- 'Flash' PMIs and US Existing Home Sales tope statistical schedule; IMF
forecast tweaks to be digested, awaiting OEPC/NOPEC meeting, start of
busy week for US/Europe earnings; Trump woes, Brexit negotiations and
geo-political negotiations remain key overarching themes
- Flash PMIs: consensus forecasts as ever agnostic, France PMIs divergent,
others seen little changed
- Week Ahead: Fed, Q2 advance GDP readings, Euro area national CPI readings,
Australia CPI and end of month rush of Japan data top data run
- Chart: IMM Euro FX future CFTC Net positioning
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** EVENTS PREVIEW **
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The week gets off to a relatively quiet start with the focus on digesting the latest tweaks to the IMF's global economic outlook, which as ever reflects an acknowledgement of recent economic data trends, rather than offering any real insights into the outlook, the focus statistically will be on 'flash' PMIs. These are forecast to show a modest setback to levels that indicate a very solid pace of activity in the Eurozone, with the German Services PMI seen recovering modestly from recent setbacks, but overall forecasts appear to reflect little more than an agnostic read through from national surveys. US Markit PMIs are increasingly being ignored, with a lack of month to month volatility, and a rather more subdued profile of the US economy relatively to the more widely followed ISM readings and regional Fed surveys, with forecasters looking for no change in the Manufacturing PMI, and a marginal uptick in Services. US Existing Home Sales are also due with a very modest 0.9% m/m dip to a solid 5.57 Mln pace seen, with sales seen hampered by a relatively low level of inventories, above all in high demand areas. The other highlight of the day will be the OPEC/NOPEC Joint Ministerial Monitoring Committee meeting, with the focus above all on what is said about Libya and Nigeria being drawn into the current production cut agreement, following the rise in output from both countries year to date.
However all of this will likely prove to be little more than ephemera in terms of the week as a whole, with thin summer trading volumes and long standing financial repression factors continue to mute markets' reaction function. Statistically the focus will be on the Fed, advance Q2 GDP readings in the US (forecast 2.5% SAAR), UK (0.3% q/q vs. Q2 0.2%), France (0.5% q/q vs. Q2 0.5%) & Spain (0.9% q/q vs. Q2 0.8%) , preliminary CPI readings from Germany, France & Spain, a deluge of corporate earnings in the US and Europe, and the overarching themes of Trump's woes and the at best stuttering Brexit negotiations. The data schedule also has Australian Q2 CPI, which is expected to militate against the idea that the RBA might adopt a more hawkish tone near term, the more so given Debelle's comments last week (governor Lowe speaks on Wednesday), while Japan has the usual end of month rush of CPI, labour data and Household Spending.
The Fed meeting can hardly be described as being eagerly anticipated, with few changes expected to the statement, though any changes to the wording on the inflation outlook will inevitably prove highly sensitive, though the statement will likely stick to the view that the current dip is transitory. Given that this is a non-press conference meeting, and the June meeting's detailed 'implementation note', the statement will doubtless reiterate that the "Committee currently expects to begin implementing a balance sheet normalization program this year, provided that the economy evolves broadly as anticipated." It is worth noting that the Fed is clearly signalling a different set of contingencies for rate hikes (very much inflation and to some extent labour market dependent) and balance sheet reduction (growth dependent), a point which seems to be largely absent from market chatter on the rate outlook.
On the US earnings front, Factset's Earnings Scorecard (
https://insight.factset.com/hubfs/R.../Earnings Insight/EarningsInsight_072117.pdf_ ) notes: "As of today (with 19% of the companies in the S&P 500 reporting actual results for Q2 2017), 73% of S&P 500 companies have beat the mean EPS estimate and 77% of S&P 500 companies have beat the mean sales estimate" and that ": For Q2 2017, the blended earnings growth rate for the S&P 500 is 7.2%. Nine sectors are reporting or are expected to report earnings growth for the quarter, led by the Energy sector." In daily terms, Alphabet (aka Google) will be today's highlight, while Tuesday has AT&T, Caterpillar, Eli Lilly, General Motors, Kimberly-Clark, McDonald's & US Steel. Wednesday brings Boeing, Coca-Cola, Facebook, Ford & State Street; Thursday has Amazon.com, Dow Chemical, Intel, Mastercard, Procter & Gamble, Raytheon, Twitter & UPS, while Friday brings a bevvy of oil sector earnings including Chevron & Exxon Mobil.
from Marc Ostwald
