The S&P 500 closed up 2.25 percent Tuesday after a massive 4.1 percent rally in the last hour on, well, nothing at all, except if you count a downbeat Fed Chairman Bernanke and some Dexia/Eurozone rumours. Amidst all this joy Moody’s decided to restrain the markets a bit by hitting Italy with a three-notch downgrade to A2 from Aa2. The calendar today looks promising as far as market interest goes, with Eurozone Retail Sales, US ADP Employment and ISM Non-manufacturing.
Italy downgraded by Moody’s: In an unsurprising move Moody’s downgraded Italy to Aa2, a three-point cut in its rating, and added a negative outlook to boot. This really is something of a non-event as evidenced by EURUSD which fought its way back to pre-announcement levels. Expect more PIIGS downgrade non-events and look out for the next big thing (possibly from the S&P) instead, namely a downgrade of France.
Eurozone Retail Sales set to decline: Consensus is looking for a 0.3 percent retreat in August following a 0.2 gain a month earlier, which would take the annual growth rate to -0.7 percent. July sales were rescued by France with a 0.6 percent gain after Germany announced flat sales and the widespread spending reductions in the Eurozone do not bode well for a surge in sales in the rest of the year.
73,000 more American payrolls in September? At least that is what consensus expects today’s ADP Employment report to show after a gain of 91,000 in August. We recognise that its big brother, the upcoming Employment (Nonfarm Payrolls) report, on Friday gets much more attention, but stress they are bothestimates of employment in the US. The latter is not fact - for that we have to wait for the states’ reports on labour which are very untimely. We believe ADP does add value, but should not simply be used as a proxy for Friday’s Nonfarm Payrolls number (actually for the Private Payrolls number, since ADP only measures private sector employment), but as part of an overall view on the health of the labour market.
ISM Non-manufacturing Index to show continued expansion: while the manufacturing index from the ISM struggles to escape the 50 threshold the Non-manufacturing index, which represents some 90 percent of the economy, has been more robust lately ranging from 52.7 to 54.6 in the last five months and consensus looks for another good, if not impressive, print of 52.8 in today’s report regarding September activity in the service sector.
Last month’s August report showed reasonably strong New Orders of 52.8 (from 51.7) though the Employment component did struggle a bit and fell to 51.6 (from 52.5).
source from: tradingfloor
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