The markets are looking to get back

Welcome back from the holiday weekend! The markets are looking to get back on track this morning but have started rather slowly but there is little event risk on the docket by way of fundamental data reports. This is set up to be a light volume week, which sometimes can mean volatility. Many in the market are looking to put 2011 in the rearview mirror and start fresh in 2012. The big news today is actually due out later this morning in the US as we are waiting for consumer confidence figures and the Case/Shiller home price index. By and large, home prices have been declining at a lower rate so it looks like the market is in a bottoming out process—for now. One of the biggest threats to home prices is rising interest rates, but we are not seeing rising rates, the Fed appears to be ready to leave rates low for an extended period of time, and recent data showed that demand for US debt is near all-time highs despite the ridiculously low interest rate we offer. Consumer confidence has been riding high of late and the spending over the holidays was some 5% higher than recent years, which indicates that perhaps the US consumer is beginning to get healthy again. As confidence rises, more economic participation takes place which helps grease the skids for the economy to get moving again. While there are many headwinds that should affect the consumer like high unemployment, uncertain tax policies, and dysfunction in government, if confidence returns it could actually be stronger than most realize. The only other real news out of the US this week is on Thursday with initial jobless claims and pending home sales figures. The initial jobless claims figures have been moving in the right direction and are now firmly out of the 400Ks and in the high 300Ks. This is good news for employment and next week’s Non-Farm Payrolls report should give us a god idea of whether this is because the job market is really improving.  Other news out this week is coming tomorrow in Japan, with the release of CPI data, the jobless rate, retail trade, and industrial production figures. While Japanese data typically doesn’t move the market in a material way unless the number are totally divergent from the expectation, there is a wild-card in the mix and that is the BOJ. As we approach year-end, the Yen was one of the top-performing major currencies this year and is currently up some 4% vs. USD despite all of the threats of intervention from the Central bank. This comes in addition to two actual interventions at which time the BOJ sold Yen to weaken the currency. Where do you think the Yen would be without he interventions? Exactly, probably a lot higher. So it will be interesting to see what the BOJ does going forward and tomorrow’s data points could be indicative of further action. And of course we can’t forget Europe and we’re waiting to see the results of Italy’s bond auctions that are set to take place over the next two days. Italy is looking to issue some 20 billion euros and yields are back up over 7% as of this morning. On Friday, German CPI data and retail sales figures will show how Europe’s strongest economy is faring and as long as Germany continues to thrive, their politicians may be more apt to be agreeable.