Author: Ilan

Fri, 11 Sep 2015 16:07 PM ESTThe volatility seen over the last month in global markets gave way to relative calm this week. US markets were subdued thanks to the Labor Day weekend holiday and a schedule light on major data releases. There was a notable increase in corporate debt issues as companies tried to get ahead of Fed hikes later this year, although the jury remains out on the feasibility of policy tightening at next week’s FOMC meeting. Other highlights included the excellent JOLTs job openings report, Apple’s product refresh, and various investor conferences where management teams largely indicated that prior guidance (or the low end) remains achievable despite the recent uptick in global growth concerns. Shanghai reopened for trade after a two-day holiday to another weak Chinese trade report, which inspired equity gains on hopes for more stimulus spending. US Treasury yields backed up modestly, as prices were pressured by supply from both corporate and government sales. For the week, the S&P and DJIA each gained 2% and the Nasdaq added 3%.Job openings in America hit another record high in July. The latest Job Openings and Labor Turnover Survey (JOLTS) – one of Fed Chair Yellen’s favorite gauges of labor market health – showed that job openings jumped to 5.75 million in July, the highest since the series began in December 2000. With openings at record highs, robust employment should be accompanied by a sustained pickup in wages, just another data point that suggests the Fed needs to tighten sooner rather than later. On Sunday, Fed watcher Hilsenrath wrote that dovish voter Williams told him he was anticipating liftoff this year if risks diminish, but that personally he remained on the fence regarding hikes. “All of the data that we have had up until now has been, I think, encouraging. It has been about as good, or better, than I was expecting, in terms of the U.S. economy. But there are some pretty significant headwinds that have developed,” said Williams.Chinese markets cooled off this week and volatility flattened out to a degree. On Tuesday, the August China trade surplus topped consensus but the decline in both exports and imports raised concerns. Exports fell 5.5% y/y, better than the 8.3% decline in July, while imports fell double the anticipated rate (-13.8% y/y v -6%e). The two-month slide in exports is causing extreme discomfort in Beijing, and the Shanghai Composite gained more than 5% on Tuesday and Wednesday on hope the ugly data would prompt yet another round of government stimulus. The August CPI and PPI data would complicate any PBoC action, as CPI inflation hit a one-year high of 2%, driven by surging food prices, while PPI inflation declined 5.9%. With costs higher and manufacturing prices lower, the outlook is only getting murkier.

In Japan, the Nikkei index gained 2.7% this week, snapping a four-week losing streak. Prime Minister Abe consolidated his power by winning a new mandate as leader of his party, and he urged companies to boost capital expenditures now that the Abenomics program is in full swing. Abe also announced that he wants to lower the corporate tax by at least another 3.3% in 2016 in support of his plans to get the corporate tax rate below 30%. An upward revision in the final Q2 GDP to -0.3% from the -0.4% preliminary reading eased some concerns about Japan heading toward yet another recession.

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