Ostwald, Marc
16:28 (4 hours ago)
to Marc
The Week Ahead - Preview: 03 to 07 September 2018
With Monday's US & Canada Labour Day traditionally signalling the end of the summer holiday season, market trading volumes (and corporate bond issuance) should start to pick up. The deluge of G7 central bank speakers throughout the week may offer the one or other prompt, though politics, above all trade tensions, will continue to provide the main mood music, as has been the case for most of this year. The statistical schedule for the first week of the month is very standardized, featuring PMIs, US & Canadian labour data, Japanese Wages and German Orders, and it will also be a busy week for Australian data. The corporate earnings schedule is modest, while the Euro area tops the govt bond auction calendar with sales in Germany, Austria, France and Spain.
- The week kicks off with PMIs with the focus above all on how much Trade tensions are weighing on Manufacturing sector sentiment, as appeared to be evident in the G7 flash PMIs, with forecasts in general assuming little change vs. August. The US labour data forecasts have an all too familiar feel to them with Payrolls seen up 190K, Average Hourly Earnings up 0.2% m/m for an unchanged 2.7% y/y, while the Unemployment Rate is projected to dip back down to its cyclical low of 3.8%, i.e. another strong report, though with no sign of wage pressures (above all in real terms). After soft readings in July, US Auto Sales are forecast to pick up modestly, and Construction Spending to rebound 0.5%, with the Trade deficit forecast to widen to its worst level since March. Japan looks to Q2 CapEx, with the expected pickup to 6.5% y/y vs. Q1 3.4%, predicated on the better than expected Business Spending component in preliminary Q2 GDP, but it will be the Labor Cash Earnings (wages) which attracts most attention, with forecasters looking for a drop back to a still healthy 2.4% y/y from the 21 year high of 3.6% in June, which would still match the previous cyclical high, with Real Earnings seen at 1.1%. German Factory Orders will be of particular interest after a rather anomalous looking slide of -4.0% m/m in June, with a rebound of 1.8% m/m expected, which would be modest given that indications from survey data (above all VDMA Orders) and Bundesbank monthly reports suggest a marked acceleration in activity after a very poor Q1 and a sluggish start to Q2; Germany & France also see Trade and Industrial Production. UK data is very much of the second division variety with PMIs accompanied by BRC Retail Sales (and other consumer spending surveys), SMMT New Car Registrations and Halifax House Prices, though clearly all UK data is now deeply subordinate to news on Brexit negotiations progress. Australia sees two further components of Q2 GDP - Inventories and Current Account - in addition to the normal start of month run of Retail Sales, Trade Balance and Housing Finance. Turkey tops a busy run of inflation data in the EM space (CPI forecast 1.8% m/m 17.4% y/y vs. July's 15.9%), with Brazil and Indonesia also likely to see further upward pressure on consumer prices due to local currency weakness. Next Saturday has the latest China Trade data.
- Canada's BoC and Australia's RBA are both expected to keep rates unchanged at 1.50%, and in both cases these are non-policy report/press conference meetings, and in Canada's case likely to reinforce market expectations of a further rate hike in October, while the RBA is seen hiking rates at the very earliest in September 2019. Sweden's Riksbank is also seen on hold at -0.50%, though the glacial shift to signalling a rate hike in the not too distant future is likely to be augmented. There will be numerous Fed, ECB and BoJ speakers, while Carney and other BoE MPC members will testify on the August rate hike and Q3 Inflation Report to the Treasury Select Committee, which will likely be hijacked by Brexit related questions, many of which will be tedious, but should also see some discussion of the status of preparations for the financial sector. In the EM / CEE space, there are rate setting meetings in Poland, Chile, Kazakhstan, Malaysia, Moldova, Serbia, Tajikistan and Ukraine - all of which seem likely to see rates held.
- Corporate earnings highlights are likely to include Barratt Developments, Bayer, Broadcom, Dell and WPP.
- The week also sees a number of major international and/ or country conferences - UN Climate Change, the Beijing Forum on China-Africa Cooperation (aka FOCAC), Egypt and Brazil - while the Euro Group meeting at the end of the week is scheduled to discuss the EIB, interest rates, crypto assets, digital taxation and structural reforms.
..........................................................................
MARC OSTWALD
Global Strategist & Chief Economist
ADM Investor Services International Limited