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Global Market Wrap-Up - March 31, 2014

Monday, March 31, 2014
By: 
Mark Hanna

5 Themes for the Week

1) Busy Week for U.S. Economic Data - The first week of the month brings many of the most followed U.S. economic reports; here are 3 to key on this week.

  • Tuesday - The U.S. ISM Manufacturing index for March. The consensus is for an increase to 54.0 from 53.2 in February. Any reading over 50 indicates expansion.
  • Thursday - The U.S. ISM Non Manufacturing index for March. The consensus is for a reading of 53.5, up from 51.6 in February.
  • Friday - Employment data. The consensus is for an increase of 206,000 non-farm payroll jobs in March, up from the 175,000 non-farm payroll jobs added in February. The consensus is for the unemployment rate to decline to 6.6% in March.

Keep in mind, Janet Yellen moved away from the 6.5% unemployment rate threshold for tightening at the last Federal Reserve news conference so the rate will not be as much of a trigger as some thought it would be.

2) Japanese Government is Set to Hike the Retail Sales Tax to 8% from 5% on April 1 - One thing to watch closely in Japan is to see how much economic activity was pulled forward to quarter 1 versus quarter 2 to avoid this retail sales tax hike. Hence, when we view it down the road there may be a spike in economic activity in Japan in Q1, offset by a drag in Q2. The last sales tax increase happened in 1997. At that time, Japan's economy fell into recession not long afterwards.

In other economic data out of the country, industrial output for February was reported as a 2.3% drop, much below estimates of a 0.3% gain. It is very likely that manufacturers are bracing for a slump in demand following the sales tax increase. Inventories fell for a seventh straight month.

3) Emerging Markets Bounce - After a rough first quarter emerging market are coming off their best stretch since last summer. Russia’s market jumped to a month high as the nation’s foreign minister met with his U.S. counterpart. Turkey’s lira led gains among world major currencies on speculation Prime Minister Recep Tayyip Erdogan’s party victory in local elections may arrest foreign capital outflows; the Turkish market rose to its best levels since December. Brazil’s market rose to an 11-week high.

4) European Central Bank Set to Meet this Week; More Stimulus? - A lot of "hints" of more stimulus were dropped from the European continent last week ahead of this week's ECB meeting. Some tools offered were "effective negative interest rates"—meaning rates so low that commercial banks would essentially pay the ECB to park their extra cash overnight. Also mentioned were purchases of government or private-sector debt to hold down long-term rates. With the Bundesbank bank the most conservative in the region, its President Jens Weidmann said in an interview that he didn't rule out large-scale asset purchases, known as quantitative easing, as a possibility. He also raised the option of negative deposit rates, though he said he wasn't talking about any imminent decision.

5) Graduate Students Student Debt Surging - A Wall Street Journal story last week highlighted the effect of graduate student debt in the growing student debt bubble; now larger than all credit card debt in the country. The typical debt load of borrowers leaving school with a master's, medical, law or doctoral degree jumped an inflation-adjusted 43% between 2004 and 2012. That translated into a median debt load—the point at which half of borrowers owed more and half owed less—of $57,600 in 2012. By comparison, the typical student-debt burden of borrowers leaving school with a bachelor's degree climbed 39% over the same period, to $27,000 in 2012.

 

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