Central Banks Central to Market Optimism - Analyst Blog
09 Agosto 2012 - 11:25AM
Zacks
Central banks remain the primary props behind the all-around air
of optimism in the market. And it’s just not the U.S. Federal
Reserve that is expected to do its bit to juice up the economic
scene -- the European Central Bank (ECB) and the People’s Bank of
China (PBOC) are equally expected to remain in an activist
mode.
This set of expectations is prompting market participants to
scrutinize every piece of incoming economic data from a monetary
policy perspective. The ECB is battling a different kind of
monster, but this morning’s inflation data in China and Jobless
Claims data in the U.S. is seen as supportive of further central
bank easing.
On the initial Jobless Claims front, we got a better-than-expected
drop of 6K increase in initial claims to 361K (a decline of 4K when
combined with revisions to the prior week’s tally), with the 4-week
average going down 2.9K to 368.3K. With the auto sector’s seasonal
shut-downs now behind us, this is perhaps the ‘cleanest’ jobless
claims data that we have seen in the last many weeks. This level of
initial Jobless Claims is generally considered consistent monthly
payroll gains of 150K to 170K or around the July level we saw last
Friday.
With respect to China, this morning’s 1.8% increase in the July CPI
is seen as favorable to more easing action by the PBOC. While the
July CPI increase was a tad bit higher than expectations, it is
nevertheless a deceleration from June’s 2.2% increase and follows
increases of 3.6% and 3.4% in April and March, respectively. The
deceleration in the Chinese inflation readings gives the country’s
monetary and fiscal authorities the space to implement more
stimulus measures to improve the economy’s growth outlook.
It is far from clear at this stage whether the recent run of labor
market data is consistent with more Fed QE. I think it is not, but
this is a minority view as a growing number of economists see the
Fed coming out with another round of bond purchases in its
September meeting.
Macroeconomic Advisors (MA), the economic forecasting firm that we
consult with, is now calling for the Fed to come up with a $600
billion to $750 billion QE3 program next month. And they credit the
new easing program in their forecasts to add a quarter percentage
point to GDP growth and a modest decline in the unemployment rate.
But they are hardly alone in this line of thinking; most of the
recent stock market gains can be assigned to this Fed outlook.
On the earnings front, we got positive guidance from
Brinker International (EAT) after the restaurant
operator came out with better-than-expected earnings on in-line
revenues. Results from Wendy’s (WEN) were in-line,
though North American comps were positive. Kohl’s
(KSS) results were largely inline with expectations, though the
retailer’s comps were on the weaker side. We have
Nordstrom (JWN) reporting after the close
today.
BRINKER INTL (EAT): Free Stock Analysis Report
NORDSTROM INC (JWN): Free Stock Analysis Report
KOHLS CORP (KSS): Free Stock Analysis Report
WENDYS CO/THE (WEN): Free Stock Analysis Report
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