Dentalfloss
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Much busier day for data and centrla banks: digesting poor German Orders,
robust Swiss GDP: awaiting Sth Africa Current A/c, US ADP Employment and
Non-Manufacturing ISM, Brazil IPCA IBGE inflation; Riksbank rate decision,
plus raft of central bank speakers; UK, German & French auctions
- German Orders: Capital Goods sector continues to slide, weaker EUR of
no benefit
- Swiss Q2 GDP: very robust and boosted by backward revisions; CHF strength
clearly no hurdle
- Sth Africa Q2 Current Account: deficit expected to narrow sharply from
Q1 outlier, but still remain very poor
- US ADP Employment: the "usual" consensus estimate, seen underlining
continued strength of labour demand
- US Non-manufacturing ISM: seen rebounding from sharp July setback, perhaps
some upside risks
- Chart: USD HY bond vs. EM Bond average spread to USTs
..........................................................................
********************
** EVENTS PREVIEW **
********************
A busier day awaits with central bankers contending for attention with a relatively busy run of statistics, which has German Factory Orders and Swiss Q2 GDP to digest ahead of an even more sensitive than usual South Africa Q2 Current Account, while the afternoon brings the US ADP Employment estimates and Non-Manufacturing ISM along with another sensitive EM data point, Brazil's key IPCA IBGE inflation, which despite the August BRL tumble is seem flat m/m to edge the y/y down to 4.3%. Sweden's Riksbank is seen holding rates again at at -0.50% (where it has been seen February 2016), though there will likely be a further glacial shift to signalling a rate hike in the not too distant future. But tonight's first of two TV debates ahead of the much anticipated and very tight Swedish general election on Sunday will probably garner a good deal more in the way of media column inches than the Riksbank, particularly as immigration is now 100% front and centre in this election. No change is expected at either CEE central bank meetings in Serbia and Ukraine. There are a number of 'big gun' central bank speakers, ranging from the overnight thoughts of BoJ's Kataoka (reliably dovish as ever), through NY Fed chief Williams, Bank Rossi's Nabiullina, SNB's Zurbrugg to BoC's Wilkins. A busier day for govt bond auctions sees France and Spain conduct multi-tranche offerings, while the UK re-opens its future 2024 5-yr benchmark Gilt. On the subject of EM turmoil, the sharp widening in EM foreign current debt spreads to UST is more than understandable, however the evidence that while fund managers are lightening their holdings, this stands in sharp contrast to the continued "reach for yield" that is all too evident in USD HY debt, as can be seen on the attached chart comparing USD HY to EM spreads, which speaks volumes to the idea that financial repression and its ******* children FOMO and TINA are still very much exercising their influence - yesterday's Italian BTP rally on the back of a less combative tone, and more EU budget rule friendly comments from Lega leader and deputy PM Salvini tells a very similar story.
** Germany - July Factory Orders / Switzerland - Q2 GDP **
- The sharply contrasting fortunes of Germany and Switzerland bears some scrutiny. A sixth fall in 7 months for German Factory Orders (-0.9% m/m -0.9% y/y vs. a forecast of 1.8% m/m 1.9% y/y) was paced again by Capital Goods (-4.4% m/m), and signals an abrupt downturn in Capital Goods Sector - with the year to date fall in Capital Goods now standing at -8.0%, by comparison Intermediate Goods are essentially flat y.t.d., and Consumer Goods -3.1%, so high level of Order backlogs at start of year will soon be exhausted. Notably, this weakness persists despite the fall in the EUR, once again busting the myth that Orders are very sensitive to currency movements. By contrast, the Swiss economy shows no sign of struggling with the 'overvalued' (as per the SNB) CHF, with Q2 turning out at 1.0% q/q against a forecast of 0.7%, with a raft of upward revision to Q1 and the whole of 2017 resulting a major beat in y/y terms of 3.4%, vs. a consensus estimate of 2.4%.
** South Africa - Q2 Current Account **
- After the big miss on Q2 GDP that confirmed South Africa is now in recession for the first time since 2009, the only question for today's Current Account is 'how bad'? Forecasts assume a relatively large narrowing of the deficit to ZAR -145 Bln (or 3.2% as a % of GDP) following an outlier ZAR -229 Bln (or -4.8%) Q1 deficit, following a seasonal pattern seen in 2015 and 2016, though not 2017.
** U.S.A. - August ADP Employment / Non-manufacturing ISM **
- That US labour demand remains very strong, sustained by the strength of underlying growth (Atlanta Fed Q3 GDPnow estimate currently 4.7%), is not up for debate. That the consensus forecasts for the ADP and tomorrow's official Payrolls have been tediously nailed to a 185K-200K range for all of this year is also a point of fact, as is the point that markets are increasingly rather insensitive to the employment component of the labour report and wholly fixated on wages, and indeed far more sensitive to political and trade development. Per se today's report will probably have to miss by a considerable margin relative to the consensus for 200K to have anything more than a passing impact. As for the Non-manufacturing ISM, this expected to rebound somewhat to 56.8, following an unexpectedly sharp drop to 55.7 in July vs. 59.1 in June. Given the sharp rise in the Manufacturing ISM (61.3 vs. July 58.1), predicated in no small part on the Prices Paid component proving to be far more resilient than most had anticipated (72.1 vs. July 73.2 and forecast 69.5), the risks certainly appear to be to the upside. As ever the usual caveat on the Employment index of the Non-manufacturing ISM being largely uncorrelated with month to month Payrolls changes applies.
