Market Analysis

The Week Ahead: Oct. 28 - Nov. 03, 2012

November brings with it a spate of new economic data, but it’s important to look to the longer term trends at work.

The new month brings a spate of economic data from the US, EU, China and Japan. While media headlines likely seek to wring out as much hype as possible from the reports, markets (in the long term) likely price in most results far in advance of their release. To accurately gauge the global economy, look instead to longer-term trends. And today that reflects still-resilient growth, albeit with pockets of varying strength and weakness—as is always the case.

As a reminder, US Daylight Savings Time ends at 2AM on November 4th—remember to set your clocks back by one hour.

Sunday, 10/28:

Ukrainian parliamentary elections

This election is largely seen as a referendum on current Prime Minister Viktor Yanukovich’s presidency and a test of the country’s democratic process. Yanukovich was central in the decision to jail his predecessor (and main rival), Yulia Tymoshenko, four years ago (to the outrage of many international observers). As a result, free and fair elections this year are seen as necessary to the country developing closer ties to the EU in the future—one of Yanukovich’s main goals.

Monday, 10/29:

Japanese economic data and Bank of Japan policy announcement

PMI Manufacturing, household spending, unemployment and industrial production data precede the BOJ’s latest policy announcement. Given ongoing political infighting and a lack of will to enact necessary reforms to right the country’s economy, we expect economic figures to reflect an ongoing malaise. Although the BOJ is widely expected to announce further quantitative easing measures, past measures (including those announced mid-September) haven’t proved sustainably effective.

Japan’s ruling party convenes special session of parliament

This special month-long session of parliament was called to address Japan’s yearly deficit bond bill—needed to finance about 40% of the budget for the current fiscal year. To us, this seems akin to the US’s 2011 debt-ceiling debate and likely to prove equally benign. While Japan’s opposition party is stonewalling the yearly government borrowing bill to force an early election, politicking likely gives way to compromise when needed.

October German CPI

Month-over-month inflation data has ticked up in recent months, but remains relatively constrained. That said, it’s likely the inflation-wary Bundesbank continues to pay keen attention to the data.

September US personal income and outlays

Dallas Fed manufacturing survey

This survey is often seen as an early indicator of national manufacturing indexes released later in the week. However, the survey only covers about 100 manufacturers in select industries across Texas and likely doesn’t fully capture the broader national manufacturing trends.

Tuesday, 10/30:

S&P releases its August Case-Shiller Home Price Index

Here’s one of several looks at home prices, though we’d argue this index’s construction isn’t ideal. Its calculation omits many parts of the market and its lag (the release covers data from two months before) means it has little bearing on the future.

South Korean September industrial production

US September consumer confidence

As we’ve often said, confidence and sentiment indexes say little-to-nothing about the direction of markets or the economy. They focus on how folks felt at a single, now-past point in time.

Wednesday, 10/31:

September German retail sales and unemployment rate

Italian CPI / PPI

EMU Flash HICP (Inflation)

French consumption and PPI

US Chicago Fed manufacturing PMI and farm prices

Chinese October manufacturing PMI reports

Thursday, 11/01:

Spate of US economic data released

Thursday marks a busy day for US economic data, as auto sales, chain store sales, weekly jobless claims, productivity, manufacturing and construction spending are all released. However, following a positive initial Q3 GDP reading, these reports are likely to be watched more to confirm the trend. See our 10/29/2012 cover story, “Three Charts on Q3 (US GDP, That Is).” for more.

Japanese October PMI composite

Australian Q3 PPI

British CIPS/PMI Manufacturing Index

September EMU unemployment rate

EU prohibition on short-selling of sovereign credit default swaps by investors who don’t own the underlying debt goes into effect

Between these bans and upcoming speculation-curbing proposals, Europe’s war on speculators appears to be in high gear. The rapid implementation of these plans are particularly sudden, given that they were only finalized last week after months of impasse between the EU and member states. Although member states do have the ability to opt-out for a year or more, this (and other regulation) is rife with the possibility of unintended consequences. For a related story, see our 10/26/2012 cover story, “Dodd-Frankly, That’s Dumb.”

September Brazilian industrial production and exports

Friday, 11/02:

French, German and EMU October PMI Manufacturing Index

October US Employment Situation Report (Nonfarm payrolls, unemployment rate)

September US factory orders

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.