Given how sensitive to any news that hints at slower economic growth in the U.S. or any other major global economy, I expect financial markets will be nervous tonight and tomorrow ahead of a full day of economic news.
Over night China will release December data on exports and imports. The worry, of course, is that the numbers will show flagging export growth—which would mean, the markets will argue, that the global economy is slowing—and slowing import growth—which would cast doubt on government plans to shift economic growth from exports to domestic consumption. Numbers from Australia today showing that in November Australian imports fell by 1% and exports were flat haven’t helped calm market worries about the Chinese numbers. (The Australian economy has stumbled lately so it’s not clear if this data says anything about any other economy than Australia, but in the current uncertainty every data point gets counted.)
Also overnight investors will get retail sales numbers from the EuroZone for November. Retail sales fell 0.2% in October. After a drop of 0.6% in September and the release yesterday of a weaker than expected Purchasing Managers Index reading for Germany’s service sector in December, financial markets are likely to see another monthly decline in retail sales as evidence that the European recovery is stalling out
And finally, tomorrow afternoon at 2 p.m. Eastern Time the Federal Reserve will release minutes from its December 18 meeting. You know, the one where the Open Market Committee decided to begin tapering off its monthly $85 billion in asset purchases. You can expect that traders and investors will try to wring any clues that they can from these minutes about what the Fed thinks the likely course of the economy will be
In all these cases I think the big danger is that financial markets will over-interpret the available data in an attempt to end the current uncertainty about growth rates in the U.S. and global economies. I understand the impulse—I’d certainly like to know where the economy is headed and at what speed. But while the kind of data we’ll see tomorrow is sufficient to move asset prices in the current state of anxiety, I don’t think these data points in these particular data series will be sufficient to tell us what we want to know.
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