Contracting U.S. GDP And Retrenching Consumers Could Spark Bearish Sentiment For Glob

A FOMC rate decision and the preliminary reading of first quarter GDP for the U.S. will provide the most significant event risk for the global markets. Consumption data in the U.S., Germany, and Japan could validate concerns that despite stimulus efforts, future growth could be threatened by retrenching consumers who remain in shock following the credit crisis.


· [B]Monday April 20th[/B]

A typical light Monday of event risk will be highlighted by a [B]German Gfk Consumer Confidence[/B] which is expected to show optimism declined slightly. However, given that both the PMI and IFO surveys unexpectedly rose, I wouldn’t rule out the same results, which could add to recent bullish sentiment fro the Dax. [B]Japanese Retail Trade[/B] figures which are expected to fall by 0.3% as consumers continue to retrench as the country falls deeper into recession, may also impact sentiment during Asian trading. [B]U.K.[/B][B] BBA home loans for purchase[/B] will give some insight into the housing market which has been an albatross for the economy. [B]Verizon and Qualcomm[/B] will highlight a busy day of earnings releases in the U.S.

· [B]Tuesday April 21st[/B]

[B]German CPI[/B] is expected to rise to 0.8% from 0.5% and the increasing price pressures may dim the outlook for consumer demand and eliminate the need for additional easing from the ECB which could weigh on sentiment for European names. The [B]Swiss UBS consumption indicator [/B]is coming off a record low so any improvement will be seen as a positive, but further weakness will add to domestic growth concerns. [B]U.S. Consumer Confidence[/B] and the [B]Richmond[/B][B] Fed Manufacturing index[/B] are expected to improve which could raise the outlook for domestic growth and ad support for U.S. equity markets.

· [B]Wednesday April 22nd[/B]

The [B]FOMC rate decision[/B] and U.S. GDP will provide major event risk for the day and early forecasts are calling for a reduction of the benchmark rate to 0.13% which is an unusual forecast since central banks generally make interest rate moves in multiples of 25. However, we did see the BoJ cut theirs to 0.10% so anything is possible. Yet, I don’t expect the Fed to change interest rates now that they have embarked on quantitative easing. The [B]U.S.[/B][B] GDP report[/B] will precede the policy decision and with forecasts of a contraction of 4.7% following last quarter’s 6.3% decline we could see the outlook for future growth decline. The U.S. economy has dug itself a deep hole and may take more time than expected to climb out of it despite the efforts from the U.S. government and if markets see a deeper than expected contraction it will only fuel those concerns. A [B]BoJ rate decision[/B] during the day will also be watched by traders to see if the central bank and to its current quantitative easing measures and to see if existing efforts are having an impact.

· [B]Thursday April 23rd[/B][U][/U]

[B]German Retail Sales[/B], [B]Unemployment Change[/B] and the [B]EZ CPI Estimate[/B] highlight a big day of event risk for the European region. German companies are expected to have laid off 65,000 more employees following 69,000 in March. The growing number of the unemployed will begin to weigh on consumer consumption which declined 0.2% in February and is expected to remain flat in March. The dimming outlook fro domestic demand combined with the country continuing to see demand for its exports decline could be a weighing factor for stocks. The EZ CPI –Estimate expected to 0.7% from 0.6% could add to bearish sentiment as rising inflation would diminish purchasing power going forward. Conversely, the elimination of the threat of deflation could raise the outlook for corporate profits which may have a positive effect. Expected declines in [B]U.S. Personal Income and Spending[/B] by 0.2% and 0.1% respectively will continue the weak consumer consumption theme that is now becoming a major concern for traders. The dour data could be a catalyst to send U.S. equity markets lower.

· [B]Friday April 24th[/B]

[B]Japanese CPI[/B] and [B]household spending[/B] will bring the focus to the Asian markets. The expected 2.7% decline in consume consumption will only add to the dour fundamentals of the Japanese economy which like Germany is an export dependent economy which has seen a drastic drop in demand for its goods. Meanwhile, inflation is expected to fall to 0.2% based on the Tokyo ex fresh food reading which is the most watched. Deflation concerns remain a concern for the economy and the lower consume prices will weigh on corporate profit expectations. The [B]U.K.[/B][B] PMI manufacturing[/B] and the [B]U.S.[/B][B] ISM manufacturing[/B] gauges are expected to show slight improvements but remain in contraction. Nevertheless, they would signal that we may be seeing a bottom in activity which could raise hopes of future growth for both countries, which have been aggressive in their stimulus efforts.