Merk Economic Calendar: Week Ahead In US Financial Markets

By: Joseph Brusuelas | Fri, Jul 18, 2008
Print Email

Financial Markets Summary For The Week of July 21-25

The week of July 21-25 will see a modest week of economic data that will take a back seat to corporate earnings statements. Earnings from the financial (Bank of America, Wachovia, and WaMu), airline (US Airways and Jet Blue), and auto sector (Ford and GM) will shape sentiment and be the primary movers of markets during the upcoming week. Other market bellwethers that can move the market such as Caterpillar, Yahoo, Boeing and Ely-Lilly will also provide earnings announcements. The week in macro data will kick off with the publication of the Fed Beige Book on Tuesday. Thursday will see the release of the weekly jobless claims series, existing homes and durable goods orders for June. The week will conclude with the publication June new home series and the final estimate of the UMICH consumer confidence survey for July. The week will see a light week of Fed talk, with FOMC Gov's Mishkin and Kohn addressing the markets on Wednesday.

Fed Talk

The week in Fed talk will see Philadelphia Fed President Plosser speak on the US economy Tuesday. Wednesday will see two FOMC Gov's Mishkin and Kohn speak. Mr. Kohn will speak on communications policy and transparency and Mr. Mishkin will speak on a topic that has yet to be determined.

Chart of the Week

Fed Beige Book (June-July) Wednesday 02:00 PM

The Beige book for the period covering mid June through mid July should reflect the fairly decent boost in personal consumption on the back of the fiscal stimulus package. While that has temporarily provided support for economic activity, much of the action stimulated by the arrival of the rebates occurred in basic household items, health and beauty and gasoline. The combination of the increase in personal consumption and demand from the external sector should set the stage for a reasonably healthy Q2 GDP. However, we also expect the beige book to reflect that fact and also to provide the market with an indication to reflect the occurrence of another bout of stressed credit markets, the record increase in energy prices, the sizeable decline in the equity markets and the market dislocation caused by the Fannie Mae and Freddie Mac bailout. The combination of these events will provide a significant deadweight on overall economic activity in the second half of the year.

Initial Jobless Claims (Week Ending July 19) Thursday 08:30 AM

Initial claims should continue to trend upward for the week ending July 19. A quick look at the labor sector reflects the growing concerns over the continuing problems in the goods production and manufacturing sector. Moreover, the time it takes for a displaced worker to find a new position continues to grow as reflected by the consistent surge in the continuing claims series. We anticipate that initial claims will arrive at 385K and continuing claims will push 3.25mln for the week.

Existing Home Sales (June) Thursday 10:00 AM

In what should traditionally be the best month of purchasing activity during the calendar year, we anticipate that the sale of existing homes will fall to 4.91mln for the month of June. The three-month trend in sales stands at 4.94mln and we do not see any real catalyst to drive the number back above 5.0mln at this time. On an annual basis, total sales are down -15.9%, the sale of single-family homes has declined -15.4% and the purchase of condo/coops has dropped 24.6%. Of course, the real problem remains the existing stock on the market, which stands at 10.8 months, just above its three-month average of 10.7 months. With much of the current activity located in the REO sector, homeowners are going to have reduce asking prices in a much more vigorous fashion to begin working off the elevated level of inventory.

Durable Goods Orders (June) Friday 08:30 AM

We have become quite bearish on the manufacturing sector and we are less than enthusiastic about the prospects for durables in June. Orders for civilian aircraft stand at 62, which should provide a very low ceiling for what looks to be another mild month of orders for durable goods. Our forecast implies a flat reading in the headline and a -0.3% decline for durables ex-transportation.

University of Michigan (July Final) Friday 10:00 AM

At this point, it does not really matter if consumer sentiment drops five points or increases five points. The fact of the matter is that consumer sentiment is about as bad as one can ever expect to observe. Our forecast implies that consumer confidence will decline to 56.5, but the truth is that until the price of gasoline begins to ease and the median price of a home stabilizes there does little on the horizon to act as a catalyst to move sentiment back towards anything resemble normal.

