There’s a new theme in the global economy and markets: nothing.
Like we mentioned yesterday, the economic calendar will be light this week, with almost no market moving data scheduled for Monday.
However, market watchers are indeed nervous about at least two things: 1) Earnings growth expectations have stagnated as stocks have continued to rally. This is making stocks increasingly expensive. 2) Deflation risk is back on the radar with inflation measures continuing to surprise to the downside. With economic data softening into Q2, falling prices could become a problem for both the markets and the economy.
The deafening silence is the theme of Paul Donovan’s morning comment for UBS. Here’s Donovan verbatim from UBS.com:
Quiet. Not necessarily peaceful
- The economic data calendar is a desolate wasteland of nothingness – with much of Europe on holiday too. The UK came out with the Rightmove house price survey, hitting a new all time high, in the wake of the Bank of England governor muttering about possible bubbles ahead.
- Chinese new home prices were released over the weekend, and showed further gains. The Chinese authorities are clearly concerned about the property market, but the regulatory attempts to control it hitherto do not seem to have cooled things down very much.
- This week hosts a fair few central bank speakers, including Bernanke testifying before the Joint Economic Committee of Congress. ECB speakers litter the calendar, and the Bank of England releases minutes of the meeting where Governor King appeared to turn optimistic.
- European leaders will be gathering together for a summit this week, with passionate debates about fiscal austerity versus growth still raging. The issue of banking union in the Euro area is supposed to be discussed too.