The iShares MSCI Emerging Markets Index (
) fell 2% last week, matching the drop in the S&P500 on the
negative payrolls report on Friday.
With Europe firmly in a recession and the Chinese economic engine
slowing, investors have been looking to the recovery in the
United States to carry equity prices.
Recent moderation in data had lowered expectations to a
reading of about 160,000 jobs created in April, but the release
of only 115,000 jobs was enough to send markets tumbling.
While the manufacturing ISM report came in much better than
expected at 54.8 on Tuesday, it should be remembered that
manufacturing accounts for only about 10% of non-farm employment
in the United States.
The non-manufacturing ISM, declining from 56.0 to 53.5 in
April, and the weekly unemployment claims were much better
previews of Friday's non-farm payroll report. Despite the weaker
data over the last month, the U.S.economy still looks to expand
around 2.0% for the year and should help drive stocks.
With a slow week in economic reports out of the U.S.and Europe
this week, the emerging markets will be waiting for news out of
China on Thursday and Friday. Investors will be watching Chinese
trade data on Thursday for strength in exports and a clue into
global economic growth. Friday will bring a string of reports
including new yuan loans, industrial production, and pricing
Important in these will be an expected decrease in the
consumer price index. An eagerly anticipated cut in the reserve
requirement ratio will be more probable if consumer prices hold
at growth of less than 3.5% on an annualized basis.
Monday, May 7
Slower growth in industrial production and a 2.6% decrease in
copper production will bring Chile's economic activity index down
to around 4.5%, despite strong growth in retail sales. Economic
activity has come in higher than 5% since November but is now
showing signs that sluggish global economic growth is slowing
demand for exports and commodity prices. The trend confirms an
update on Latin American markets last week suggesting that
investors look more to
consumer goods and services for growth
Indonesian GDP growth may moderate somewhat to 6.32% but will
still see some of the fastest growth in the region this year.
While political uncertainty and severely outdated infrastructure
is still a risk, the country's
middle class has almost tripled
in the last ten years. Further, domestic consumption accounts for
55% of GDP, meaning the country is less exposed to weakening
global growth than others in the region.
Airmedia Group (
) reports earnings after the close on Monday.
Tuesday, May 8
Brazil may show that inflation picked up last month with the
FGV inflation report increasing to 0.88% against last month's
0.56% increase. The central bank has largely abandoned its
mandate for stable prices in favor of rates close to historic
lows and aggressive currency manipulation. The government
on Friday that guarantee a minimum rate on deposit accounts in a
move that will allow rates to be lowered further.
Reporting earnings on Tuesday are MercadoLibre (
) and VisionChina Media (
Wednesday, May 9
Expectations are for no change in the base rate when the
National Bank of Poland meets on Wednesday.
Inflationary pressures in Mexico may fall further as the CPI
comes down to about 3.5% on an annualized basis.
Reporting earnings on Wednesday are 51Jobs (
), Bancolombia (
), Copa Holdings (
), Teva Pharmaceutical (
) and ChinaCache Intl Holdings (
Thursday, May 10
Central banks in Peru and Indonesia decide rates on Thursday
but are expected to hold at 4.25% and 5.75% respectively.
Economic growth has moderated with weakness in global markets but
is still higher than most others in the respective regions. Both
countries have seen a decrease in inflationary pressures due
largely to lower food and energy prices.
The market is expecting the Bank of Korea to raise rates to
3.5% when it meets on Thursday after almost a year of holding
rates at 3.25%. The risk is firmly to no change as exports have
fallen for two consecutive months and the government lowered
expectations for growth to 3.5% last month.
China's trade surplus is expected to increase to $9.8 billion
against last month's reading of $5.35 billion. Investors will be
more focused on relative growth in imports and exports, expected
to increase by 10.9% and 8.5% respectively. An increase in
exports below expectations could send the markets down on renewed
fears of weak global growth and its affect on China's
Reporting earnings on Thursday are Xinyuan Real Estate (
) and Zhongpin (
Friday, May 11
Inflationary pressures in China should fall further with
expectations for a decline in the CPI to 3.4% (3.6% prior) and
the PPI at -0.5% (-0.3% prior).
China industrial production is expected to increase slightly
from 11.9% to growth of 12.1% on an annualized basis.
China retail sales should hold at a strong pace of 15.1%
annualized growth. While economic growth in the country continues
above 8%, the government has promised further stimulus measures
to achieve growth in domestic consumption. If retail sales were
to come in below expectations and consumer inflation continues to
moderate, investors should position themselves for a short-term
bounce as the central bank enacts stimulus.
New yuan loans in China will most likely decrease over last
month's strong gains of CNY1,010 billion to around CNY780 billion
but will still show that previous stimulus measures are working
their way through the economy.
Renesola LTD (
) reports first quarter earnings before the open on Friday.