Week ahead in US financial markets
By Joseph Brusuelas
A modest week ahead in terms of US macro data will, given the market
dislocation, test whether recent steps by central banks and the immanent
mergers of large financials can inject confidence and stability into markets.
The major event will be Thursday's testimonies of Federal Reserve chairman Ben
Bernanke and Treasury Secretary Henry Paulson on the takeover of Fannie and
Freddie before a House panel. Dallas Fed president Richard Fisher will speak on
the economy and financial industry on Monday.
Tuesday 10am (all times eastern daylight)
Existing home sales (August)
Consensus 4.95m, Merck 5.09m, Prior 5.00m
Sales of existing homes during August should see a modest
increase on the back of sales of foreclosed properties going at distressed
prices and a slight decrease in the cost of a 30-year fixed mortgage. Our
forecast implies that sales of existing homes should come in at 5.09 million.
However, with the stock of existing homes still high, though declining, the
rate of sales needs to pick up to adequately address the number of homes
currently on the market and those on the way through foreclosure or normal
cyclical activity. The seizure of Fannie Mae and Freddie Mac by the US Treasury
has been the primary catalyst behind the recent decline in the 30-year fixed
mortgage rate should be partially captured by the September report, which will
be impacted by the seizing up of short-term credit markets in the aftermath of
the failure at Lehman Brothers.
After three straight months of growth, we anticipate that the durable goods
orders for the month of August should decline by 1.3% on weak orders of
civilian aircraft and a moderation in global demand. The core ex-transportation
estimate should come in flat as the demand for machinery, primary and basic
metals continues to be solid.
Jobless claims should see a slight moderation to 450,000 for the week ending
September 20. According to the Department of Labor the headline would have
declined for the week ending 13 September if it were not for the increase in
claims in Louisiana due to hurricane Gustav. However, continuing claims should
move higher to 3.501 million.
Thursday 8:30am
New home sales (August)
Consensus 515k, Merck 535k, Prior 515k
New home sales should see a second straight month of improvement on the back of
a modest decline in the cost of a 30-year fixed mortgage. The flexibility to
attract new consumers on the part of the development community has pushed the
inventory rate down to 10.1 months, down from the peak of 11.2 months seen in
March 2008. However, going forward the recent decline in the cost of long-term
mortgage rates may be partially offset by the disturbance in domestic credit
markets following the bankruptcy of Lehman.
Friday 8:30am
GDP final estimate (Q2 2008) Consensus 1.20%, Merck 1.2%, Prior 1.20%
The final estimate of economic output during the second quarter of 2008 should
see the rate of growth hold steady at 3.3%. Given the events of recent days,
whatever positive momentum from the increase in growth inspired by the
combination of the fiscal stimulus and demand from the external sector should
wither. We anticipate that the market will look at the rate of growth as one
decisively located in the rearview mirror and not have any substantial reaction
to it.
Thursday 10am
University of Michigan Consumer Sentiment (September- final) Consensus 72,
Merck 63.9, Prior 73.1
The decline in the cost of gasoline prices throughout much of the country and
the fall in the price of imported oil were the primary catalysts behind the
above expectations increase in the preliminary release. Of interest to the
market will be the reaction among consumers to the recent upset in the market
in the aftermath of the bankruptcy at Lehman. We think that this will serve as
a factor in causing consumer sentiment to retreat to 63.9 for the month of
September.
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