Today's Coffee - Market Wrap Up
Enjoy your fresh coffee with our summary and analysis of the market activity of the day and a medley of important information you should find useful. The market took a roller coaster ride today, but I would temper any excitement generated by the afternoon bounce if I were you. The troubles within the financial sector have not subsided overnight. A miracle did not befall those caught within a spreading credit crunch. Consumers did not all of a sudden find spending money inside their lunchtime fortune cookie. Those same issues that were here yesterday, remain burdensome today. Heading into the weekend, I once again cannot foresee this market comfortable enough to enter it long stocks.
OVERSEAS MARKETS
Yesterday's drastic drop shook international markets today, because Asia has much to lose from a weakening U.S. economy. America represents the most important export market for much of Asia, and markets from Tokyo to Singapore faltered as a result. The Hang Seng dipped 2.57%, the NIKKEI 225 sank 2.9% and the BSE SENSEX 30 fell 3.5%.
The concern spread to Europe, which would have to deal with a separate set of issues should the U.S. economy fall into recession. Credit spreads have started to widen as risk finds its way back into the investment equation. Investors are demanding higher returns for investments bearing greater risk. Credit risk spreads had dwindled to near nothing up until recently, but with the subprime sector in flux, warning flags were raised. Recent productivity data sounded the alarm for employment. If demand were to wain, then companies would be faced with an excessive workforce, and guess what, retail spending came in weak in February. The American consumer has at times held up this economy like Atlas held the world. If the consumer tightens his belt, unemployment will rise and GDP will flirt with recession, in our view.
As credit tightens, liquidity dries. Merger and acquisition activity has added lift to European shares over the past year, and likely helped to build a related premium into the price of European equities. Reduce that likelihood and European equities become pressured. The DJ STOXX 50 sank 2.9%, the DAX dipped 2.7% and the CAC 40 fell 2.5%.
In the U.K., the FTSE 100 fell 2.6%, despite the decreased unemployment reported today. This evening the CBI raised its expectations for economic growth to 2.9% from 2.7% previously, but the Bank of England is expected to raise rates again this year.
ECONOMIC DATA & ANALYSIS
The current account deficit narrowed to $195.8 billion in the fourth quarter, from $229.4 billion in the third quarter. The deficit benefited from lower oil prices and increased exports. The deficit has garnered much attention lately, due to the risk posed to interest rates and the value of the dollar should foreigners reduce ownership of American assets. Chinese plans to diversify its reserves added fuel to that fire this month.
Import prices rose just 0.2% in February, versus Bloomberg consensus expectations for a 0.6% increase. Excluding petroleum, prices actually decreased 0.1%, which likely comforted hawks within the Federal Reserve.
Tomorrow:
Don't miss Thursday's PPI report at 8:30 a.m. EDT. Bloomberg's consensus sees February producer prices rising 0.5%, compared to a decrease of 0.6% in January, due largely to higher oil prices. Keep an eye on how core PPI fairs, as the inflationary outlook holds great weight with equities. Still, right now the market is more concerned about the possibility of the economy slipping into recession, and it might ignore a slightly higher than expected result.
Also on Thursday, the treasury will provide a read on January international capital flows, and the March Philly Fed Survey will be posted. Philly Fed is widely expected to approximate 4.0, versus a measure of 0.6 last time. Retiree, and previous Fed Chairman, Alan Greenspan will find another microphone on Thursday too, so beware.
The earnings calendar includes Bear Stearns, Claire's Stores, Tektronix, Aeropostale, Children's Place, Pacific Sunwear, Winnebago Industries, American States Water, and Pope & Talbot.
You can receive "Today's Coffee" in your email inbox at the moment we publish it to the site. Just click here, provide your email address, and we will add you to the distribution list. We respect your privacy, and never share your information with third parties. (disclosure)
OVERSEAS MARKETS
Yesterday's drastic drop shook international markets today, because Asia has much to lose from a weakening U.S. economy. America represents the most important export market for much of Asia, and markets from Tokyo to Singapore faltered as a result. The Hang Seng dipped 2.57%, the NIKKEI 225 sank 2.9% and the BSE SENSEX 30 fell 3.5%.
The concern spread to Europe, which would have to deal with a separate set of issues should the U.S. economy fall into recession. Credit spreads have started to widen as risk finds its way back into the investment equation. Investors are demanding higher returns for investments bearing greater risk. Credit risk spreads had dwindled to near nothing up until recently, but with the subprime sector in flux, warning flags were raised. Recent productivity data sounded the alarm for employment. If demand were to wain, then companies would be faced with an excessive workforce, and guess what, retail spending came in weak in February. The American consumer has at times held up this economy like Atlas held the world. If the consumer tightens his belt, unemployment will rise and GDP will flirt with recession, in our view.
As credit tightens, liquidity dries. Merger and acquisition activity has added lift to European shares over the past year, and likely helped to build a related premium into the price of European equities. Reduce that likelihood and European equities become pressured. The DJ STOXX 50 sank 2.9%, the DAX dipped 2.7% and the CAC 40 fell 2.5%.
In the U.K., the FTSE 100 fell 2.6%, despite the decreased unemployment reported today. This evening the CBI raised its expectations for economic growth to 2.9% from 2.7% previously, but the Bank of England is expected to raise rates again this year.
ECONOMIC DATA & ANALYSIS
The current account deficit narrowed to $195.8 billion in the fourth quarter, from $229.4 billion in the third quarter. The deficit benefited from lower oil prices and increased exports. The deficit has garnered much attention lately, due to the risk posed to interest rates and the value of the dollar should foreigners reduce ownership of American assets. Chinese plans to diversify its reserves added fuel to that fire this month.
Import prices rose just 0.2% in February, versus Bloomberg consensus expectations for a 0.6% increase. Excluding petroleum, prices actually decreased 0.1%, which likely comforted hawks within the Federal Reserve.
Tomorrow:
Don't miss Thursday's PPI report at 8:30 a.m. EDT. Bloomberg's consensus sees February producer prices rising 0.5%, compared to a decrease of 0.6% in January, due largely to higher oil prices. Keep an eye on how core PPI fairs, as the inflationary outlook holds great weight with equities. Still, right now the market is more concerned about the possibility of the economy slipping into recession, and it might ignore a slightly higher than expected result.
Also on Thursday, the treasury will provide a read on January international capital flows, and the March Philly Fed Survey will be posted. Philly Fed is widely expected to approximate 4.0, versus a measure of 0.6 last time. Retiree, and previous Fed Chairman, Alan Greenspan will find another microphone on Thursday too, so beware.
The earnings calendar includes Bear Stearns, Claire's Stores, Tektronix, Aeropostale, Children's Place, Pacific Sunwear, Winnebago Industries, American States Water, and Pope & Talbot.
You can receive "Today's Coffee" in your email inbox at the moment we publish it to the site. Just click here, provide your email address, and we will add you to the distribution list. We respect your privacy, and never share your information with third parties. (disclosure)
posted by The Greek | 6:03 PM
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