- Busier day for data & events, digesting BoE stress tests, Powell written
testimony & Dudley policy comments, looking ahead to Eurozone M3, US
Consumer Confidence, Trade & Inventories, OECD forecasts, Powell hearing,
Fed speak, Treasury Market conference & BoC Financial System Review;
UK 2060 mini-tender and US 7-yr
- Powell written testimony signals strong continuity at Fed; Dudley comments
highlight lack of concern at "slightly below target inflation"
- US Consumer Confidence: modest dip seen after October surge, though normal
key influences suggest upside risks
- Chart: BoE Capital Ratio stress test results
..........................................................................
********************
** EVENTS PREVIEW **
********************
From yesterday's famine to today's feast summarizes the data and events schedule. Central bankers are once more to the fore, with the BoE's bank stress tests, Financial Stability Report & press conference kicking off a busy day, that has Powell's Fed Chair Senate confirmation hearing, accompanied by speeches by Dudley and Harker, with the Bank of Canada also publishing its Financial System Review. The OECD's semi-annual global economic outlook will inevitably garner plenty of headlines, even if its forecasting record is far from good. Statistically Eurozone M3 and Private Sector precedes the German GfK Consumer Confidence survey, though US Consumer Confidence will likely be the highlight, and the US also has the Advance Goods Trade Balance and both FHFA and Case Shiller House Prices. Govt bond supply comes via way of a 'mini tender' of 2060 UK Gilt, and $28.0 Bln of US 7-yr. Powell's written submissions ahead of his confirmation hearing points to a very high level of continuity in the way that the Fed conducts policy, which should come as no surprise whatsoever. Of rather more interest were the comments from NY Fed's Dudley who underlined that he is "not particularly concerned that inflation is a little bit below target", adding that he is "not in favour of tax stimulus at the current time because the economy doesn't really need it". The latter is a sentiment that we would echo, and will doubtless be a question that Powell will face in his hearing this afternoon. The passage of the Senate tax reform bill still looks far from assured, if the noises coming out of the GOP are anything to go by. As for the BoE's stress tests, while all banks passed for the first time, both Barclays and RBS only scraped through (see attached chart. It is also worth noting that the test assumes a 4.0% Base Rate, admittedly a lot higher than the current rate, but still very low by any historical standard, and underlining the vulnerabilities of the UK economy.
** U.S.A. Nov Consumer Confidence, Oct Goods Trade Balance **
- If the usual contributors to a solid Consumer Confidence reading are any guide, i.e. robust labour demand, broadly stable gasoline prices and the strength of the equity market are any guide, then the consensus expectation for a modest dip to 124.0 following a sharp jump to 125.9 in October, look to be misplaced, with a new cyclical high looking like a distinct possibility. The Advance Goods Trade Balance is seen widening very modestly to $-65.0 Bln from September's modestly narrower $-64.2 bln deficit, and would point to a neutral contribution from Net Exports to Q4 GDP, while Wholesale Inventories are expected to see a very modest 0.4% m/m build, with particular focus on Retail Inventories, which fell in September almost wholly due to the Auto Sales surge, the latter should again be the key balancing item in the October data.
from Marc Ostwald