Oil Oil Everywhere Nor Any Drop To Drink

Intro: Investors have a heavy week of economic data ahead highlighted by NonFarm payrolls and Unemployment rate. Also on the docket is 90 S&P 500 companies scheduled to report. The market will also be watching Treasury yields after last week’s smallest increase in labor costs in 33 years and China.

Earnings: Earnings season continues with 1 of the Dow 30 companies reporting highlighted by Walt Disney, Time Warner and Priceline. Traders can see individual stocks have huge price swings if a company’s earnings outpace or fall short of what the street expected

Non-Farm Payrolls & Unemployment Rate:  On Friday (8/7), Non-Farm Payrolls and the Unemployment Rate are released. Traders will be looking to the results as a measure of the strength of the U.S. economy. The Fed will be paying close attention as the latest economic data will determine whether we see a rate hike in September.

Monetary Policy: Across the globe, multiple central banks will be making monetary policy statements. Traders will be looking for any changes in rates which could affect foreign currencies if they decide to tighten or ease policy.   

Super Thursday: The UK’s Central Bank will be simultaneously releasing data that they usually report over a 2 week period in what they are calling ‘Super Thursday” They will publish its policy decision, minutes of the meeting, official votes and new forecasts. There is also a chance that the Reserve Bank of England may tighten interest rates for the first time in almost a decade. This is similar to what is happening with the FED. 

China: Last Monday, China’s Shanghai stock exchange fell over 8%, starting a global sell off. Over the course of last week, the Chinese market stabilized A slow-down in China pushes the price of commodities lower on weaker demand. Traders will monitor the situation to see if China . 

 

MONDAY (8/3)

  • 8:30 AM ET – Personal Income - Jun
  • 8:30 AM ET – Personal Spending – Jun
  • 10:00 AM ET – ISM Index - Jul
  • 10:00 AM ET – Construction Spending - Jun
  • 5:00 PM ET – Auto Sales – Jun
  • China Manufacturing PMI
  • China HSBC Manufacturing PMI
  • Japan Final Manufacturing PMI
  • Australia Building Approvals
  • European Final Manufacturing PMI
  • Great Britain Manufacturing PMI
  • FOMC Member Jerome Powell Speaks
  • Canadian Banks are closed in observance of Civic Day
  • Earnings: HSBC Holdings, American International Group, Allstate

 

TUESDAY (8/4)

  • 10:00 AM ET – Factory Orders – Jun
  • Australia Retail Sales & Trade Balance
  • Reserve Bank of Australia Rate Statement
  • Great Britain Construction PMI
  • Earnings: Walt Disney, CVS, Aetna

 

WEDNESDAY (8/5)

  • 8:15 AM ET – ADP Employment Change - Jul
  • 8:30 AM ET - Trade Balance - Jun
  • 10:00 AM ET – ISM Services - Jul
  • 10:30AM ET – Crude Oil Inventories
  • New Zealand GDT Price Index
  • China HSBC Services PMI
  • Great Britain Services PMI
  • Canada Trade Balance
  • Earnings: Time Warner, Priceline, Prudential Financial

 

THURSDAY (8/6)

  • 7:30 AM ET - Challenger Job Cuts - Jul
  • 8:30 AM ET - Weekly Jobless Claims
  • Australia Unemployment Rate
  • Bank of England Official Bank Rate, Inflation Report & Statement
  • Bank of England Governor Mark Carney Speaks
  • Great Britain Manufacturing Production
  • Earnings: Allergan, Rio Tinto, Duke Energy

 

FRIDAY (8/7)

  • 8:30 AM ET - Nonfarm Payrolls - Jul
  • 8:30 AM ET - Unemployment Rate - Jul
  • 8:30 AM ET – Hourly Earnings - Jul
  • 10:00 AM ET – Consumer Credit - Jun
  • Reserve Bank of Australia Monetary Policy Statement
  • Bank of Japan Monetary Policy Statement and Press Conference
  • Canada Building Permits
  • Canada Unemployment Rate
  • Canada Ivey PMI
  • Earnings: JD.com

I wanted to add a little more on China’s stock markets as traders should be skeptical of the Shanghai Composite and Shenzhen. 

China’s Shanghai Composite was down 13% for the month of July which helped pull the US and global markets down on certain days. The Shenzhen market was down 41% from Mid-June to Mid-July. China’s decrease over this period also brought down the price of commodities on the potential slowdown in their economy. However, we should remember that the exchange from the beginning of November to Mid-June was up nearly 114%. If the S&P 500 was to mirror the Shanghai composite over the same time period, the S&P would be at approx. 4300.

A higher demand for commodities would have happened over that time period which did not happen as Brent crude has hovered between $55 and $75. Last year, at this time Brent was trading over $100.

As some of the skeptics in the US consider the stock markets as legalizing gambling, China literally uses it as a slot machine. The communist party promoted the stock market and explained to the public what it meant to trade on margin pushing money into a market which drove prices up artificially for semi-educated people. Market valuations exploded without increases in profits or revenues. Speculators pumped stocks to astronomical proportions. Helping this explosion is the country now has over 250 million trading accounts.

Than in the last month, the market crashed. Pig farmers, street vendors and Opium Den owners lost their savings. The Chinese government needs to save face not just for the people who lost money, but for the regime itself. To help the stem of outflows, the Chinese government initiated draconian measures including a list of stocks you can’t sell which was made up of half of the roughly 3000 Chinese companies. The Chinese Securities Finance Corp lent money to top brokerage firms to purchase ‘blue chip” stocks.

As we witnessed in the last few trading sessions, the Chinese markets have stabilized. Global markets have stabilized in the meantime. However, the only logical reason for the stabilization is the Chinese government stepping in and purchasing all these failing companies themselves.

China accounts for only 14% of the world’s GDP so drastic drops in world exchanges are entirely inflated. We must remember that Greece made up 3% of Europe’s economy but any news on negotiations had European exchanges up or down 5% in a single day. The only thing to fear from China’s slowdown is a revolt by the millions of people who lost everything from a regime trying to pretend their economy is still growing at 10%.

As a result of China’s latest slowdown, it’s only a matter of time until the money used to build millions of empty buildings, an empty Disneyland park, and villages without any inhabitants, and now the loss of their money in a casino hit a boiling point. The awarding of the 2022 Winter Olympics to Beijing is only a temporary relief as no other country would build stadiums that will become parking lots in a year as we see in Brazil after last year’s World Cup. But as we have learned from past revolts, and I learned first hand from my trip to China, revolts result in millions of people getting killed with villages being wiped out because, as the government said to the people 25 years ago, the “Weather” is why everybody “Disappeared”.