Global Events Will Take Center Stage This Week

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 |  Includes: EEM, EWA, EWG, FXI, GMF, HAL, HAO, PKX, SLB, TEF, TLSYY, VOD
by: Soos Global Capital

In the week ahead (week of December 6, 2010), there is little on the US economic data calendar to jar markets (see Briefing.com or similar site). While clearly not all-inclusive, the following is a list of events that I will be watching closely for their impact on markets around the globe. In addition, I've indicated some stocks that I own that are likely to be most directly impacted by the event (though some of these events could possibly impact other holdings meaningfully). As always, readers should be aware that this is meant to be thought provoking commentary and is in no way meant to be personalized investment advice. Each investor has to opine and decide for themselves as to the appropriateness of what's stated here to their unique portfolio goals, risk tolerances and financial profiles.

ASIA

  • Australia: Reserve Bank (Tuesday) interest rate announcement...unlikely to hike again given recent comments from the Reserve Bank Governor about policy being appropriate....also, softness in retail sales data and a modest GDP reading for last quarter augur for no rate change. (I'm long EWA and OTCPK:TLSYY)
  • Korea...Bank of Korea (Thursday) also not likely to move rates, but bigger focus will be on domestic angst on recently announced trade deal with the US, and of course, ongoing war of words and worse between North and South. (I'm long PKX)
  • China....all eyes continue to be focused on any move by authorities to slow growth in combating inflation. On Friday, trade figures will be released... the data is watched closely by markets as an indicator of domestic demand strength and in relation to US demand for China to revalue its currency. (I own FXI, HAO, EEM, GMF)

EUROPE

  • Ireland, though agreeing to the Euro 85B rescue package last week, still has to have Parliament approve the 4-year fiscal austerity that goes with the deal. The vote will be on Tuesday. This will be one of the week's key moments. Failure to approve the deal would likely set off high levels of uncertainty and risk across all markets.
  • Contagion from Ireland crossing over to the Continent, as in recent weeks, will continue to be under the spotlight. Watching sovereign bond spreads and CDS will be front and center (probably for some time). (I own TEF, EWG, VOD)
  • Germany will release factory order data on Tuesday, and trade and industrial production numbers on Wednesday. (I own EWG)
  • UK's Bank of England will meet on Thursday, with most expectations looking for no change in rates nor in asset purchasing amounts.

US

  • "60 Minutes" will be the talk of the town early Monday. Ben Bernanke was interviewed on the Sunday night program and he was reported to have stated he'd consider even more QE. That set off weekend pundits to already dub QE3 as a fait accompli.
  • President Obama, in reacting to the Senate's Saturday rejection of the tax cut package that would have extended tax cuts to most Americans but not upper income levels, declared he'd be willing to consider a deal that included all income levels in exchange for some Democratic priorities such as extension of unemployment benefits. The market is likely to react positively to any deal that solidifies the current tax levels at least into 2011.
  • Trade and consumer confidence data on Friday, in addition to the usual Jobless Claims on Thursday are likely to highlight the economic data agenda.

Finally, these concluding comments are a follow-up to a blog posted late last week entitled "US Foreign Policy Impact on Global Portfolios" and are specifically focused on one of the week's potential highlights, a geopolitical issue that could have meaningful impact on a variety of assets including oil and the Energy sector overall.

In particular, with regard to Iran's nuclear capability, meetings this week with the "P5+1" and Iran have already drawn attention to the issue of whether Iran's nuclear program is progressing towards civilian or military ends...with Iran claiming the former and the P5+1 (and others) fearful of the latter. (P5+1 refers to the 5 permanent members of the UN Security Council plus Germany, the 5 being US, UK, France, Russia and China). I'd recommend a look at the Council of Foreign Relations' "The World Next Week" and their "HBO History Makers Series with Condoleezza Rice", the former portraying a somewhat foreboding outlook on this week's talks, clarifying the progress that Iran has made in developing its enriched uranium capabilities, while former Secy of State Rice expresses more optimism on the progress of the sanctions on Iran and the possibility (possibility, not necessarily probability) that things may be coming together to achieve the 'civilian use' outcome that the P5+1 desire.

After both CFR audio/visuals were done and hit the website, the weekend news from Iran added some heat to the issue. From the WSJ: Saturday's "Iran Rules Out Halting Nuclear Enrichment" and Sunday's "Iran to Process Own Raw Uranium".

Whether one believes that the sanctions on Iran have worked or not, or whether the recent "24" style events within Iran (motorcycle flyby sticky bomb assassination attempts and successes, computer viruses attacking Iran's nuclear computer systems) are the work of internal or external forces (or a joint effort!), the fact is that the pulse on this issue appears to be gaining strength and frequency within and among the foreign policy, strategy, and financial media and 'think-tanks'.

Oil's surge on Friday to a two-year high was partly due to the falling USD in response to the weaker than expected NFP data, but largely due to growing concerns about demand/supply imbalances. The heightened global temperature among those allied against Iran's efforts on the nuclear front is likely to continue to affect oil specifically and the Energy sector overall in the coming week. (I wrote recently about two of my holdings in this sector, HAL and SLB, and I'm long several other stocks within XLE). (See "Time to Consider Schlumberger and Halliburton")

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Disclosure: I am Long VOD, SLB, HAL, FXI, HAO, EEM, GMF, EWA, EWG, TEF, PKX, XLE, TLSYY. Positions can change at any time without notice