New Home Sales (June) Friday 10:00 PM

We expect that June will see another month of declines in the new home sales sector. We expect that the building community will see purchasing activity decline to 497K vs. the 512K recorded previously. The major story in the housing sector continues to be the elevated level of inventories. With the large number of completed projects still entering the market, this is depressing prices at a time when the potential buyers are still in the process of recalibrating expectations over returns on investment in residential real estate assets.



Joseph Brusuelas

Author: Joseph Brusuelas

Joseph Brusuelas
Chief Economist
VP Global Strategy
Merk Investments LLC

Bridging academic rigor and communications, Joe Brusuelas provides the Merk team with significant experience in advanced research and analysis of macro-economic factors, as well as in identifying how economic trends impact investors. As Chief Economist and Global Strategist, he is responsible for heading Merk research and analysis and communicating the Merk Perspective to the markets.

Mr. Brusuelas holds an M.A and a B.A. in Political Science from San Diego State and is a PhD candidate at the University of Southern California, Los Angeles.

Before joining Merk, Mr. Brusuelas was the chief US Economist at IDEAglobal in New York. Before that he spent 8 years in academia as a researcher and lecturer covering themes spanning macro- and microeconomics, money, banking and financial markets. In addition, he has worked at Citibank/Salomon Smith Barney, First Fidelity Bank and Great Western Investment Management.

Mr. Brusuelas lives in Connecticut with his wife and St. Bernard.

Merk Investments LLC is the manager of Merk Mutual Funds, including the Merk Asian Currency Fund and the Merk Hard Currency Fund. The Merk Asian Currency Fund invests in a basket of Asian currencies. Asian currencies the Fund may invest in include, but are not limited to, the currencies of China, Hong Kong, Japan, India, Indonesia, Malaysia, the Philippines, Singapore, South Korea, Taiwan and Thailand.

The Merk Hard Currency Fund invests in a basket of hard currencies. Hard currencies are currencies backed by sound monetary policy; sound monetary policy focuses on price stability.

The Funds may be appropriate for you if you are pursuing a long-term goal with a hard or Asian currency component to your portfolio; are willing to tolerate the risks associated with investments in foreign currencies; or are looking for a way to potentially mitigate downside risk in or profit from a secular bear market. For more information on the Funds and to download a prospectus, please visit

Investors should consider the investment objectives, risks and charges and expenses of the Merk Funds carefully before investing. This and other information is in the prospectus, a copy of which may be obtained by visiting the Funds' website at or calling 866-MERK FUND. Please read the prospectus carefully before you invest.

The Funds primarily invest in foreign currencies and as such, changes in currency exchange rates will affect the value of what the Funds own and the price of the Funds' shares. Investing in foreign instruments bears a greater risk than investing in domestic instruments for reasons such as volatility of currency exchange rates and, in some cases, limited geographic focus, political and economic instability, and relatively illiquid markets. The Funds are subject to interest rate risk which is the risk that debt securities in the Funds' portfolio will decline in value because of increases in market interest rates. The Funds may also invest in derivative securities which can be volatile and involve various types and degrees of risk. As a non-diversified fund, the Merk Hard Currency Fund will be subject to more investment risk and potential for volatility than a diversified fund because its portfolio may, at times, focus on a limited number of issuers. For a more complete discussion of these and other Fund risks please refer to the Funds' prospectuses.

This report was prepared by Merk Investments LLC, and reflects the current opinion of the authors. It is based upon sources and data believed to be accurate and reliable. Opinions and forward-looking statements expressed are subject to change without notice. This information does not constitute investment advise nor a solicitation or an offer to buy or sell any products or services. Foreside Fund Services, LLC, distributor.

Copyright © 2008 Merk Investments LLC

All Images, XHTML Renderings, and Source Code Copyright ©