The Day Ahead: Case-Shiller HPI, Treasury Auctions 2 Year Notes, FOMC
Equity markets around the globe sank following news that Standard & Poor’s lowered Japan’s long-term credit rating outlook to negative from stable. China’s Shanghai index traded down 2.42%, Japan’s Nikkei was down 1.78%, and England’s FTSE 100 is off 0.18%.
S&P said “the outlook change reflects our view that the Japanese government's diminishing economic policy flexibility may lead to a downgrade unless measures can be taken to stem fiscal and deflationary pressures”.
Investors are also concerned that China is increasing reserve ratios, again, for some of its largest banking institutions.
“The US$ index is stronger, as news that a number of Chinese banks have been ordered to halt lending for the rest of the month and hike reserve ratios has fueled risk aversion,” noted Benjamin Reitzes from BMO Capital Markets.
In the US, equity futures are mixed. Dow Futures are up 4 points to 10,142 and S&P 500 Futures are 1.40 points lower to 1,091.. Meanwhile, WTI Crude oil is down 66 cents to $74.60 per barrel and Gold is trading $5.50 lower at $1,091
The Day Ahead:
9:00 ― The S&P Case-Shiller Home Price Index, which has shown five consecutive monthly price gains, may be one of the week’s biggest economic releases. As of October, national home prices were 9.4% below year-ago levels, versus -11.3% in August and -19.0% in January. Compared to their July 2006 peak prices remain down 26%.
“A drop this month would mark the first decline in house prices since April 2009,” noted analysts from Nomura Global Economics. “Most of this deceleration likely reflects a normal seasonal downswing. However, we also believe the first-time homebuyer tax credit may have supported prices in 2009, and that prices may lose some momentum this year.”
10:00 ― Analysts are expecting a slight rise in Consumer Confidence this month. With unemployment in double-digits and the stock market shedding more than 4% last week, it’s a bit of a mystery why the index would rise. Most economic notes available point to out that confidence is historically low and assume consumers are becoming more confident as GDP increases. In December the index was 52.9; in January the expectation is for 53.5.
“With the start of a new year, confidence typically improves,” said analysts from IHS Global Insight. “Strong growth in real GDP in the fourth quarter suggests that an upturn in employment is coming soon. Increased optimism about employment and income growth in the year ahead should give confidence a lift.”
The Federal Open Market Committee will begin their two day meeting on domestic monetary policy today. The FOMC will release their policy statement at 2:15 tomorrow afternoon.
Treasury Auctions:
- 11:30 ― 4-Week Bills
- 1:00 ― 2-Year Notes