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Longs Meet Shorts to Start the Merry Month of May

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This week kick-starts the merry month of May.

The ‘Sell in May’ short crowd must keep crowing that old trader’s mantra. It helps their bearish team on to victory.

In the Global Week ahead, I wouldn’t bet on macro data out on the U.S. (or abroad for that matter) to support the short view. Full share valuations on U.S. share indices help shorts -- not looming U.S. macro forecasts.

A looming bull report is the U.S. nonfarm payroll report, out on Friday.
  • The Federal government says +200K should print as April job additions.
  • ADP private data out Wednesday forecasts virtually the same at +195K.  
  • U.S. unemployment claims out on Thursday appear rock bottom at 260K.

The U.S. horizon looks clear, once again.  

As an economist, please help me. I don’t understand where to find the worry about the U.S. economy. This type of U.S. jobs data looks solid. +200K a month ties to modest and stable expansion in U.S. GDP growth.

Also this week, global traders get comprehensive readings on manufacturing PMIs and services PMIs. Only Brazil looks to remain a threat to longs.

Europe composite PMIs forecast ongoing manufacturing expansion and services expansion. Greece is the sole country exempted from Europe’s expansion, and it is old news.

China manufacturing PMIs -- both official and the private Caixin -- comes out on Tuesday. China got an advance PMI reading out last weekend. This showed a stable print, albeit barely in expansion.

Tepid expansion says China’s manufacturing circumstance is not strong enough to raise market’s consensus, but not weak enough to scare investors, either.

It’s a wait-and-see game with China.

Mexico and U.S. PMIs should move little. Each shows stable expansion. Brazil looks terrible again. A looming 39 print on Brazilian services looks appalling. 50 marks the line into expansion.

It is well past time: shift leaders and policies, Brazil! Just do it in an orderly fashion.

We got bullish additions to the Zacks VGM (Value-Growth-Momentum) ‘A’ ranks with Zacks #1 (Strong Buy) ratings over the weekend.  

Two stocks showed up from inside the U.S. commercial real estate business.  One is a commercial real estate service provider. The other is a metal building manufacturer. Fresh high marks speak to the turn up in commercial real estate market in the USA generally.

(1) HFF Inc. (HF) went to a Zacks VGM of A. This is a $1.2 billion market cap real estate operations company. The stock also holds a Zacks #1 Rank (Strong Buy) rating.  

HFF Inc. operates out of eighteen offices nationwide and is a leading provider of commercial real estate and capital market services to the U.S. commercial real estate industry.

(2) Gibraltar Industries (ROCK) went to a Zacks VGM of A. This is an $800 million market cap building and construction maintenance company. The stock also holds a Zacks #1 Rank (Strong Buy) rating.

Gibraltar Industries, Inc. is a leading manufacturer, processor and distributor of metals and other engineered materials for the building products, vehicular and other industrial markets.

Over in Europe, a large-cap stock name I have seen periodically on Zacks top stock lists re-appeared again.

(3) UPM-Kymmene (UPMKY) is a $10.3 billion market cap ADR stock in the paper and related products industry. The Zacks Industry Rank for Paper is high at 56 out of 265 (top 21%).  The stock also holds a Zacks #1 Rank (Strong Buy) rating.

UPM-Kymmene Corporation is a global paper and forest products company. The Company is engaged in the production of paper, with an emphasis on the manufacture and sale of printing and writing papers.

One major driver of the manufacturing upturn in Europe is straightforward. Producer price indexes there are falling -4.6% y/y. European PPI data showing this better cost competiveness is out on Tuesday.

Here are key Global-Macro fundamentals out this week—

On Monday, Europe saw a spate of new manufacturing PMIs — and slight overall improvement

The overall Eurozone composite went to 51.7 from 51.5 -- Expansion in train.
  • The Swiss PMI was 54.7 vs. 53.2 prior
  • The Italy PMI was 53.9 vs. 53.5 prior
  • The German PMI was 51.8 vs. 51.9 prior
  • The France PMI was 48.0 vs. 48.3 prior

In Latin America, it is a tale of two very different countries.
  • The Markit manufacturing PMI for Brazil should be 47 vs. a prior 46. Both are weak.
  • The Markit manufacturing PMI for Mexico should be 53 vs. a prior 53.2. Expansion. This is strong.

In the U.S./U.K., there is a stable, low growth environment for manufacturers.
  • The US ISM for manufacturing looks to get to 51.4 vs. a prior 51.8.
  • The CIPS/Markit manufacturing PMI for the UK should be 51.2 vs. a prior 51.

Australia’s NAB Business Confidence index moved to 5 from a prior 4.

Japan’s vehicle sales rose +7.2% y/y, reversing a -3.2% y/y decline.

Mario Draghi speaks in Frankfurt, Germany.

On Tuesday, China’s official manufacturing PMI should be 49.8 vs. a prior 50.2. The Caixin manufacturing PMI was 49.9 vs. a prior 49.7.

The Eurozone PPI should be down -0.1% m/m from a prior -0.7% m/m mark. That puts the overall PPI at -4.6% y/y. This falling producer cost index is why Europe’s manufacturing is expanding.

The Reserve Bank of Australia (RBA) overnight rate should remain at 2.0%.

U.S. vehicle sales should remain strong at 17.3 million units.

The Bank of Canada’s Poloz speaks in Los Angeles. The Fed’s Lockhart speaks in Florida.

On Wednesday, Europe will report its Services PMIs. A strong expansion is in the cards.  

The Eurozone services PMI composite should remain at 53. That’s solid expansion.
  • Spain’s services PMI should be 55 vs. a prior 55.3
  • Germany’s services PMI should be 54.6 vs. a prior 54.6
  • France’s services PMI should be 50.8 vs. a prior 50.8
  • Greece should be 49

The Eurozone retail trade number should rise to +2.7% y/y vs. a prior +2.4% y/y number.

U.S. ADP payrolls should be 195K versus a prior 200K. The U.S. expansion marches on.

The U.S. ISM non-manufacturing index should get to 54.7 from a prior 54.5.

Brazil’s composite PMI should be 40.8, with a face plant 39 recession forecast for services. Ouch!

The Fed’s Kashkari speaks in Rochester, MN.

On Thursday, the China Caixin services PMI should be 52.2.

The U.K.’s Halifax house price index should be +9.6% y/y, down from +10.1% y/y, but still too strong.

U.S. initial claims should be rock bottom at 260K.

The Bank of Mexico (Banxico) holds its monetary policy meeting. No change at 3.75% is expected.

On Friday, U.S. nonfarm payrolls should see another +200K. That’s been the approximate monthly U.S. job additions number for some time.

The U.S. unemployment rate looks to be unchanged at 5.0% from a prior 5.0%.

The coming U.S. jobs data for April 2016 says ‘all is fine.’
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