Enis’s Macro Wrap – Back to Where We Started

by Enis September 4, 2012 7:45 am • Commentary

Price action over the long weekend was a good bit of back and forth in all asset markets, but they are all quite close to where we left them on Friday afternoon.  Asian stocks have been close to unchanged the past 2 days (though slightly lower overall), while European stocks had a strong day yesterday, offset by weakness today.  This week involves a busy calendar, with 2 events dominating the preparations of traders and investors.  

First, the ECB meeting concludes on Sept 6th, and we will hear from Draghi on his plans for the next stage of bailouts for the periphery.  He has gradually guided expectations over the past month, leaning towards purchasing 2-3 year Italian and Spanish debt as long as those countries follow their reform programs and the German court approves the ESM, which would allow governments to participate in purchases of sovereign debt alongside the ECB.  This week’s commentary will not provide the final plan, since the ECB must wait for the German court decision on Sept 12th.  But it should set the overall direction.

Second, among a number of U.S. economic data releases (including ISM manufacturing and non-manufacturing), the most important will be the non-farm payrolls report on Friday.  After a decent report in August, aggressive action from the Fed next week might hinge on the strength of this month’s report.  The market no doubt views the significance of the report in that manner.

Overnight price action:

  • SPX futures are unchanged after trading as low as 1395 and as high as 1410 in the past 2 days
  • The U.S. dollar is close to flat vs. most major crosses, with the weakness in the Australian dollar the notable outlier as Chinese stimulus hopes are deflating by the week
  • The commodity complex is broadly higher, between 0-1% for most commodities
  • Treasury bonds close to flat, as are the credit markets.