Fundamental analysis, which makes use of economic data and macroeconomic events to attempt forecasting of market direction, has a “gray area” within its perception range for market participants.
This area allows for cultural traditions and historical predisposition to potentially have an influence upon the prioritization of fundamental data for a country, region, or market sector. This perceived level of priority is fluid of course and subject to change by a number of factors, both internal and external.
Developments that are unforeseen or contribute to a general feeling of uncertainty can throw this balance out of sync but will at a certain point, much like the markets themselves, make an attempt at self correction. It is possible for these attempts to fail however, due to the evolutionary nature of fundamental analysis as a perception of the society that it serves.
The role of any sphere or means of influence as it pertains to the markets is not set in stone and must either adapt or run the risk of losing its potential ability to influence market direction.
KEY REPORTS
Below is a partial listing of macro data for some of the key Asian and European economies.
JAPAN
The Tankan Report is released by the Bank of Japan on a quarterly basis (March, June, September, and December). It is a measure of business confidence supplied by leading companies of the major industries and services of Japan. Market sectors potentially influenced: equities, financials, and currencies.
Most of Japan’s fundamentals that have the potential for market moves stems from corporate or governmental policy outlooks and actions. Unlike many Western economies focus on consumer driven supply and demand, the Japanese cultural focus on efficient use of space (a possible leftover from land being such a premium for an island nation with a history of isolationism) and creating a greater number of products and services with a “product for life” quality compared to many developed economies. As a result, the focus of fundamental analysis seems to be drawn more toward the actions, both perceived and implemented, of Japan’s fiscal and monetary spheres of influence.
GERMANY
HICP (Harmonized Consumer Price Index). A measure of the fluctuations of a standardized package of goods and services purchased by German households. The index was created as a more focused indicator of inflation for specific regions of the Euro zone. Market sectors potentially influenced: currencies, financials, and equities.
ZEW Economic Sentiment Current Conditions. A monthly survey that represents the analysis of German economic direction and strength for the next six months. The data is compiled from the analytical work of approximately 350 economists from the ZEW, which translated stands for the Centre for European Economic Research. Market sectors potentially influenced: currencies, financials, and equities.
IFO (Institute For Economic Research). A monthly survey followed as a leading indicator of the economic health of Germany and in effect significant parts of Eurozone economies. Data is collected for the categories of overall business climate, current business situation, business outlook going out approximately six months. Market sectors potentially influenced: currencies, financials, equities, energies.
Germany still often appears compelled to walk the line of fiscal and monetary austerity. The cultural bias toward fiscal responsibility arise from its highly developed inflation concerns which date back to the post World War I era and the crushing hyperinflation which the country suffered as a result of among many elements; a massive war reparations debt.
In addition, the dominance of the German economy as a whole and as a member of the Euro zone has resulted in Germany wielding a tremendous amount of power with regards to fiscal and monetary policy for the region. Germany appears to fully understand its prominent role, choosing to make use of its influence publicly as well as behind the scenes; as with many of the deals struck to combat the Euro zone sovereign debt crisis. The focus of German fundamental data, though it often seems out of step with the other major western economies, must be taken seriously as the most prominent economy in the Euro zone on so many levels.
GREAT BRITAIN
The fundamental focus of data in the United Kingdom closely mirrors that of the United States. Sectors of economic data considered crucial measure inflation, monetary policy, consumer demand, job creation, and employment data.
There are a number of important economic indicators which were not listed here. This by no means diminishes their importance. Crossover spheres of influence also exist that can also be in conflict. There was a time not long ago where central banks did not seem to have the presumably coordinated support structure which is flooding the global liquidity tank and drying up life sustaining yield.
It is essential to understand that fundamental analysis can both be limited to and crossover boundaries defined by maps, history and cultural belief systems. Overall though, it boils down to which of the two great drivers–fear or greed is on control may always act as some form of equalizer.
