Weekly Economic Indicators: More Euro Problems Ahead?

Graphic "When Greece falls" presente...

Graphic "When Greece falls" presented by Dutch government on 21 June 2011, speaking of European sovereign debt crisis (Photo credit: Wikipedia)

The economic release schedule for the week of April 22nd is as follows:

  • Monday:  Chicago Fed National Activity Index and Existing Home Sales
  • ICSC-Goldman Store Sales, PMI Manufacturing Index Flash, FHFA House Price, New Home Sales, Richmond Fed Manufacturing Index
  • Wednesday:  MBA Purchase Applications and Durable Goods Orders
  • Thursday:  Jobless Claims, Kansas City Fed Manufacturing Index, and Fed Balance Sheet
  • Friday:  GDP and Consumer Sentiment

I spoke with Arthur Cashin, Managing Director of Floor Operations at UBS Financial Services, and frequent CNBC commentator, about what he will be watching most closely next week. This week the economic calendar is light, although Cashin will focus on a few important pieces of economic data, including the overall market, housing sector, jobless claims, a second reading on 1st quarter GDP, and consumer sentiment.

According to Cashin, Europe is becoming a problem once again, after being off the radar for the past few weeks, while the bulls were off to the races. The head of the Bundesbank President, Jens Weidmann warned that the European debt crisis could last as much as a decade and hinted that the ECB might reduce interest rates if economic data does not improve. The deteriorating economic situation in Europe is weighing on global financial markets. The state of the consumer is in focus, as the auto sector in Germany is declining drastically. There are rumors of a downgrade in German debt due to the Japanese yen undercutting global currencies. The Japanese central bank recently implemented a new round of quantitative easing which is significantly impacting the price of the yen. The soft patch in the economy could be the pullback investors have been waiting for on the sidelines.

First Quarter Earnings

According to Thompson Reuters, about 20% or 102 S&P 500 companies have reported earnings through April 19. Cashin said, first quarter earnings thus far have been unspectacular with more disappointments, despite lowered expectations. He is concerned with profit margins being at all-time highs, as erosion and cost cutting are catching up to companies.

Housing Data

This week investors will get reports on existing home sales, FHFA house price index, new home sales, and MBA purchase applications. Cashin said “the macro data is starting to raise questions as there are signs of weakness in the economy and the market could be ahead of itself and vulnerable.”

Weekly Jobless Claims

The jobless claims data a few weeks ago was surprisingly lower than expectations, followed by better than expected unemployment data on April 18th. Cashin expects the data to come in unevenly for a while.  However, he is concerned with the ISM manufacturing data, as the Philadelphia Fed data, and leading indicators were weak, signaling a sputtering economy.   

 

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