Our Main Macro Man Enis is on his way to Turkey this morning to do a little emerging market groundwork, so I am gonna take a quick shot at his Macro Wrap.
First things first lets start with the weekend chatter that was dominated by the ever increasing case for QE3. While most market participants had recently become convinced that the U.S. was de-coupling from the economies of Europe and Asia, Friday’s disappointing employment data brought many back to the realities of the interconnectedness of the global economy and the myth of “de-coupling”. So even after our “less bad” string on economic data, Fed Chairman Bernanke, saddled with the mandate to “promote maximum employment” is faced with few alternatives after Friday’s Jobs report. Doesn’t make a whole heck of a lot of sense to me, in my non-economist, and slightly pedestrian view of things, QE1 & QE2 have done little to stimulate jobs growth and merely just re-inflated the stock market to levels not seen since before the “Great Recession”.
It appears obvious to me that some in Washington should take a step back and consider some fresh alternatives to policies that have benefitted few at considerable cost. Yesterday’s performance by RGIII in the Redskins win over the Saints in New Orleans was just the sort of new fangled, measured, but accurate action that should be taken by the central bank that has been struggling to keep the economy above water for years now. After the Redskins have struggled mightily for the last decade to keep their heads above water, RGIII’s reported $21 million over 4 years, may have been the deal for the next decade. Whatever they had paid him, after yesterday’s performance, it wouldn’t have mattered, Redskins fans, the team, management etc finally have a reason to believe, and from that hope good things are likely to happen. I guess the problems with the Fed’s action is that we know how this game is going to end, with increased uncertainty and volatility.
-Chinese equities had one heck of a week last week, the Shanghai Comp up nearly 4% after some modest stimulus plans were introduced. Despite weaker than expected data over the weekend, the Shanghai Comp closed up 34 bps as investors continue to anticipate further easing.
-European equities are down modestly, with the DAX flat on the session as investors digest the previously mentioned data in China, but most importantly the German Constitutional Court ruling expected Sept 12 to decide the country’s participation in the previously ESM.
-U.S. futures are also down a few handles as the main event here will be the FOMC’s 2 day meeting starting Wednesday, and the Fed Chairman’s now all but expected unleashing of QE3.