Archive for April, 2016

Global Economic Doctor

April 26, 2016

Quick Market View:

April 26, 2016

This is a busy week on the economic front. The FOMC gets underway today and concludes with its Rate Decision on Wednesday, followed by post-meeting Press Conference, which will be closely watched with an eye to any cryptic wording that hints about when rates go up again. This is followed by the BoJ policy meeting release on Thursday as well as well as the Commerce Department releases its first estimate of Q1 2016 GDP. We see 0.6% for Q1, which is consensus. We expect the FOMC meeting to reinforce views already in the market – no immediate FOMC rate hike (though still possibility later in the year), while the BoJ meeting will reflect that the Asia Pacific country will continue to struggle against deflationary pressures. Overall, the general thrust of economic data indicates that the U.S. economy is in muddle through mode, with 2016’s real GDP growth likely to struggle to make it to 2.0%. 

Also today:

* Voters go to the primary polls in 5 states in the U.S., with Trump and Clinton seeking to consolidate their hold on their party’s respective nominations.

* About 10% of the S&P 500 reports earnings, including Apple, Chipotle Mexican Grill, eBay, Lockheed Martin, Twitter and Whirlpool. BP beat earnings (which was a surprise) due to cost-cutting, improved refining margins, and trading business did well.

* S&P downgrades ExxonMobil to AA+.  The company had been put on watch in February. This is expected to increase the company’s cost for financing.

* EU may fine Spain and Portugal for missing budget targets.  Spain still has not formed a government since the inconclusive December 2015 elections and Portugal’s leftwing government is struggling on a number of fronts, the economy and handling of bad bank debt in particular being problems.

* China state firms Q1 profits fall 13.8%.  Although the number looks a little frightening this should be expected, considering the structural changes being made in the Chinese economy and the slowdown in growth.

* The Washington-based Institute of International Finance (IIF) forecasts that China will see $538 billion in capital exodus in 2016. Some of this no doubt is being put away in Caribbean offshore financial centers or European real estate, but some of it is also going into corporate M&A activities. It is something that needs to be watched.

* Saudi prince announces new plans to end “addiction” to oil. Diversification is the key to a new Saudi Arabia, but lower oil prices and restructuring the economy also has a social dimension as many Saudis are now being asked to step up their productivity and think differently about the workplace.

The rest of the week has more earnings, the National Association  Realtors data on pending home sales (Wednesday), U.S. jobless claims (Thursday), the University of Michigan consumer sentiment survey (Friday).

Scott B. MacDonald

MacDonald Scott b

      Dr. Scott B. MacDonald is Chief Economist at Smith’s Research & Gradings.
      Prior to this, he was Senior Managing Director and Chief Economist at KWR International, Inc (KWR). Prior to KWR he was the Head of Research for MC Asset Management LLC, an asset management unit of Mitsubishi Corporation based in Stamford, Connecticut (2012-2015) and Head of Credit & Economics Research at Aladdin Capital (2000-2011) and Chief Economist for KWR International (1999-2000). Prior to those positions he worked at Donaldson, Lufkin & Jenrette, Credit Suisse and the Office of the Comptroller of the Currency (in Washington, D.C.).
      He did his Ph.D. in Political Science at the University of Connecticut, Masters in Asian Studies at the University of London’s School of Oriental and African Studies, and BA in History (Honors) and Political Science at Trinity College (Hartford). He has written 18 books and numerous articles. Areas of expertise are macroeconomics, international finance and geopolitical risk.