Market Analysis

The Week Ahead: Sept. 16-22, 2012

A brief look at economic data and geopolitical events in the week ahead and MarketMinder’s view.

The New York Fed releases its September manufacturing survey.

Independently, regional manufacturing surveys presage little about the overall US or global economies. Their results often tend to reflect short-term conditions driven by local industries rather than national trends.

Italy and Brazil report monthly trade data.

European Union current account and trade data released.

Results from the Netherlands’ recent election are finalized.

Dutch voters resoundingly voted for parties supporting the euro. Now, the arduous task of forming a government begins. Negotiations between coalition partners will likely take several weeks, as they’ll need to bridge gaps in their policy stances, despite their shared support for the euro.

Q2 2012 US current account balance released.

The current account, a broad measure of trade tracking the sale of merchandise, services and investment flows between nations, is a commonly misunderstood economic statistic. Expect media lamentations of a widening deficit. But in the US’s case, that’s likely a good thing. Revisit our 12/01/2006 column on the current account here.

The BOE announces August UK CPI results.

US housing starts and existing home sales data for August released.

Housing data have shown resilience and some improvement of late. However, the economy has expanded to all-time highs and continues growing without a robust housing recovery. From here, a housing recovery would likely be an incremental tailwind, but it isn’t necessarily required for the economy and markets to continue marching forward. For more, see theseposts from Dr. Mark J. Perry at Carpe Diem.

The ECB Governing Council and General Council hold a two-day non-rate setting meeting in Frankfurt.

Typically, the Governing Council meets the first week of the month to make rate-setting decisions. A second meeting in the same month typically deals with issues related to other tasks and responsibilities of the ECB and member states’ national central banks. In this case, it’s generally speculated the councils will discuss the details of ECB chief Mario Draghi’s recently announced OMT program.

First round of Dutch government coalition talks conclude.

Led by the People’s Party for Freedom and Democracy (VVD), the Netherlands concludes the first round of coalition government talks. Should it form a coalition with one or more other parties to form a majority in the House of Representatives, current Prime Minister Mark Rutte likely retains power.

US weekly jobless claims reported by the Bureau of Labor Statistics.

Last week, weekly initial jobless claims fell to their lowest levels in a month. While still far from their pre-2008 lows, continued improvement would be a positive. That said, the trend is more important than the weekly reading (which is often subject to significant volatility), and thus far, the private sector continues to add jobs to the economy.

The US ISM Purchasing Managers Index for September released.

Recently sluggish manufacturing PMI results have some folks fearing an imminent slowdown in manufacturing. But profits recently suggest the industry continues to do quite well.

The Philadelphia Fed releases its monthly Business Outlook Survey of manufacturers.

The Conference Board releases its August Leading Economic Index.

A composite of 10 economic indicators, the index is supposed to help investors gauge future economic activity. However, since it’s a composite of indicators (many of which are backward looking) already released earlier in the month, the impact on stocks is likely minimal.

The Fed publishes its weekly Balance Sheet and Quarterly Flow of Funds reports.

Eurozone Flash September manufacturing PMI.

Expectations are for continued contraction, but at a slower pace than last month. At this point, ongoing eurozone economic weakness shouldn’t be a surprise to most folks.

Two day EU-China Summit kicks off.

European Council President Herman van Rompuy, European Commission President José Manuel Barroso and Chinese Premier Wen Jiabao are the main guests. Expect a significant degree of rhetoric discussing practical cooperation between China and the EU—and maybe some tussling over solar subsidies. However, summits rarely, if ever, produce meaningful policy changes.

Quadruple witching day.

Expect some media chatter about quadruple witching. However, the event has little to do with getting ready for Halloween. Rather, it represents the quarterly expiration of stock index futures, stock index options, stock options and single stock futures in US markets. Although not stocks themselves, their expiration can have some short-term impact on stock prices. However, long-term investors have little to fear—once these derivatives expire, the positions are typically unwound with little, if any, lasting impact on stocks.

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