Events offshore will muscle our markets this week, perhaps eclipsing domestic considerations. The Mid East was reviewed earlier. We take a look at Japan, following our guide to the week’s data.
We have Feb Existing Home sales on Mon (expected to be lower), Feb New Home sales on Wed (expected to be higher). We have Feb Durable Orders on Wed. This key number reflects orders placed with manuf’s for delivery of hard goods. The number is expected to be up 1.5% but the risk is for something more. The unemployment Claims release on Thus is also key. The risk is that this release will cheer the market, falling below expectations. The third revision for Q4 ‘10 GDP is on Friday - ancient history. Also on Fri we have the Mar Univ of Mich sentiment figure, something to be ignored by planners and traders as it carries few leading characteristics.
Now to Japan. Anyone who bets against Japan does so at their peril.
True to the anchor set earlier we can expect the nuclear emergency to continue to diminish, we can expect the gov’t to rapidly set machinery in place for resuscitation, a process that will flatten St estimates. GDP may take a hit near term (maybe 1%) aggravated by a temporary national power shortage, but can be expected to surge, Q4. A major rescue package is nearing completion, including tax breaks. We expect the Bk of Japan to monetize the deficits needed to fund construction (although they currently deny such a step) and with that, pressure the yen lower, also a plus.
Production constraints associated with the crisis will be concentrated in Asia. Observers have highlighted supply considerations for US manufacturers; there will be little impact on our economy in this regard as Japan’s competitors move quickly to fill the gap. Look for headlines this week to cooperate with that view. This tragedy will provide an immediate spark to US industry. There will be some added pressure to energy prices as Japan will rely more on natural gas for power generation, at least for the near term. There will also be added pressure to materials prices - cement and re-bar come to mind.
We likely over-estimated the US price risk associated with repatriation but we do know accompanying yen strength would have retarded the Japanese recovery. Japan requested and received G-7 assistance in this regard. That potential crisis has passed. Look for further weakening, this currency.
Longer term implications for the US will be determined by the extent the growth of nuclear projects worldwide is impaired. From the Telegraph, we understand that the world has 442 reactors, with 65 under construction. “They generate 372 GW, covering 13.8pc of global electricity. The share is higher in the rich world: France 75pc, Belgium 52pc, Ukraine 47pc, Korea 35pc, Japan 29pc, the US 20pc, and the UK 18pc. In China it is just 2pc.” In the most general sense, output was expected to double over the next twenty years. A set back obviously translates back to conventional energy prices. Our view is that after some examination, nuclear will recover.
Robert Carven
We have Feb Existing Home sales on Mon (expected to be lower), Feb New Home sales on Wed (expected to be higher). We have Feb Durable Orders on Wed. This key number reflects orders placed with manuf’s for delivery of hard goods. The number is expected to be up 1.5% but the risk is for something more. The unemployment Claims release on Thus is also key. The risk is that this release will cheer the market, falling below expectations. The third revision for Q4 ‘10 GDP is on Friday - ancient history. Also on Fri we have the Mar Univ of Mich sentiment figure, something to be ignored by planners and traders as it carries few leading characteristics.
Now to Japan. Anyone who bets against Japan does so at their peril.
True to the anchor set earlier we can expect the nuclear emergency to continue to diminish, we can expect the gov’t to rapidly set machinery in place for resuscitation, a process that will flatten St estimates. GDP may take a hit near term (maybe 1%) aggravated by a temporary national power shortage, but can be expected to surge, Q4. A major rescue package is nearing completion, including tax breaks. We expect the Bk of Japan to monetize the deficits needed to fund construction (although they currently deny such a step) and with that, pressure the yen lower, also a plus.
Production constraints associated with the crisis will be concentrated in Asia. Observers have highlighted supply considerations for US manufacturers; there will be little impact on our economy in this regard as Japan’s competitors move quickly to fill the gap. Look for headlines this week to cooperate with that view. This tragedy will provide an immediate spark to US industry. There will be some added pressure to energy prices as Japan will rely more on natural gas for power generation, at least for the near term. There will also be added pressure to materials prices - cement and re-bar come to mind.
We likely over-estimated the US price risk associated with repatriation but we do know accompanying yen strength would have retarded the Japanese recovery. Japan requested and received G-7 assistance in this regard. That potential crisis has passed. Look for further weakening, this currency.
Longer term implications for the US will be determined by the extent the growth of nuclear projects worldwide is impaired. From the Telegraph, we understand that the world has 442 reactors, with 65 under construction. “They generate 372 GW, covering 13.8pc of global electricity. The share is higher in the rich world: France 75pc, Belgium 52pc, Ukraine 47pc, Korea 35pc, Japan 29pc, the US 20pc, and the UK 18pc. In China it is just 2pc.” In the most general sense, output was expected to double over the next twenty years. A set back obviously translates back to conventional energy prices. Our view is that after some examination, nuclear will recover.
Robert Carven
No comments:
Post a Comment