The U.S.A. And China Start Talking: Global Week Ahead

On Monday, the Global Week Ahead opens with a flood of manufacturing data.

The U.S. Institute for Supply Management (ISM) manufacturing Purchasing Managers Index (PMI) is on tap. Closely tracked ISM data will get trader’s attention. A U.S. output expansion has been taking off since last fall.

The recovery began well before the U.S. election -- as equity markets and the economy rebounded from a medley of challenges that reached a nadir early in 2016.

But, where are we now?

Europe’s manufacturing PMI data, also out on Monday, should set a positive tone for equity markets there. Major equity indices have been rallying there. As long as the PMIs stay above 55 collectively, that will keep the European bull running.

On Tuesday, the central banks of Australia and India are likely to keep their policy rates firm.

The core fixed income logic to understand about 2017 is this: the U.S. central bank is hiking rates methodically. The rest of the world is NOT following suit.

It is the combination -- of rate hikes inside the deepest most liquid global financial market, and fixed policy rates, literally everywhere but Mexico -- that matters.

This wider relative rate gap is going to mostly keep the U.S. dollar strong, and make it stronger, as the year progresses. FYI. That hurts U.S. exports.

On Wednesday, traders get Fed minutes from the last meeting of the FOMC, where the members voted to hike rates. This should provide little new insight. This week, five Fed speakers can shed current light on the rate path ahead.

The noteworthy macro print in the Global Week Ahead will be the U.S. nonfarm payroll report. The private ADP payroll addition report -- out on Wednesday -- is set for a low +110K. On Friday, Federal nonfarm payroll report looks for +125K.

With expectations set so low, being witness to a positive data surprise is more likely. As long as ‘muddle through’ remains the outcome, I wouldn’t think this data matters much. Valuations are already so high.

On Thursday and Friday, a meeting in Florida -- between China’s President Xi and U.S. President Trump -- traders will watch closely. Trump has tweeted that the meeting ‘will be a very difficult one.’

The new president blames China for its U.S. bilateral trade deficit, in contrast to what most economists believe. Whether his close advisers inject a more reasoned approach is not clear.

He has tweeted that China is ‘ripping off’ the U.S.

Geopolitical power is underpinned by GDP size. This needs to be accepted -- Roles in the world economy over the last decade have indeed shifted. The U.S. share of world GDP has eroded, mostly as China’s GDP rose and recently surpassed it. The U.S. is not talking to its little brother anymore. There is another adult in the room.

What to do with a bellicose North Korean leader? That topic is also likely to be discussed. Then, there are the recently constructed South China Sea Islands.

Want the best peaceful language to be written publicly? The leaders of the 2 big global powers are talking in person – now -- and not sending or reading tweets.

Amen to that, eh?

Top Zacks #1 Rank (STRONG BUY) Stocks—

I focus on top European stocks this week.

(1) RWE AG (OTC:RWEOY) : This $9.9 billion market cap stock holds a nice long-term Zacks VGM score of A.???
RWE AG is among Europe's five largest utilities. RWE is active in the generation and transmission as well as the sale and trading of electricity and gas. RWE is also active in the water business in Continental Europe. This integrated business model gives them a good position from which to take advantage of the rising demand for energy.

RWE is the biggest power producer in Germany and No. 2 in the UK. RWE continues to expand its position in Central and South-Eastern Europe.

(2) Wolters Kluwer NV (OTC:WTKWY) : This $12.5 billion market cap stock earns a long-term Zacks VGM score of B too.

Wolters Kluwer is a leading global information services and publishing company. The company provides products and services globally for professionals in the health, tax, accounting, corporate, financial services, legal, and regulatory sectors.

Wolters Kluwer maintains operations in over 33 countries across Europe, North America, and Asia Pacific and employs approximately 19,500 people worldwide.

Wolters Kluwer is headquartered in Amsterdam, the Netherlands. Its shares are quoted on the Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices.

(3) Ipsen SA (OTC:IPSEY) : This $8.3 billion market Cap stocks earns a long-term Zacks VGM score of B too.

Ipsen S.A. is a pharmaceutical company. It provide drugs for urology, oncology, endocrinology, neurology, gastroenterology, cognitive disorders, rheumatology and cardiovascular.

Ipsen S.A. is headquartered in Boulogne-Billancourt, France.

Key Global Macro—

Manufacturing PMIs hit early in the week ahead. Strength should be obvious in Europe. But look at the US ISM manufacturing PMI and Mexico too.

Over the weekend, the private company Caixin Manufacturing PMI came out. The prior reading was 51.7.

The other big news this week will be the U.S. nonfarm payroll report. The private ADP payroll addition report -- out on Wednesday -- is calling for a low +110K.

On Friday, the U.S. Federal report is looking for an equally low +125K.

On Monday, the global copper industry meets in Chile.

India’s latest manufacturing PMI comes out. The prior was 50.7. That doesn’t look too strong.

The Eurozone manufacturing PMI should be re-setting the prior 56.2. That’s a strong reading.

Germany’s manufacturing PMI comes out. The prior was 58.3. Ditto Italy. The prior was 55.0. Both are strong readings.

Sweden’s manufacturing PMI is already in. The prior was a red hot 60.9 and the new reading was 60.

On this side of the Atlantic pond, the closely tracked US ISM manufacturing number comes out. The prior was 57.7 and the forecast is for 57.0.

The Markit Mexico manufacturing PMI comes out. The prior was 50.6 and the forecast is for 50.0.

Turkey could be dealing with an inflation rate of 10.8% y/y now, up from 10.13%.

The Fed’s Dudley speaks in NYC.

On Tuesday, the Reserve Bank of Australia should leave its overnight rate at 1.5%.

On Wednesday, the Irish services PMI comes out. The prior was 60.6.

The Russian services PMI comes out too. The prior was 55.5.

The composite PMI for the Eurozone comes out. The prior was 56.7.

The Markit Brazil composite PMI comes out. The prior was 46.6 and the forecast is for 47.2. 50 would mark an expansion. Hence, both of these readings are contraction-ary.

The U.S. ADP employment survey comes out. The prior was +298K. But this time around, the market is only looking for a weak +110K. That may be a late winter reading.

The Fed’s latest minutes come out.

On Thursday, Greece’s unemployment rate should come in. The prior was 23.1.

The FGV inflation rate in Brazil, basically consumer inflation, comes out. The prior was 5.26% y/y. The new forecast number is 4.86%.

U.S. initial claims look low at 258K.

EU finance ministers meet in Malta.

On Friday, the US unemployment rate should go to 4.6% from 4.7%. That’s frictional.

U.S. nonfarm payrolls came in at +227K last month. Look for +125K this month.

Canada’s unemployment rate, in comparison, is 6.6%.

Mexico’s CPI comes out. Forecasts look for a +5.33% y/y to reach above the prior +4.86% y/y rate. This CPI rise is what is causing Banxico to raise rates.