On Monday, Alexei Kudrin, longtime ally of Vladimir Putin, tipped by many to succeed Medvedev as prime minister, made some notably blunt comments. These made the front pages of the London FT.
Kudrin says Russia faces a “full-blown economic crisis” next year. This crisis will trigger a series of defaults and the loss of its investment-grade credit rating:
“Today I can say that we have entered or are currently entering a full-blown economic crisis; next year we will feel it in full force. As for what the president and government must do now: the most important factor is the normalization of Russia’s relations with its business partners, above all in Europe, the U.S. and other countries.”
Shortly, the ECB should announce covered bond and asset backed securities purchases.
Early in 2015, look for a one-two punch of stock market catalysts (either positive or negative) in Europe. Number one, Russia must come to the table and strike a deal to get sanctions removed, or at least reduced. That situation is dire. Number two, the ECB must get “QE” underway.
On Tuesday, global markets get the big dump of fundamental data in this holiday-shortened week.
Two sick major European countries report on the strength of their respective consumer sectors. French consumer spending estimates have it at -0.2% y/y. Italian retail sales estimates have that at -0.5% y/y. If either France or Italy give markets a positive consumer story, that should move all European markets up substantially. European stock markets are still recovering from a Russia ruble scare that (hopefully?) peaked last week.
In North America, on Monday, Mexican aggregate supply and demand beat forecasts. This Mexican overall growth measure came in at +3.0% in year-on-year terms. The prior estimate was at +1.9%. Consensus was looking for +2.6%.
Canada reports its latest GDP reading on Tuesday. The prior GDP reading of +0.4% and a market call of +0.1% are what the set the stage there.
To its south on Tuesday, U.S. durable goods numbers, the FHFA home price index, the University of Michigan sentiment index, new home sales and personal income and spending come out. A rise in U.S. personal income and spending of +0.5% is what markets expect, with the prior reading at +0.2%. On Wednesday, a U.S. initial claims index coming in around 290,000 should keep U.S. stock market bulls on all the way to Christmas Day. Claims data below 300,000 signals bull market GDP growth.
Given that it's the season for U.S., Mexican and Canadian shopping — and holiday hiring — a global boost from North America looks solidly in the cards.
This is the last batch of fundamental data for 2014. It pretty much serves as summary statistics for what has gone on with stocks globally — all year long.
The U.S. economy remains the star. Rising growth across a range of indicators keeps North American sister economies of Canada and Mexico turned on.
Across the pond, Vladimir Putin screwed matters up regally, shortly after the Sochi Winter Olympics. European interest rates now plumb historic depths. Established expectations for more “QE“ must be met firmly by expeditious actions from the ECB in January.
In France and Italy, unlike in U.S., Canada and Mexico, consumers are not feeling the holiday cheer this year.
Hope centers on this idea: Things change for the better across the pond next year.
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