The Global Markets Weekly 9/30/11

Posted October 3, 2011 by CLeahey

[private][private]§ U.S.: Markets are seizing on any clues shedding light on the direction of the recovery. The focus is on the September Employment Report (Fri), and DE’s expectations are extremely modest – only +4,000 excluding the returning Verizon workers. Also due, September ISM indices should point to stabilization in the Manufacturing (Mon) and Non-Manufacturing (Wed) sectors – but too close to neutral for most.

§ Eurozone: The monetary backdrop, at least as perceived by the ECB, would give the central bank scope to cut rates in the near future if it wishes, but many other factors will be considered at the Council meeting (Thu), albeit with the focus on unconventional policy matters. The data slate in coming days is unlikely to have much impact on ECB thinking, with market trends and banking strains a more important ingredient. .

§ United Kingdom: The main focus data-wise will be the PMI numbers – manufacturing (Mon) (Consensus: 48.8; DE: 48.7) and services (Wed) (Consensus & DE: 50.5) – where further, but limited erosion is anticipated. The week ends with PPI data (Fri) which should show relatively soft output price data, albeit with the numbers (likely to be made available to the BoE) reminding some on the MPC that producer price inflation is still so high. As a result, without clearly weaker data emerging in the interim, Thursday may be too soon for the BoE to resume asset purchases with (at this juncture) a move in November the more likely.

§ Japan: The week will be about the Q3 TANKAN (Mon), and what the BOJ Monetary Policy Board makes of it at the monthly meeting (Fri). With disaster-rebound effects waning and exports conspicuously weak, growth prospects are darkening, and the TANKAN expectations readings will be of critical concern. The BOJ baseline forecast looks increasingly untenable, and is subject to revision in the semi-annual Outlook report due at month-end—policy action would probably await that.

§ Emerging Markets/Regions: Ongoing monitoring of China suggests that a hard-landing, while still not the most likely scenario for the next twelve months, should be viewed now as a higher probability event. Central bank watch: The week brings a central bank meeting in Poland. Zloty weakness and still-elevated (though likely moderating) inflation will leave the central bank on hold, but attention will be on the bank’s discussion of risks to the outlook.
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