World Week Ahead: The start of a better quarter?

Monday 3rd October 2011

Stocks in mature and emerging markets rounded out a weak quarter last week on doubts the global economy can sustain its pace of growth. Bonds had a stellar three months. The 10-year U.S. Treasury bond yield shed 1.2 percentage points to finish the quarter below 2%. Gold ended the quarter higher and the euro shed almost 10%.

There's plenty of evidence due this week on world growth including U.S. non-farm payrolls and central bank monetary policy reviews in Australia, Japan, the U.K. and Europe. The European Central Bank is forecast to cut its key rate by 50 basis points, according to economists at IBS.

As well, Japan's Tankan index of manufacturing is scheduled for release along with U.S. factory orders and manufacturing. Federal Reserve chairman Ben Bernanke is giving testimony.

Economists expect America's unemployment rate held at 9.1% last month in an economy that may have added a tepid 50,000 jobs.

The U.S. economy needs to add about 200,000 jobs a month to bring the jobless rate down to 7.1% in the next 12 months, Eric Green, chief market economist at TD Securities, told Bloomberg.

The Dow Jones Industrial Average fell 2.2% to 10913.38 on Friday, while the Standard & Poor's 500 Index fell 2.5% to 1131.42

The Dow shed 12% in the quarter while the S&P 500 fell 14%, the biggest slide since the final three months of 2008. The VIX, known as Wall Street's fear gauge, has climbed to about 43, having touched the highest level since the immediate wake of the collapse of Lehman Brothers in late 2008.

For much of this year, the VIX barely broke above 25.

“We’re coming from a background that is extremely depressed and extremely uncertain with the big question mark over growth that we have globally,” Alex Tedder, senior portfolio manager for American Century Investments, told Bloomberg.

Euro leaders have been buoyed by the approval by Germany's upper house for expanding the European Financial Stability Facility and finance chiefs are to meet this week to flesh out terms of the bailout fund. Under the agreed expansion, the EFSF will be able to provide credit lines, buy bonds and help lenders recapitalise.

In New Zealand, the NZIER's quarterly survey of business opinion and commodity price index round out the picture. The kiwi dollar starts the week near a six-month low against the greenback and yen, having been pegged back on the downgrade to New Zealand's sovereign rating.

Australia's dollar is trading at around an 11-month low. The RBA is expected to leave its target rate at 4.75% this week.

Retail sales for August across the Tasman may show Australian's haven't recovered their taste for consumption. Westpac is forecasting a 0.3% decline for August and expects retailing will remain weak through the end of the year.

(BusinessDesk)

BusinessDesk.co.nz

Comments from our readers

No comments yet