31/08/10

All three major US indices fell more than 1% yesterday on the quietest trading day of the year as investors turned their attention to a number of big economic reports due this week. Stocks opened lower, with selling gaining momentum later in the session as worries about the pace of the economic recovery heightened. Reports due this week include readings on consumer confidence, home sales and manufacturing. However, investors are gearing up for the government's monthly jobs report, due before the opening bell Friday. The Dow Jones lost 140.92 points to 10,009.73, the S&P 500 fell 15.67 points to 1,048.92 and the Nasdaq dropped 33.66 points to 2,119.97.

In corporate news a number of deals failed to keep stocks in positive territory. Intel Corp bid $1.4 billion to buy the wireless unit of German chipmaker Infineon Technologies. Intel fell 1.6% as a result, while the PHLX semiconductor index dropped 2.5%. 3M fell 1.6% after announcing that it will buy Cogent for $943 million – an 18% premium. On the upside, Genzyme Inc gained 3.4% after rejecting an $18.5 billion buyout offer from French drug maker Sanofi-Aventis SA.

The Nikkei tumbled 325.20 points to 8,824.06 this morning after the Bank of Japan’s emergency moves the day before failed to curb the yen’s strength. Disappointment set in after the central bank expanded its fund supply tool, widely seen as an ineffective move, while the government’s promise to use reserve funds for jobs and deregulation also failed to impress. The Hang Seng is currently 277.76 points lower at 20,459.46. Developers lead stocks lower ahead of a government land auction, where it is widely expected that price paid per buildable square foot will reach an all time high.

Economics 
UK Gfk consumer confidence (Aug) 00:01 BST

The overall index fell from -19 to -22 in July, largely due to weaker readings on the components relating to personal finances and the broader economic outlook over the next 12 months. Improvements are unlikely to have occurred in these areas during August, while the major purchases index may have edged down after rising by eight points in July. Overall, consumer confidence appears to be in retreat, and analysts expect the headline number to fall further to -25 in August.

UK Mortgage approvals (Jul) 09:30 BST

Slight declines in mortgage approvals were reported in July on both the Bank of England major lender and British Bankers Association series, and analysts expect this weakness to be reflected in the overall approval figures for the month. Analysts expect a reading of 46,200 in July from 47,600 in June. Analysts forecast a GBP0.1bn decline in consumer credit for July, which, if confirmed, would be the third decline in the past six months. Although the headline retail sales figure proved stronger than expected in July, this was the result of unusually large gains in two minor components of the series, predominantly concerning smaller businesses, while the areas relating to consumer durables reported falling sales.

US S&P/Case-Shiller home price index (Jun/Q2) 14:00 BST/09:00 EDT

Measures of US house prices could be set to soften as the data begin to capture more of the transactions that occurred after the homebuyer tax credit expired at the end of April. The FHFA house price index fell 0.3% in June, after increasing in each of the three previous months. The Case-Shiller series are based on three-month moving averages and may be a bit slower to adjust. Analysts look for the 20-city index to be unchanged in June.

US Chicago PMI (Aug) 14:45 BST/09:45 EDT

The Chicago PMI has held up better than many of the other regional manufacturing surveys. Given that both the Empire and Philadelphia Fed surveys were disappointing in August, the risk is that the Chicago PMI also turns lower. Analysts look for a decline to 55.

US Consumer confidence (Aug) 15:00 BST/10:00 EDT

The University of Michigan measure of consumer confidence edged higher in August, following a steep decline in July. Analysts look for this month’s Conference Board index to rise slightly to 51.0. Consumers remain pessimistic about labour market and business conditions.

US FOMC minutes (Aug 10 meeting) 19:00 BST/14:00 EDT

At this meeting, the Fed decided to stop the natural shrinkage in its balance sheet. The FOMC announced that it would reinvest the principal payments from its holdings of agency debt and agency MBS back into longer-term Treasury securities. News reports suggested that this decision was a contentious one. The arguments expressed by FOMC members for and against taking this step will provide some further insight into the likelihood of a move towards outright quantitative easing.



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