Ostwald, Marc
Attachments08:20 (4 minutes ago)
to Marc
- PMIs and surveys dominate data schedule; Turkey rate decision; raft of
Europe & US Corporate Earnings; UK and US bond auctions; US API oil
inventories and EIA's International Energy Outlook 2018
- PMIs: Eurozone and US readings seen marginally lower, but overall still
indicate solid pace of output
- Turkey rates: 100 bps rate hike discounted, some upside risk given CPI
spike, likely to remain hawkish
- Charts: Chart: Brent Oil Future / Brent & WTI Oct/Nov 2018 futures spread;
US 2 yr yield, US & China 2/10 yr spread, China 10 yr yield
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** EVENTS PREVIEW **
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Surveys dominate the statistical schedule - flash PMIs, UK CBI Industrial Trends and US Richmond Fed; with little else other than Mexican mid-month CPI. There are rate decisions in Chile and Hungary, which are both expected to see policy on hold, but it is the decision in Turkey that will once again be the focal point. The TCMB continues to be heavily encumbered by fears of political interference, and while the TRY has stabilized in recent weeks, the sharply higher than expected June CPI data (15.4% y/y vs. forecast 13.9%, May 12.2%) underlined that the cumulative pressure of the TRY's slide continues to be very substantial. It is therefore unsurprising that the consensus expects a further 100 bps one week repo rate hike to 18.75%, and a clear signal that the TCMB retains a tightening bias. A busy day for corporate earnings has LVMH, Peugeot, Telecom Italia and UBS likely to headline in Europe, while the US looks amongst others to AT&T, Eli Lilly, Harley Davidson, Lockheed Martin, United Technologies and Verizon. The EIA publishes its 2018 Annual Energy Outlook, which along with speculation about Iran oil import exemptions and an SPR release, along with broader trade tensions, and tonight's API and tomorrow's EIA inventory runs will be in focus for oil markets, as will be the sharp swing in the Brent futures curve to contango in the past couple of trading sessions (see charts). In respect of the API/EIA inventories data, a 3,2 Mln draw is seen for Crude, a 200K build for Gasoline and an 800K draw for Distillates, according to a Thomson Reuters survey. Govt bond supply sees the UK re-open the 2024 Gilt (next yerar's 5-yr benchmark), while the US kicks of this week's $119 bln of Treasury coupons with $35 Bln of 2-yr T-Notes. BoE's Broadbent's speech was rather more technical in nature, focussing on the process of unwinding the BoE's QE holdings, and seeking to argue that a balance sheet unwind would not be per se 'hawkish', noting "That's why we took care to add another sentence to last month's monetary policy statement: 'Decisions on Bank Rate will take into account any impact of changes in the stock of purchased assets on overall monetary conditions, in order to achieve the inflation target'."
** G7 - June 'flash' PMIs / CBI Industrial Trends **
- 'Flash' PMIs for the Eurozone are (as ever) seen edging back very modestly from June (as is Germany's Ifo (due tomorrow), though still indicating a solid pace of current activity (see attached chart of French Manufacturing survey Own Company Production Outlook), despite heightened concerns about trade tensions; while the UK CBI Industrial Trends survey is expected to see the Orders measure dip from June's 5-month high of +13 to a still solid +8, though the quarterly Business Optimism is expected to dip to -6 from -4, with risks skewed to the downside given that the manufacturing sector has been especially vociferous of late in its criticism of the govt's handling of Brexit negotiations. As for the US, the PMIs and the Richmond Fed surveys appear likely to echo the NY & Philly Fed surveys and the Beige book in underlining a robust pace of US output, as was also seen in yesterday's very robust Chicago Fed National Activity Index (though the latter has been highly erratic and volatile over the past year).
from Marc Ostwald