Economic Calendar for week 24th – 28th November 2008
PLEASE NOTE – All times GMT
Monday November 24th:
GE – 09:00 – Ifo Business Climate.
EU – 09:00 – Current Account.
EU – 10:00 – Industrial New Orders M/M.
US – 15:00 – Existing Home Sales.
US – 15:30 – Annual Pre-Budget Report.
Tuesday November 25th:
GE – 07:00 – Gfk Consumer Climate.
GE – 07:00 – Final GDP Q/Q.
UK – 09:30 – BBA Mortgage Approvals.
UK – 09:30 – Prelim Business Investment Q/Q.
UK – 09:45 – MPC Treasury Committee Hearings.
US – 13:30 – Prelim GDP Q/Q.
US – 13:30 – Prelim GDP Price Index Q/Q.
US – 14:00 – S&P/CS Composite-20 HPI Y/Y.
US – 15:00 – CB Consumer Confidence.
US – 15:00 – HPI M/M.
US – 15:00 – Richmond Manufacturing Index.
Wednesday November 26th:
GE – 07:00 – Prelim CPI M/M.
GE – 07:00 – Import Prices M/M.
UK – 09:30 – Revised GDP Q/Q.
UK – 09:30 – Index of Services Q/Q.
US – 13:30 – Core Durable Goods Orders M/M.
US – 13:30 – Durable Goods Orders M/M.
US – 13:30 – Core PCE Price Index M/M.
US – 13:30 – Personal Spending M/M.
US – 13:30 – Personal Income M/M.
US – 13:30 – Unemployment Claims.
US – 14:45 – Chicago PMI.
US – 14:55 – Revised UoM Consumer Sentiment.
US – 14:55 – Revised UoM Consumer Expectations.
US – 15:00 – New Home Sales.
US – 15:35 – Crude Oil Inventories.
US – 17:00 – Natural Gas Storage.
Thursday November 27th:
US – ALL – Thanks Giving Bank Holiday.
UK – Tentative – Nationwide HPI M/M.
GE – 08:55 – Unemployment Change.
EU – 09:00 – M3 Money Supply Y/Y.
EU – 09:00 – Private Loans Y/Y.
EU – 10:00 – Consumer Confidence.
Friday November 28th:
UK – 00:01- GfK Consumer Confidence.
EU – 10:00 – CPI Flash Estimate Y/Y.
EU – 10:00 – Unemployment rate.
UK – 11:00 – CBI Realised Sales.
EU – Europe wide
FR – France
UK – United Kingdom
US – United States
GE – Germany
The week ahead.
Last week US equities ended a volatile week with big rallies on Friday, but these only came after the benchmark S&P 500 index had plunged to levels not seen for over a decade on Thursday. Despite Friday’s 6%+ rallies on the Dow Jones and S&P 500, those markets still finished the week down 5.31% and 8.39% respectively. After months of bailouts, mini rallies, rate cuts, and false dawns, investors threw in the towel. On Thursday, there was a panicked flight to quality, as the yield on the shortest term US treasury bonds sank to near zero. Money is flooding to what is perceived to the safest haven in these troubled times. The panic pushed investors into bonds, breaking records for that market. The yield on four-week Treasury bills fell to 0.045 %, and the three-month bill was yielding just 0.03 %, as investors rushed for safety.
The cost of insuring against investment grade companies defaulting shot up to its highest level since the crisis began. Worse still, Warren Buffet’s Berkshire Hathaway fund has seen the cost of its credit default swaps shoot to 5 times the level they traded at in June. At current levels, the CDS prices are implying that Berkshire is more likely to go bust than Morgan Stanley. When the Dow was trading around 13,000, Buffet used derivates to effectively bet that the market would be higher than this level in 15 to 20 years time. While there is still considerable time for this bet to work out, Buffet has already marked down a $6.7 billion loss on that trade. When investment ‘Gods’ such as Buffet look ready to fall, it is hardly surprising that investors are running to safe havens.
Just two months ago, the US Federal Reserve was still concerned about the “upside risks to inflation”. With last week’s 1 % decline in US consumer prices and rapid declines in UK inflation figures, we’ve gone from fears over inflation and stagflation, all the way to deflation in the space of 90 days. As a sign of the times, oil prices hit a new milestone last week. Just four months after making record highs of $147 a barrel, oil touched a low of $48.25 on Friday, a remarkable drop of 67%. The rapid demise in crude prices is having a direct impact on the Russian economy and stock market. Since May the Russian stock market has been leading other so called BRIC nations lower, with a drop of around 70% since the May highs.
Financial shares led the selling. HSBC received a broker down grade on fears of the state of its tier 1 equity ratio. HSBC was formerly at arm’s length to the rest of the banking sector with its relatively low exposure to US subprime loans. However, the ‘world’s local bank’ is now feeling the pressure due to its exposure to emerging economies, especially the troubled BRIC economies. In the US Citigroup was hit hard, losing half its value in just three days. Once the biggest US bank by market value, there is speculation that bad loans and writedowns may add up to losses totalling $20 billion for the troubled Citigroup. Some commentators point to Treasury secretary Paulson’s change of tack with regard to long directly buying toxic assets under the TARP program for sparking much of last week’s sell off.
Next week starts with the German Ifo business climate report which will analysed closely after recent announcements that many parts of the Eurozone are already in recession. US existing home sales are released at 13.00 on Monday and analysts are expecting further declines to 5.02 million from 5.18 million. Tuesday morning brings a raft of UK economic announcements with the MPC treasury committee hearing top of the list. Preliminary US GDP is announced around midday, with the revised UK figures out the next day. Thursday is an extremely busy day with a large number of US announcements. Core durable goods, unemployment claims and new home sales are the notable highlights. The rest of the trading week could be relatively quiet with many traders using Thursday Thanksgiving holiday to make a long weekend.
There is simply no telling what the market or economy might be like as we start 2009. A selloff of this speed hasn’t been seen since the 1930s, and although comparisons have often been made of late, it is worth noting that at the low points of this period, rallies, when they came were surprisingly aggressive. Barry Rithholtz last week noted that the AAII individual investor’s stock allocation was 15% below its 21 year historical average. Although not marking the exact bottom, readings of this nature were not a million miles from the lows of 1987, 1990 and 2002. With a hoard of cash waiting in the wings, there is always the possibility of this reading again marketing the bottom. However, this market has left many seasoned professionals scratching their heads as the selloff has been unlike anything seen for generations. In recent months, these markets have reached extremes of sentiment that in the past have market key turning points. The trouble is that of late, markets have continued to make new extremes way beyond previous inflection points.
One market that has been away from the headlines is gold. In the first quarter, it ran up to over $1,000, but has since retreated to just under $800. Gold was seen as a hedge against inflation and was used as a hedge against the weak dollar. With inflation on the wane and the dollar on the attack, gold has been on the retreat. However it hasn’t collapsed in the same manner than oil has and this is because gold is seen as a safe haven in times of trouble. These opposing cross winds have kept oil in a volatile trading range between $800 and $700 over the last 30 days. With gold rallying $50 alone on Friday, there is a very real chance of a break out of this range in the next 30 days. An up or down trade predicting that the price of gold in dollars (Gold/ USD in the forex menu) will touch $650 or $900 in the next 30 days could return 111%