Digesting Fed on much busier day for data and events: focus on German CPI
and US Durables; also US final Q2 GDP, Pending Home Sales & KC Fed Mfg;
Italy budget details, Indonesia & Philippines rated decisions, more
central bank speakers: Italy BTP sales and US 7-yr
- Indonesia/Philippines rates: BI set for another 25 bps hike as IDR swoon
continues; Philippines' BSP still well behind the curve
- Germany CPI: marginal m/m rise translates to no chnage in y/y rate, needs
to surprise to prompt any reaction
- US Durable Goods; aircraft seen pacing headline rise, focus on strong
run of CapEx proxy gains
- Charts: IDR/USD and PHP/USD
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** EVENTS PREVIEW **
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Having digested yesterday's Fed meeting, today brings yet another deluge of central bank speakers, rate decisions in Egypt, Indonesia, Philippines and Taiwan, as well as busy run of data and surveys, with Italy and the US again dominating the govt bond auction schedule. Italy is also due to publish its 2019 budget details, with something of battle royal between Tria & Conte and the two party leades di Maio and Salvini, the key question being exactly what percentage of GDP the 2019 deficit will be, and above all whether the promises to rollback pension reforms, introduce a 'universal income' and some form of tax cut (likely to be staggered) are credibly funded. The busy week for EM central banks continues and is expected to see further rate hikes in Indonesia (+25 bps to 5.75%) and the Philippines (+50 bps to 4.50%), with the former likely to retain a tightening bias (with the IDR still on the ropes), and the latter still very much behind the curve, given CPI jumped to 6.4% y/y in August from 5.7%, and the PHP also under pressure. Statistically, Germany has CPI dn Gfk Consumer Confidence, and the Eurozone has M3 & the array of monthly EC confidence surveys, while a busy in the US features final Q2 GDP, Durable Goods, Initial Claims, Pending Home Sales and the KC Fed Manufacturing survey. Outside of the EM central bank meetings, there are speeches from BoE's Carney, Fed's Kaplan and BoC's Poloz, as well as the Brazilian Central Bank's quarterly inflation report.
** Germany - September CPI **
- Following on from the great 'much ado about nothing' over Draghi's comments earlier in the week over a "a relatively vigorous" uptrend in core Eurozone CPI, we get the first of this week's national CPI data from Germany. But this seems unlikely to stir markets' 'animal spirits' if forecasts of 0.1% m/m for an unchanged 2.0% y/y (HICP 1.9%) prove to be correct, with the Eurozone CPI (tomorrow) seen edging up 0.1 ppt to 2.1% headline and 1.1% core, thanks to similar 0.1 ppt rises in y/y rates for Italy and Spain, with French HICP seen unchanged at 2.6% y/y.
** U.S.A. - Durable Goods Orders **
August Durable Goods Orders are expected to post an aircraft led rise of 2.0% m/m, with the ex-Transport measure seen up a more modest 0.4% m/m (following July's 0.1%), though the key aspect will likely be what materializes on Non-defence Capital Goods ex-Aircraft (the so-called 'CapEx proxy’), which has posted an impressive run of gains since April of 2.0%, 0.7%, 0.8% and July's 1.6%, with a more modest 0.4% m/m seen for August. The remainder of the US data schedule will have to spring some major surprises to have more than a passing impact, with Claims seen remaining very low at 210K, but up from the new cyclical low of 201K last week, final Q2 GDP seen unrevised at 4.2%, and Pending Home Sales projected to dip 0.5% m/m.
from Marc Ostwald