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Data in China, Japans Do Little to Ease Investor Uncertainty

Data in China, Japans Do Little to Ease Investor Uncertainty
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Friday, 01 April 2016 07:15 AM Current | Bio | Archive

Sentiment surveys are often overreacting, but the Tankan has achieved a special status in Japan as one of the few statistics markets really trust.

The quarterly survey of business sentiment was weaker than expected and now stands at its lowest level since June 2013, while the all-industry CAPEX (capital spending), which is very important, came in at -0.9 percent vs. the -0.7 percent expected.

Because this is a corporate survey, it is not entirely clear if this means Japanese companies would spending less on capital spending “in” Japan or less on overall capital spending.

That is a pertinent point because there has been a steady trend to “hollowing out” in Japan with capital spending by Japanese companies “overseas” rising relative to capital spending by Japanese companies “domestically.”

The latest data will increase the pressure for further stimulus and the Bank of Japan may be forced into action simply to create the appearance of doing something.

Meanwhile in China, the Purchasing Managers Index (PMI) of business sentiment improved with the Manufacturing sentiment data moving over the magic level of 50.

Of course, a move like this does not tell us that the Chinese economy is going to roar ahead. In fact a move like this is little more than noise in an indicator that has an unreliable predictive power at best, but markets seem to like this sort of thing.

The euro area Manufacturing Purchasing Managers ticked a little bit higher, but March still saw the second-weakest improvement in manufacturing conditions seen for just over a year.

The data suggest manufacturing grew by only around 0.2% in the first quarter while with prices charged at the factory gate falling at the steepest rate since late-2009.

I don’t think it’s an overstatement to say these Euro area data are not going to change anyone’s expectations on ECB's monetary policy or anything else.

In the U.S., however there is the “potential” of being surprised to the upside by the ISM with a relatively strong reading.

The regional sentiment surveys in the states have pretty consistently been positive in their readings of late and this may start investors on a course of thinking more positively about the U.S. economy.

Again, this is likely to be an over-interpretation of a single set of numbers, but there it is.

The price data in the ISM may attract additional attention, as there has been a steady increase of concern about the inflation prospects in the United States. 

All this is coming around the main event of the U.S. employment report, which is expected to come in at good levels.

Besides that, the U.S. labor market continuous to perform well, raising some questions as to the reliability of the consumption figures that we have been seeing as of late.

Labor markets are tight for skilled and semi-skilled workers, though the appearance of still weak labor markets for unskilled labor remains well in place.

Nonetheless, it is skilled and semi-skilled labor that drive the U.S. economy, as it is there where the spending power is focused.

If the U.S. flow data come as expected, then that may sound something as a challenge to the peculiarly dovish tone of Fed Chair Janet Yellen earlier this week.

Please take notice the Fed Chair will not have known of today’s data when she spoke this week.

Markets are likely to offer between “halfiness” of Fed support and concerns the Fed may be falling behind the curve, especially on the matter of inflation.

Etienne "Hans" Parisis is a bank economist who has advised global billionaires and governments on the financial markets and international investments. To read more of his articles, GO HERE NOW.


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Markets are likely to offer between “halfiness” of Fed support and concerns the Fed may be falling behind the curve, especially on the matter of inflation.
fed, jobs, economy, investors
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2016-15-01
Friday, 01 April 2016 07:15 AM
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