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We live, work, and trade in a global economy dominated by the USA and China.
In the Global Week Ahead –in turn– two macro reports from the USA and China matter above all others. The all-important U.S. non-farm payroll report for August on Friday; and updates from two Mainland China manufacturing activity surveys on Thursday, frame trader sentiment.
Last Friday, Fed Chair Janet Yellen upped chances on a Sept. 20th rate hike after she struck a more optimistic note on the U.S. economy at the Jackson Hole conference. Her comments keep a September rate hike “in play”, but not by enough to make it probable. Now, with data-dependent Fed decision makers, that August payroll report becomes the big U.S. macro “tell” heading into the Sept. 20th Fed meeting.
China’s factory activity keeps a competing focus. Official manufacturing and services purchasing managers’ indexes (PMIs) hit the ticker tape Thursday. The official PMIs measure activity in large, mostly state-owned factories. The Caixin manufacturing PMIs is due too. It follows small-to-medium sized private firms in Mainland China.
Concern over the depreciation of China’s renminbi, and worry about growth in the global economy abates – only as factory activity stabilizes in Mainland China. That government’s fiscal expansion does seem to be supporting its manufacturers.
To tie matters up on world’s economic affairs, a G20 Summit will be held in Hangzhou, China September 4th and 5th. Is there any probability of coordinated fiscal policy via that meeting? It looks slim.
To sum it up, the chart below shows. A credible world economy narrative boils down to the USA and Mainland China these days.
(1) The USA economy (the Green Line) nears $17.9 trillion in GDP in 2016, while the Mainland China economy (the Blue Line) nears $12 trillion in GDP.
(2) Remaining major world powers –Germany, Japan and the U.K. in the chart below– are not even close behind in size. None grow fast, if at all.
Three new Zacks #1 Rank (STRONG BUY) Stocks to look into—
NOTE: I picked 3 stocks involved in global manufacturing. It is relevant to note the stock market winners when China manufacturing stabilizes and U.S. growth is not a concern.
Nidec Corp ADR (NJDCY – Snapshot Report) . This company is in the electronic misc. components industry. The stock has $27 billion in Market Cap.
Nidec Corp and its subsidiaries are primarily engaged in the design, development, manufacturing and marketing of i) small precision motors, ii) mid-size motors, iii) machinery and power supplies, and iv) other products, which include auto parts, pivot assemblies, encoders and other services.
Manufacturing operations are located primarily in Asia and they have sales subsidiaries in Asia, North America and Europe.
Anhui Conch Cement (AHCHY – Snapshot Report) . This company is in the Building-Construction Materials Industry. It has a Zacks VGM score of B too and the stock has $3.7 billion in market cap.
Anhui Conch was founded in 1997 and listed in Hong Kong the same year. It was the pioneering overseas listed company in the Chinese cement industry. The company is mainly engaged in production and sales of cement and commodity clinker. It is also the world’s largest single brand cement supplier.
In recent years, the company’s cement production capacity has been continuously rising. The company has five locations with ten million tons of clinker base in Tongling, Yingde, Chizhou, Zongyang and Wuhu. In addition, there are building three new lines of 12,000 tons/day. These will use the world’s most advanced cement-making technology.
Benchmark Electronics (BHE – Snapshot Report) . This is a Electronic Manufacturing Services (EMS) industry player. The stock gets a Zacks VGM score of A and has a market cap of $1.1 billion.
Benchmark Electronics, Inc. provides contract electronics manufacturing and design services to original equipment manufacturers in select industries, including medical devices, communications equipment, industrial and business computers, testing instrumentation and industrial controls.
They specializes in manufacturing high quality, technologically complex printed circuit board assemblies with computer-automated equipment using surface mount and pin-through-hole interconnection technologies for customers requiring low to medium volume production runs.
Big global/macro events this week—
On Monday, Italian consumer confidence dropped to its lowest point in over a year, dragged down by nerves over job security, with business sentiment also pulling back.
On Wednesday, the fresh monthly US ADP private payroll should be +190K in August. The fresh Federal nonfarm payroll should be +165K. It’s out on Friday.
On Thursday, both Mainland China manufacturing PMIs come out.
On Monday, the ISAE business sentiment index for Italy was 101.3 vs. a 103.1 prior. And the consumer confidence index was 109.2 vs. 111.3 prior. Both were down.
USA personal income should be up +0.5% m/m and spending up +0.3% m/m.
Mexico’s unemployment rate (seasonally adjusted) is 3.95%. That’s low.
The Fed’s Yellen speaks at the ECB forum held in Portugal.
On Tuesday, the Brazilian FGB inflation rate is forecast to be 11.50% y/y. That’s still too high.
Brazil’s national unemployment rate should be 11.6%, up from a prior 11.3%.
Germany’s HICP inflation rate should be a paltry +0.4% y/y, the same as the prior reading.
The US Case-Shiller Home Price Index should be up +5.3% y/y from a prior +5.24%.
On Wednesday, there is a Brazilian COPOM monetary policy meeting.
The Brazilian SELIC interest rate should remain at 14.25%.
Retail sales in Germany should be +2.7% y/y.
The ECB’s Praet and the Fed’s Rosengren speak in Beijing.
The unemployment rate in Germany is 6.1%. In Italy, it is 11.6%.
The US ADP employment survey should be +190K jobs added in August. That up from +179K jobs in July.
On Thursday, US vehicle sales should be 17.1 million units.
The China PMI index for manufacturing should be 49.8, in line with the prior 49.9.
The China Caixin PMI should be 50.1, in line with the prior 50.6. This is the private, smaller manufacturing company index.
India’s manufacturing PMI should be near the prior 51.8.
Brazil’s market manufacturing PMI should be 45.5, lower than the prior 46.
On Friday, Italy’s final GDP growth rate should be +0.7% y/y.
US nonfarm payroll should be +165K in August, solid, but not as good as the prior +255K. The unemployment rate should fall -0.1% to 4.8%.
The G-20 leaders meet in Hangzhou China on Sept. 4th and 5th.
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