Global stock market consensus struggles with this hard riddle–
Can the U.S. economy stay out of trouble until China’s growth engine gets purring again?
When markets are torn and looking for direction I often think of a special two-headed animal in Dr. Dolittle’s classic tale.
The pushmi-pullyu ("push-me—pull-you") is a "gazelle-unicorn cross."
This goofy animal has two different heads at opposite ends of its body. In The Story of Doctor Dolittle, the pushmi-pullyu usually uses one head to talk, reserving the other for eating (thus allowing it to eat while speaking without being rude).
It claims its great-grandfather was the last unicorn. Think of one head as the U.S. economy. China is the other head. One head is talking (the U.S.) while the other head is eating (China).
Today’s market spectators just wish the China economy head would eat up a whole lot more oil and commodities. We are all waiting around for that to happen.
On Monday, this Global Week Ahead started with a blast of manufacturing PMIs.
Two sister Asian purchasing manager index (PMI) readings captured headlines.
They were the China manufacturing PMIs. The official reading came in a 49.4, better than the prior 48.2. The private Caixin PMI came in at 48.4, better than its prior 48.2. Getting both readings to higher scores is good. Yet, staying under that Rubicon of expansion at 50 is not a healthy score.
After Friday’s big rally, markets needed a reason to take profits. They used the latest China manufacturing PMI data to do it. Let’s see what happen in the rest of the week.
Unfortunately, it looks like the short oil sharks were swimming together on Monday. WTI oil prices were back down -$1 a barrel intraday. This heavily concentrated short bet by speculators is NOT dead.
On Wednesday, private ADP payroll data looks softer at +195K, down from a prior +257K. On Friday, the Global Week Ahead concludes with the all-important official U.S. non-farm payroll data.
There might be such a thing as an Asian acronym mega-cap story, similar to the FANG concept in the US. If there is — Zacks #1 Ranks share two candidates.
The letter A would be $180B market cap Zacks #1 Rank Alibaba (BABA). The letter T would be $113B market cap Zacks #1 Rank Taiwan Semi (TSM). Today, these are the two biggest market cap stocks in the Zacks #1 Ranks.
More and more, it seems, trader’s stock pick buys in the Info Tech race get won by the very, very biggest Asian and U.S. companies. That tells you something important. It shows how the underlying business races are won in global Info Tech.
I need to come up with two more Asian mega-caps and form a new acronym!
If you are looking for an interesting Latin American buy, take a look $16B market cap Grupo Televisa (TV). It has a Zacks #1 Rank now and holds a B in the Zacks Growth score.
Grupo Televisa, S.A. is the largest media company in the Spanish-speaking world, and a major player in the international entertainment business.
Here is the week ahead in Global Macro fundamentals—
On Monday, the official China PMI for manufacturing came out at 49.4, better than the prior 48.2, but slightly below the consensus for 49.6. It did show improvement.
Also out of China, the private Caixin PMI for manufacturing came out of 48.4, better than the prior 48.2, and better than the consensus for 48.1. However, both PMIs for manufacturing are still below key 50 thresholds that signal expansion.
Cross that Rubicon, and Chinese stock markets will rally big.
The Eurozone composite PMI was flat with a prior reading at 53, which shows expansion. Other country level manufacturing PMIs–
Ireland 54.3 up from 54.2
Poland 50.9 flat from 52.1
Spain 55.4 up from 53
Italy 53.2 down from 55.6
France 50 and flat from 50
Germany 52.3 and flat from 52.3
The U.S. manufacturing PMI looks to be 52.7, the same as the prior. While the private ISM manufacturing PMI should get to 48.5, up from a prior 48.2.
The Markit PMI for Brazil manufacturing looks to be 46.
On Tuesday, Australia’s RBA holds its interest rate meeting.
The Eurozone composite unemployment rate should be flat at 10.5%.
The German unemployment rate looks to be 6.3%.
The Italian unemployment rate looks to be 11.2%.
The Eurozone PPI should be down -2.8% y/y, after a -3.2% prior reading.
The Markit manufacturing PMI for Mexico should be good at 52.
U.S. vehicle sales should be good at 17.55 million annually, up from 17.22 million.
On Wednesday, the BoJ’s Kuroda speaks in Tokyo. The BoJ releases its minutes.
The Eurozone composite PMI should be 53.5. Other country level services PMIs–
The Italian services PMI should be 59.2
The Spanish services PMI should be 54.5
The French services PMI should be 50.6
The German services PMI should be 55.4
The U.S. ADP employment survey should be weaker at +195K, down from a prior +257K.
The US ISM non-manufacturing index should be 55.3, in line with the prior reading.
On Thursday, the BoE Monetary Policy Committee meeting and rate decision happens. No change in the base rate is expected.
U.S. initial claims should be good at 280K.
On Friday, the U.S. should publish its latest non-farm payroll number.
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