Federal Stock Numbers

Key economic events for the week of Sept. 5

The Institute for Supply Management releases its index of activity for the nation’s service businesses. The survey is expected to show a slowdown in the rate of growth for nonmanufacturing firms — but not outright contraction: Forecasters expect the index to fall to 51, from 52.7. (Numbers above 50 indicate expansion).

Wednesday

The Fed releases its “beige book,” a compilation of anecdotal information about business conditions prepared in advance of each policy meeting of the central bank. Look for a tone of caution and worry out of the Fed’s business contacts, but worry combined with expectations of continued expansion.

Thursday

The Commerce Department will release new data on international trade in July. The report is expected to show a narrowing of the trade deficit in that month, to $51 billion from $53.1 billion, reflecting in part the falling price of imported oil.

The International Council of Shopping Centers releases sales data for major chain retailers in August, offering the first read on whether American consumers held back last month amid stock market volatility and a steep drop in consumer confidence surveys.

The main event Thursday will be a 1:30 p.m. speech by Bernanke at the Economic Club of Minnesota. The topic of the talk is “The U.S. Economic Outlook,” and it comes at a crucial moment: On Sept. 20 and 21, the Fed’s policy committee will meet and consider new steps that might help boost growth amid a deteriorating job market and slumping recovery. Monetary policy operates with a lag, so any change to policy depends not on what has happened in the recent past, but what Bernanke and his colleagues expect to happen in the future.

The open question for this speech is how much Bernanke has downgraded his expectations for growth next year in light of recent weakness, and whether he thinks inflation pressures will soon diminish as well, which would open the door for more monetary easing.

Weekly Market Commentary by Asiasons WFG | Biz Daily

Local stock market experienced another week of volatility. The benchmark FSSTI rose almost 5 per cent initially on renewed hopes that the US Federal Reserve would implement further measures to boost the economy, but retraced towards the end of the week on profit taking and disappointing manufacturing numbers from Europe. For the week, the index rose 94.91 points or 3.5 per cent to close at 2,843.09.

Regional markets followed a similar trend with the Hong Kong Hang Seng Index rising 630.03 or 3.2 per cent for the week to close at 20,212.91. The US market was down for the week due to the bad jobs number released on Friday, after the Asian market closed. The Dow was down 253 points on Friday after the release of the non-farm payrolls registered a zero increase, its first since World War 2.

The zero growth in US non-farm payrolls was a surprise. However, if we take into consideration of what had happened in August, the zero payrolls increase may not indicate a steep deterioration in the economy.

The month of August started with fears over the US debt ceiling, followed by the downgrade of its rating and sharp falls in the stock market. Looking back to the chain of events, we could trace the starting point of the current problem to the Japan earthquake and tsunami in March 2011.

Early this year, perception was that the global economy is recovering and inflation and interest rates may rise. European Central Bank (ECB) even raised its rate in April. The Japan earthquake caused the supply chain problem in the global manufacturing sector and led to weak economic numbers starting from May. Poorer economic numbers triggered another round of European debts crisis. This was followed by the US debt ceiling and rating issues.

The above events clearly show that sentiment can change the economy and vice versa. So sentiments could still be changed by positive events from the US government, Federal Reserve or the ECB. Wait and see would be a better temporary strategy.

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