No economic data is due to be reported before Wednesday in the US which is keeping traders cautious. But most important is a meeting taking place today between German Chancellor Angela Merkel and French President Nicolas Sarkozy in Berlin. As market participants wait for word from that meeting, both the equity and bond markets are flat.
While the US has shown a steady improvement in economic data over the past few months and, in particular, last week with the better than expected jobs numbers, there is little data being reported this week that will actually fan those flames of growth.
Wednesday is the day for the Fed’s Beige Book, a review of the economic conditions in the Federal Reserve’s banking regions. Improvement is expected, yet much of the data that makes up this report is already known. The most important piece of data for the week is the Retail Sales report for December which may confirm a strong holiday sales season. However, a note of caution is due because several of the past few years have had commentary of “strong retail sales” during the holidays only to give way to actual numbers that were disappointing. The week will finish with weekly jobless claims and import prices and consumer sentiment.
Today’s meeting in Berlin between the German and French leaders is about policies that can stimulate growth in the Euro-zone region and methods of expediting the fiscal coordination within the currency union. No dramatic new initiatives are expected yet traders seem to be giving the leaders the benefit of the doubt and keeping markets near the levels from Friday’s close. Should nothing productive come from the meeting today, European markets and the euro currency could fall late today or tomorrow.
Mortgage rates could be a beneficiary this week of a lack of US data and a lack of progress in Europe. Already at record lows, mortgage rates may have a little more room to fall as investors choose to protect themselves from European fears rather than act on US optimism.
By David Coster on January 9, 2012
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