from Marc Ostwald
robust Swiss GDP: awaiting Sth Africa Current A/c, US ADP Employment and
Non-Manufacturing ISM, Brazil IPCA IBGE inflation; Riksbank rate decision,
plus raft of central bank speakers; UK, German & French auctions
- German Orders: Capital Goods sector continues to slide, weaker EUR of
no benefit
- Swiss Q2 GDP: very robust and boosted by backward revisions; CHF strength
clearly no hurdle
- Sth Africa Q2 Current Account: deficit expected to narrow sharply from
Q1 outlier, but still remain very poor
- US ADP Employment: the "usual" consensus estimate, seen underlining
continued strength of labour demand
- US Non-manufacturing ISM: seen rebounding from sharp July setback, perhaps
some upside risks
- Chart: USD HY bond vs. EM Bond average spread to USTs
..........................................................................
********************
** EVENTS PREVIEW **
********************
A busier day awaits with central bankers contending for attention with a relatively busy run of statistics, which has German Factory Orders and Swiss Q2 GDP to digest ahead of an even more sensitive than usual South Africa Q2 Current Account, while the afternoon brings the US ADP Employment estimates and Non-Manufacturing ISM along with another sensitive EM data point, Brazil's key IPCA IBGE inflation, which despite the August BRL tumble is seem flat m/m to edge the y/y down to 4.3%. Sweden's Riksbank is seen holding rates again at at -0.50% (where it has been seen February 2016), though there will likely be a further glacial shift to signalling a rate hike in the not too distant future. But tonight's first of two TV debates ahead of the much anticipated and very tight Swedish general election on Sunday will probably garner a good deal more in the way of media column inches than the Riksbank, particularly as immigration is now 100% front and centre in this election. No change is expected at either CEE central bank meetings in Serbia and Ukraine. There are a number of 'big gun' central bank speakers, ranging from the overnight thoughts of BoJ's Kataoka (reliably dovish as ever), through NY Fed chief Williams, Bank Rossi's Nabiullina, SNB's Zurbrugg to BoC's Wilkins. A busier day for govt bond auctions sees France and Spain conduct multi-tranche offerings, while the UK re-opens its future 2024 5-yr benchmark Gilt. On the subject of EM turmoil, the sharp widening in EM foreign current debt spreads to UST is more than understandable, however the evidence that while fund managers are lightening their holdings, this stands in sharp contrast to the continued "reach for yield" that is all too evident in USD HY debt, as can be seen on the attached chart comparing USD HY to EM spreads, which speaks volumes to the idea that financial repression and its ******* children FOMO and TINA are still very much exercising their influence - yesterday's Italian BTP rally on the back of a less combative tone, and more EU budget rule friendly comments from Lega leader and deputy PM Salvini tells a very similar story.
** Germany - July Factory Orders / Switzerland - Q2 GDP **
- The sharply contrasting fortunes of Germany and Switzerland bears some scrutiny. A sixth fall in 7 months for German Factory Orders (-0.9% m/m -0.9% y/y vs. a forecast of 1.8% m/m 1.9% y/y) was paced again by Capital Goods (-4.4% m/m), and signals an abrupt downturn in Capital Goods Sector - with the year to date fall in Capital Goods now standing at -8.0%, by comparison Intermediate Goods are essentially flat y.t.d., and Consumer Goods -3.1%, so high level of Order backlogs at start of year will soon be exhausted. Notably, this weakness persists despite the fall in the EUR, once again busting the myth that Orders are very sensitive to currency movements. By contrast, the Swiss economy shows no sign of struggling with the 'overvalued' (as per the SNB) CHF, with Q2 turning out at 1.0% q/q against a forecast of 0.7%, with a raft of upward revision to Q1 and the whole of 2017 resulting a major beat in y/y terms of 3.4%, vs. a consensus estimate of 2.4%.
** South Africa - Q2 Current Account **
- After the big miss on Q2 GDP that confirmed South Africa is now in recession for the first time since 2009, the only question for today's Current Account is 'how bad'? Forecasts assume a relatively large narrowing of the deficit to ZAR -145 Bln (or 3.2% as a % of GDP) following an outlier ZAR -229 Bln (or -4.8%) Q1 deficit, following a seasonal pattern seen in 2015 and 2016, though not 2017.
** U.S.A. - August ADP Employment / Non-manufacturing ISM **
- That US labour demand remains very strong, sustained by the strength of underlying growth (Atlanta Fed Q3 GDPnow estimate currently 4.7%), is not up for debate. That the consensus forecasts for the ADP and tomorrow's official Payrolls have been tediously nailed to a 185K-200K range for all of this year is also a point of fact, as is the point that markets are increasingly rather insensitive to the employment component of the labour report and wholly fixated on wages, and indeed far more sensitive to political and trade development. Per se today's report will probably have to miss by a considerable margin relative to the consensus for 200K to have anything more than a passing impact. As for the Non-manufacturing ISM, this expected to rebound somewhat to 56.8, following an unexpectedly sharp drop to 55.7 in July vs. 59.1 in June. Given the sharp rise in the Manufacturing ISM (61.3 vs. July 58.1), predicated in no small part on the Prices Paid component proving to be far more resilient than most had anticipated (72.1 vs. July 73.2 and forecast 69.5), the risks certainly appear to be to the upside. As ever the usual caveat on the Employment index of the Non-manufacturing ISM being largely uncorrelated with month to month Payrolls changes applies.
from Marc Ostwald
