- Digesting soft, but as expected Australian CPI, awaiting Ifo and UK
CBI Retailing surveys ahead of US New Home Sales; EU/Trump meeting,
BRICS Summit and Pakistan elections; US sells 5-yr and FRN 2-yr,
Germany 5-yr; very busy day for European and US corporate earnings
- Germany Ifo: seen edging down again, but BBK monthly report and PMIs
imply upside risks
- US New Home Sales: reactive correction after May surge expected, low
inventories a potential drag
- Charts: Aluminium, Cobalt, Copper, Iron Ore, Nickel, Steel Rebar,
Tin, Zinc
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** EVENTS PREVIEW **
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As has been the case thus far this week, the statistical schedule is quite meagre, being a case of digesting the Australian CPI (core very subdued as expected and below the RBA's 2-3% CPI target), ahead of Germany's Ifo survey, Eurozone M3, the UK CBI Distributive Trades and Retailing surveys and US New Home Sales. In event terms, the BRICS summit gets under way in South Africa (with China literally "throwing money" at South Africa in the past 24 hours), Pakistan holds its general election following a campaign which has been plagued with accusations of meddling and interference (above all by the military) on an unprecedented scale, though it is the Trump/EU summit will likely attract most attention (though Trump has already sounded a downbeat note in terms of what might be achieved at this meeting, in effect torpedoing comments from a number of his cabinet members last week, including Wilbur Ross, who talked up prospects for some kind of a deal at the meeting). Corporate earnings highlights are likely to include Banco Santander, Dassault Systemes, Deutsche Bank, Fiat Chrysler, GlaxoSmithKline, Iberdrola, ITV, Linde, STMicroelectronics, Tullow Oil & Valeo in Europe; while across the pond the spotlight will probably fall on AMD, Coca-Cola, Facebook, Ford Motor, Freeport-McMoRan, General Dynamics, General Motors, Gilead Sciences, HCA Healthcare, Hess, Hilton, Keurig Dr Pepper, Mondelez, Northrop Grumman, PayPal, Qualcomm, UPS & Visa, along with Brazil's mining behemoth Vale. Last but not least Germany holds a 5-yr OBL auction and the US sells $36.0 Bln of 5-yr and $18.0 Bln of 2-yr Treasury FRNs.
** Germany - July Ifo survey **
- There should never be any debate that the Ifo survey is a far superior "take" on the state of the German economy than the too often errant PMIs. Be that as it may, the myopic and too often self-serving world of financial markets will view the risks on today's Ifo survey as skewed to the upside following the better than expected Manufacturing and as expected Services PMIs. In so far as the two sets of surveys have been reasonably well correlated over the past few months, this seems reasonable above all in terms of the overall index (consensus 101.5 vs. June 101.8) and Current Assessment (104.9 vs. June 105.1). The key points on today's survey are a) would an uptick in the headline confirm that overall growth momentum, and b) (far more complex in overall terms) to what extent fears of Trump-related trade barriers and concerns are in fact primarily a function of trade related F.E.A.R. (False Expectations About Reality), rather than actual business flows, which have long been paced by domestic, Eurozone and CEE (EU) related demand.... and as such overwhelming non-EU trade fears (at least in the short-term!).
** U.S.A. - June New Home Sales **
- Following the weaker than expected Existing Home Sales (though not per se weak from a long run perspective), today's New Home Sales are projected to drop 3.1% m/m to 668K, which looks to be a very agnostic forecast in so far as it is the average for the quarter to date. The risk of a larger than expected fall is predicated not on the Existing sales drop, but rather on the low stock of New Homes for Sales (May 5.1 months). But overall it (along with the gamut of other housing indicators) should still imply a reasonable contribution from Housing Investment to Friday's Q2 advance GDP, for which tomorrow's Goods Trade Balance & Durable Goods Shipments and Inventories will provide the final items which might prompt some final tweaks. The current consensus for Q2 GDP is 4.2%, just below the Atlanta and St Louis Fed's GDPnow estimates of 4.5%, though in stark contrast to the
from Marc Ostwald