Europe remains in the spotlight, with investors looking for some visibility out of this week’s summit meeting on Thursday and Friday. A number of material items are on the meeting’s agenda, but the summit may not yield the results that investors are looking for.
The data docket on the home front this week will bring housing, confidence and manufacturing-related readings that are expected to confirm the recent trend line of moderating economic growth. Overall, the market will likely remain range bound, with a downward bias.
Germany, France, Italy and Spain appear to have agreed to implement a few growth measures to their policy menu for the summit. These measures are expected to be the equivalent of about 1% of the region’s GDP or about EUR130 billion in total.
The summit is also expected to reconsider the terms of Greece’s bailout. While tangible plans for fiscal and banking unions may not materialize, a decision on using the region’s bailout funds towards secondary market purchases would be a significantly positive one from the market’s perspective.
The Spanish prime minister has indicated recently that some along these lines may be on the cards. But a clear endorsement from Germany — along with details of the size and scope of such purchases — is needed at present. In the end, we may not get anything concrete out of the summit, other than may be the new spending program.
On the home front, we will get the May New Home sales report after the market opens today, with consensus expectation of a roughly 1% gain to 350K after the 3.3% gain the month before to 343K. In other housing reports this week, we will get the April Case-Schiller home price index on Tuesday and the May Pending Home sales report on Wednesday.
The May Durable Goods report coming out Wednesday morning is expected to show 0.4% growth following the flat reading the month before and confirm the decelerating trend on the manufacturing side.
The final read on the first quarter GDP report on Friday is expected to show an unchanged 1.9% pace, while the May Personal Income & Outlays report that same day is expected to show a 0.3% gain in nominal personal income after the 0.2% gain in April, with spending essentially unchanged.
Consumer confidence measures coming out this week, with the Conference Board’s measure coming on Tuesday and the Michigan survey coming out on Friday, are expected to show some pullback. We will also be getting a number of regional Fed manufacturing surveys throughout the week, with the Chicago PMI coming out on Friday.
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