Central Bankers Strike – The Week That Was

The last week was an event full one. The drama in Eurozone is ensuring that almost every week is full of exciting and anxiety inducing actions. On top of that, the week also included FOMC meeting, ECB press conference and the US non-farm payroll report, so it was a certainty that all financial markets will see lot of volatility. And, volatility they did see.

The Positive:

There were a slew of good economic reports in the US, which indicated that all may not be doomed. The reports were also accompanied by good corporate earnings.

  • Tuesday saw positive surprises for the S&P/CS Composite-20 HPI Y/Y reading. The Case-Shiller index y/y change came at -0.7% whereas the market was expecting -1.5%. This gave some hope for housing sector.
  • Chicago PMI also beat the expectations at 53.7 vs. 52.6. So did Conference Board Consumer Confidence which was at 65.9 when the market was expecting 61.5
  • ADP non-farm payroll reading was at 163K jobs as compared to 121K forecast
  • Weekly unemployment claims were also lower than expected
  • The week was rounded up by non-farm payroll number of 163K, which were better than estimates and ISM non-manufacturing PMI, which also was better than estimate
  • In the second quarter, US corporations beat Wall Street’s lowered earnings estimates at a healthy rate. This has helped Citi Economic Surprise Index (CESI) – one of the better stock market index – to turn up after bottoming out.

There were some positive and encouraging economic reports elsewhere too.

  • Chinese manufacturing PMI was above 50 – a number that indicates that the activities were not shrinking. Non-manufacturing PMI was at 55.6.
  • Australian economy saw higher than estimated building approvals, better reading of Home Price Index, better retail sales number and improving trade balance.
  • Japanese unemployment rate dropped to 4.3%
  • Germany unemployment changed by less than forecast
  • UK’s construction PMI was above 50 at 50.9 when 48.2 was expected.
  • Swiss retail sales improved more than forecast and PMI was better than consensus too
  • The day-after reinterpretation of ECB President Mario Draghi’s press conference on Thursday painted a much rosier picture than its immediate assessment

The Negative:

Last week had more than its share of negative and ugly events.

  • FOMC meeting was a dud. Though, Fed said that economic growth is sluggish, inflation is tamed and the unemployment picture is not reassuring, it still decided not to do anything.
  • On ECB President Draghi did not follow up on his previous weeks speech, in which he promised to do enough to address the Eurozone’s crisis.
  • ISM manufacturing PMI was below 50 – an indication of contraction
  • The Hourly Earning was below expectation
  • Canadian GDP reading was worse than estimated. So were the RMPI and IPPI (prices paid for raw material and good sold)
  • Britain’s HPI was worse than forecasted. So were the Manufacturing PMI, Services PMI and mortgage approvals
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