It was sad to see US President Barak O’Bama on the TV this morning speaking on yet another mindless massacre of young people by one of their peers. What is it about the Americans which fails to get that moral courage neither struts nor does it need to have a weapon in hand in order to demonstrate its power?
The sadness of the event was one thing, the image of the tired old man speaking was something entirely different? What has become of the enthusiastic first term Senator who charmed the world with his “Yes We Can”?
Despite lots of the “Ra, ra, ra, raise the bar!” which is coming out of the States, the recovery is beginning to look tired. Downstream, at consumer level, all seems to be fine but further up the economic food-chain things are not all rosy. The September reading for the ISM Manufacturing PMI undershot the already bearish forecast of 50.6 by coming in at 50.2 which is precipitously lower than the August number of 51.1, that in July of 52.7 and June of 53.5. If this trend is in fact a trend, then it is very much not your friend. Initial Claims for the week and ahead of today’s Payroll Report were also higher than expected at 277k but I would not put too much store in that; the series is generally quite volatile and one swallow, a summer does not make.
That neatly brings us to today and to the 47th successive “most important economic release in modern history”. For all intents and purposes, at 5.1% unemployment, the US is as near as dammit fully employed. Forecasts are for an increase in the Nonfarm Payroll of around 200,000. That number concerns me less than the revision of the August figure which was, at 173,000, pretty low. I would not be surprised to see that one strongly revised upwards and if it is, then we can equally assume that whatever we see today for the September period to be equally revised higher this time in November. Also keep a keen eye on the hourly earnings which have been stubbornly rigid despite the visible tightening in labour market conditions.
Is the outcome, whether stronger or weaker than consensus forecast, going to have any influence at all on the FOMC or is this now a hardening case of “Don’t confuse me with facts, my mind is made up”? The Fed has not covered itself in glory in the past couple of years in the way it has played “The Grand Old Duke of York” with not only markets but with the economy as a whole. In its fervour not to do anything wrong, it has ended up doing nothing at all and that might in the future prove to have been the worst of all possible mistakes.
Although the Payroll Report is the main event of the day, it is not the only one and at 10:00 EST, US manufacturers report their new orders for August, another interesting bit of up-stream information. But what do we do if we find manufacturing to be consolidating while consumers are on fire? Did you see the vehicle sales yesterday? Did they ever knock the cover off the ball!
Cornered
While focusing on the USA, there is one thing that I have observed which, as tragic as it is, makes me chuckle. As a child of the Cold War, I was used to seeing the Americans backing repulsive but otherwise broadly legitimate regimes whereas the Russians (or Soviets, as they were at the time) armed and backed all manner of extra-parliamentary rebel forces. Now, in Syria, the shoe is on the other foot. The Russians are supporting the repulsive but otherwise broadly legitimate Assad government and it is the Yanks who are playing around with the rebels. On this point the Russians have got the Americans cornered. With that, with the debt ceiling waving and with the defenestration of John Boehner still hanging over Capitol Hill, no wonder O’Bama is looking totally knackered
Finally, on a practical note, an interesting event in the US credit markets was brought to my attention. Edenbridge Energy came yesterday with a US$1.6 billion 3 tranche deal led by Citi, Morgan Stanley, Deutsche and BNP. The deal, with initial guidance, was struggling. Then something happened which we haven’t seen in a while, namely that the guidance was widened. Once correctly priced, the deal flew and subsequently performed nicely in the after-market. I wonder how long it will take for those syndicate beasts in Frankfurt, Paris and London to work out how to make a deal work for both sides of the trade? Is the time finally coming closer when they will have to consider that the providers of the money actually have a choice? I wonder whether they’re even watching?
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Alas, it is that time of the week again and all that remains is for me to wish you and yours a happy and peaceful week-end. As an England rugby supporter, this has been a horrible week and it might well get just that little bit worse tomorrow. I do, however, have faith in our boys. Though not a great fan of that chap in the White House, I will humbly pay my respects to him and cheekily borrow his “Yes We Can”. regards
