Trading with point and figure

- Central bank speakers and reports like to trump data as day's key
influence: Sweden CPI, US jobless claims and PPI accompany BoE Credit
Conditions survey, Draghi & Brainard speak, IEA Oil market and DOA
WASDE reports, Italy multi tranche BTP and US 30 yr auctions

- FOMC Minutes: majority likely to back Dec rate hike, more impressed by
jobs and growth than concerns about inflation downtick

- Sweden CPI: headline and core both seen above target for 3 month,
but Riksbank hostage to ECB

- US PPI: headline seen at 5-yr high on hurricane related rise in food
and energy prices

- Charts: Fed rate hike probabilities, Iron Ore, Steel and Coking Coal

..........................................................................

********************
** EVENTS PREVIEW **
********************

The day is not completely bereft of potentially market moving economic data, but the array / cloud of domestic political and geopolitical tensions allied with a rash of central bank speakers and reports, and indeed the official start of the US Q3 earnings season appears likely to rule the roost. Even if somnabulance still seems the appropriate epithet to describe both market activity levels. Statistically there is the UK RICS House Price survey to digest ahead of Swedish CPI, Indian CPI and Industrial Production, and the highlights of the day via way of US PPI and weekly jobless Claims. The events side of the equation has the FOMC minutes to digest ahead of the BoE's Credit Conditions & Bank Liabilities surveys, a deluge of ECB and Fed speakers, most notably Draghi, who follows Praet signalling that he would prefer to see QE extended for longer and by extension at a considerably slower pace (EUR 30 Bln), & Fed's Brainard, mostly on the sidelines of the IMF/World Bank meetings, and the last of the week's oil market reports from the IEA. The latter follows on from the divergent reports from OPEC and the EIA, the former revising oil demand forecasts higher, and the later shading them somewhat later; the IEA therefore has something of a casting vote. Agricultural commodity markets will be watching the monthly USDA WASDE report on crops very closely, particularly after the September report revised some crop output estimates higher, confounding expectations of a downward revision due ot hurricane and other weather effects. Government bond supply sees auctions in Italy (3, 7 & 30yr) and the US 30-yr sale.

The BoE's surveys today bear some scrutiny, in so far as the increasingly well documented weaknesses in the commercial and top end of the London housing market may pose a rather greater risk to the banking sector than many would probably wish to admit, even if these look to be manageable in the short-term. It will also be interesting to see if there is any mention or further quantification of Brexit related risks, particularly those identified by the FPC in respect of derivatives. The Fed minutes were largely unsurprising, underlining that while the majority are disappointed that inflation has been below target, they still expect to raise rates again in December, in no small part to solid growth and very low unemployment, as well as loose financial conditions. As such the bar to not raising rates in December looks to be high, though there is a considerable amount of water to flow under the statistical bridge to flow between now and then. As for this morning's Swedish CPI data, this is expected to remain very clearly above the Riksbank's 2.0% target, (CPI forecast at 2.5% y/y, core CPIF 2.4% y/y) for a third consecutive month. But the Riksbank has very clearly signalled that it will only respond to ECB policy moves, and as such all today's day is likely to do is underline that the Riksbank are not only 'inflation nutters', but also the ECB's poodle.

** U.S.A. - September PPI **
- Today's PPI and tomorrow's CPI are both likely to see considerable fall-out on food and energy prices from the hurricanes, and many will likely dismiss these as 'transitory' (sic! Ed.), particularly given the lack of any follow through in the wake of hurricanes Katrina and Sandy. Be that as it may, food (OJ, beef) and energy (primarily refined oil products) are likely to considerable upward pressure on the headline, which is seen up 0.4% m/m taking the y/y up to 2.6%, which would be the highest since February 2012. Core PPI is expected to rise a more modest 0.2% m/m to leave the y/y rate unchanged at 2.0%, with the erratic Trade Services component perhaps even more of a wild card than usual. The risks look to be firmly skewed to the upside of the consensus, if price components of regional and national surveys prove to be any guide.


from Marc Ostwald
 
oil
 

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