reserve requirements have him concerned. Cashin believes the sharp reaction by central bankers signals that they are frightened by what is coming moving from inflation fears to pumping more money into the system. The crisis in Europe is getting worse, as borrowing costs for European countries are surging. Traders are trying to guess what triggered the Fed and central banks to move so swiftly - a potential collapse of a larger European bank perhaps? Cashin believes this is a crisis aversion response, and not a solution. The real test will come on December 9, when European leaders meet at a summit to outline a plan to shore up the Euro zone.  German chancellor, Angela Merkel and French President, Nicolas Sarkozy are due to meet on Monday to unveil a proposal to address the financial crisis in Europe.

Retail Sales and the hype of Black Friday: Cashin says reports of record sales on Black Friday may be exaggerated - no retailer wants to say that they are not seeing consumer traffic in their stores, or sales are low. He posits the hype was to get buyers pumped for deep discounts; though some retailers offered good deals, stores were empty after the Black Friday rush was over. These retailers did not generate significant returns on the Black Friday sales because margins were very thin. They were hoping to draw customers into the stores with aggressive discounts, but shoppers did not stay to buy other items, and in some cases, were actually returning items bought on credit.

Factory Orders, ISM Non-Mfg Index, and Consumer Sentiment: Cashin is hoping these sectors continue to improve, although slowly. If companies begin to invest and expand, then factory orders will increase. He will be watching the ISM  Non-Mfg Index, as the US is a service economy and it’s an important indicator of how business is doing. These indices have a direct impact on the Consumer Price Index.  He believes that if we begin to see companies placing orders, then growth will improve.

Initial Jobless claims: Cashin is encouraged by claims falling below the 400 mark and says this will lead to improvements in the economy. He cautions it is a sensitive indicator; here is some concern jobless claims will tick up above the 400 mark once again this week. Cashin sees mortgage rates remaining low for a considerably long time, though banks are not lending as freely as they would like, because of tighter regulations.