This seems like it will be a make or break type week for world markets as everyone will be looking to Europe for any type clarity on the debt and banking situations there. In the U.S. everyone will be watching and listening for any hints of additional Fed stimulus from Ben Bernanke in Jackson Hole. The Libyan situation also seems to be coming to some sort of conclusion, with implications across the region and in world oil markets.
The big event of the week comes all the way at the end of it. Bah! Most of the rest of the week will be dominated by developments in Europe, but there will be some other distractions along the way.
Chicago Fed National Activity Index: Doesn’t get the attention it deserves, but this report will be about July, which is when dinosaurs roamed the earth.
New Home Sales: You get one guess how this went.
Treasury Auctions 2-year Notes: And you’ll buy them.
Durable Orders: For July. How many Flintstone cars were mined down at the quarry?
Treasury Auctions 5-year Notes: And you’ll buy them, again.
Jobless Claims: 400,000 or bust!
Treasury Auctions 7-year Notes: You know you want them.
GDP, Second Quarter Second Estimate: No education in the second kick of a mule.
University of Michigan Consumer Sentiment: If economic reports were songs, this one would be “Hurt,” as sung by Johnny Cash.
Ben Bernanke Speech at the Fed’s Jackson Hole Symposium: I can haz stimulus?
Angela Merkel on Sunday urged Europe to stand firm in the face of market pressure and the “dramatic crisis” gripping the eurozone, insisting the solution was for states to slash public debt and boost competitiveness.
“Politics cannot and will not simply follow the markets,” Germany’s chancellor said, repeating her refusal to countenance funding indebted nations with a bond guaranteed by all members of the single currency bloc.
“The markets want to force us into doing certain things, and that we won’t do,” Ms Merkel said, shrugging off last week’s gyrations in equity and bond markets.
Her remarks came as a leading French banker warned that anxiety swirling around European banks could continue for months to come.
“Nervousness around banking stocks could last at least until the beginning of November,” Frédéric Oudéa, chief executive of Société Générale, told a French newspaper.
Libyan rebels said they captured two of Muammar Qaddafi’s sons as they swept through the capital Tripoli in a drive to end his 42 years of autocratic rule. President Barack Obama said the Libyan leader must recognize he “no longer controls” the country.
Government forces offered little resistance and celebrations broke out in the city’s Green Square, the location for pro-Qaddafi rallies in recent months. Regime spokesman Moussa Ibrahim said Qaddafi was ready to negotiate with Mustafa Abdel Jalil, the head of the rebel council, and asked for an immediate cease-fire.
Nasdaq percent of stocks above 200-day MA ends the week at 12.22%. (10-year chart)
The European Central Bank’s rate-hike cycle looks like it will stop at a grand total of two. After hiking rates in April and July, the ECB is now expected to hit a lengthy pause, with rates stuck at 1.5% until the end of 2012, according the revised forecasts Friday from Barclays Capital and J.P. Morgan Chase.
It’s a rapid turnaround. As recently as a few weeks ago, most economists thought the ECB would deliver its third rate hike in October, and another one in early 2012. At its most recent meeting two weeks ago, the ECB said inflation risks were still to the upside and that risks to the economy were balanced, suggesting another rate increase was still in the cards.
But a GDP report this week showing that Germany and the rest of the euro zone slowed to a crawl last quarter has changed the outlook for the ECB.
Much attention will focus on a speech on Friday by Ben S. Bernanke, the Federal Reserve chairman, in Jackson Hole, Wyo., where policy makers and academics are meeting as part of an annual symposium.
Last year, Mr. Bernanke used the forum to suggest that the Fed could help growth by buying long-term bonds, a prelude to a program that did just that.
However, no grand new plan is expected this year, in part because the Fed already pledged this month to keep interest rates near zero into 2013.