Weekly Round-Up: 05/20/13 – 05/24/13

Weekly Round-Up: 05/20/13 – 05/24/13:

Some FOMC members felt that their asset purchase program should be tapered   

China’s PMI flash unexpectedly contracted

Jobless claims were better than expected

Flash manufacturing PMI in the US was better than expected

New home sales beat consensus by a wide margin

Durable goods orders were better than expected

  

Commentary

This week was uneventful until China’s flash PMI reading on manufacturing disappointed and contracted for the first time in seven months. This sent Japanese equities down 10% within the last two trading sessions. Stocks in the US declined as well but not as severe as Japanese stocks. Poor Chinese data coupled with Fed commentary of tapering bond purchases sent the SP 500 down for three consecutive trading sessions this week. The number of FOMC members that are calling for a slowdown in bond purchases is small. The hawks do not have enough support within the committee to actually taper bond purchases, according to the minutes. So in essence, the hawks’ calls for bond tapering are only rhetoric at the moment. Japanese equities overreacted in my opinion. We received Chinese data within the past few weeks that disappointed, however, Japanese stocks hardly reacted to the disappointing Chinese reports. I see US stocks continuing their ascent this week if GDP estimates exceeds economists’ consensus on Thursday. I also see the Yen resuming its decline if Japan’s household spending report and consumer price report beat analysts’ estimates this Thursday.