The Day Ahead: Jobless Claims, Existing Home Sales, Treasury Auction
The sharp sell-off in yesterday’s final hour hurt investor sentiment around the globe and contributed to general uncertainty about near-term prospects. Commodity prices are slightly weaker this morning with oil near $68 per barrel, while the US dollar has firmed from annual lows. Major events today include the weekly jobless claims report an hour before the opening bell, and the Existing Home Sales index half an hour into the session.
The session in Asia was deeply mixed. Japan’s Nikkei posted a 1.67% advance even though all-industry activity failed to meet expectations in July and nominal exports showed only minor improvement. Meanwhile, shares in Hong Kong nosedived 2.52% after it was reported that August exports were 13.9% slower than one year ago. The European market is also in the red. A sixth monthly gain in Germany’s Ifo index hasn’t prevented the DAX from falling 0.40%, and shares in England and France are currently down 0.33%.
As the G-20 meeting kicks off in Pittsburgh, investors will be looking for a third straight weekly improvement in jobless claims. If that happens, optimism could grow that September payrolls will moderate significantly. Then at 10:00, attention will turn to the Existing Home Sales report, which analysts believe will improve for the fifth straight month.
In addition to fresh data, the Treasury will hold an auction in the early afternoon for 7-Year Notes, just as President Obama’s chief economic advisor gives a speech on the economy.
Key Releases Today:
8:30 ― Weekly Jobless Claims have moderated for the past two weeks, and the 545,000 new filings reported last week was the smallest number since early July. Some analysts look for a third week of improvement, but the median estimate is 550k.
“With markets anxiously awaiting signs of stabilization in the labor market, the weekly claims reports take on added importance,” said analysts from Nomura. “So far, the data only show evidence of very gradual improvement and an unexpected jump in continuing claims last week suggests businesses remain reluctant to re-hire laid-off workers.”
10:00 ― Existing Home Sales should post their fifth monthly gain in August, pushing the cumulative gain to around 19%. The Pending Home Sales Index, which predicts existing home sales, bumped up 3.2% in July, indicating the annualized pace of sales should be around 5.41 million units in August.
Analysts at Nomura, however, believe the sales rate will fall 0.8% to 5.20 million. “Although we believe home sales remain on a rising trend, the very sharp increase in July suggests some payback this month,” they said in a weekly note. “That said, there may be upside risks due to the first-time homebuyer tax credit. The popular program expires at the end of November and prospective buyers may attempt to close sales earlier to ensure they qualify for the rebate.”
1:00 ― Christina Romer, head of the White House’s Council of Economic Advisers, delivers the keynote address to the Chicago Federal Reserve Bank's International Banking Conference in Chicago.
Treasury Auctions:
1:00 ― 7-Year Auction