Dentalfloss
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** EVENTS PREVIEW **
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As schedules of data and events go, it does not get much busier than today's schedule, though outside of reaction to the 'disappointing' underwhelming BoJ policy decision, thin summer trading conditions and month end may serve to dampen activity, even if this could also be a prompt for some volatile price action across a number of asset classes, as has already been seen in USD/JPY, JGBs and the Nikkei. Topping the statistical agenda are the overnight run of data from Japan and Korean Industrial Production on the 'to be digested list, while ahead lies a swathe of European and NAFTA Q2 provisional GDP readings, where in pride of place eminently goes to the US and Eurozone readings, the latter also has July provisional CPI; meanwhile the UK sees June monetary and lending aggregates. On the policy side of the equation, there are the first two post FOMC meeting speakers (Williams and Kaplan), along with expected no change in Russia and a further 25 bps hike in Colombia rate decisions, but most attention will be given to this evening's EBA annual Bank Stress tests. The beleaguered energy markets will be keeping any eye out for the EIA's monthly crude oil/natural gas production report, along with the usual weekly Baker Hughes Rig Count. In respect of the BoJ decision, the 'disappointment' was above all a case of markets being wary of the BoJ's decision to review the efficacy of past monetary policy, given that the BoJ had been leaning against market expectations of a major policy move at today's meeting, which the modest revisions to its forecasts (about which one can have considerable doubts) would not have justified in any case. It can be seen as sensible, in so far as the BoJ really does need to know the details of the fiscal package, before it makes any further significant policy moves. That said, the noises from 'sources' close to the BoJ policy committee have for some time been going in the direction of questioning the benefits of its QQE measures, and that does raise questions about what policy action might be undertaken. It has to be added that if there any clear doubts about the efficacy of unconventional policy measures, then this would also put the outlook for BoE MPC policy under something of a cloud.
** Eurozone - July prov. CPI **
- Yesterday's higher than expected German CPI/HICP readings already imparted some upside risk to the expected 0.1% y/y headline reading and a marginal drift in core CPI to 0.8% y/y from June's 0.9%, which the smaller than expected fall in Spanish HICP (-0.6% m/m vs. forecast -0.8%) only adds to, even if this would hardly have the ECB breaking sweat. Nevertheless, as was/is the case with Germany, the run of flat/negative m/m 2015 readings falling out of the comparison in August through December will be rather more decisive in terms of the policy outlook, even if the recent setback in oil prices (if sustained) should help to temper the upward drift.
** Europe - Q2 prov. GDP / Bank Stress Tests **
- While preliminary Q2 GDP readings from Germany and Italy (both due 12th August) will not be published today, the French, Spanish, Austrian, Belgian and Eurozone readings should offer a relatively comprehensive picture on growth trends in Euro area. The consensus looks for a marked slowdown from Q1's mild winter related jump of 0.6% q/q to a close to underlying trend rate of 0.3% q/q, which would in turn see the y/y rate decelerate modestly to 1.5% y/y from 1.7% y/y, which will certainly be a case of not 'punching any lights out', but a rather better performance than many had originally been expecting. Eminently anything better than expected will see the sceptics pointing to the various risks for H2 GDP, but with the French reading missing forecasts at Flat q/q 1.4% y/y, this looks to be an unlikely outturn. Given that the Swedish GDP reading was also a very substantial miss at just 0.3% q/q against forecasts of 0.6%, with Q1 revised down to 0.4% q/q from 0.5%, it would seem that 0.2% q/q will be about the best that can be achieved for the Eurozone, and even that would be contingent on a very strong contribution from Germany. This may all prove to be rather moot, if the EBA's bank stress tests prove to be unsettling, or lack credibility. The EBA chairman has already noted that European banks have a whopping EUR 1.0 Trln of non-performing loans (NPLs), and it has also been noted that the current stress tests have not been modelled to account for the long-term impact of negative interest rates, and are per se intrinsically deficient, i.e. not very credible.
** U.S.A. - Q2 advance GDP **
- While the consensus forecasts looks for a 2.5% SAAR pace, the Atlanta Fed GDPnow model, which was updated after the much wider than expected Goods Trade deficit yesterday, suggests just 1.8%, with some forecasters likely to have revised their forecasts closer to 2.0%. The details will as ever be important, with Personal Consumption expected to accelerate from a very sluggish 1.5% in Q1 to 4.4%, which would be the strongest reading since Q2 2005! Housing Investment should also make a positive contribution, but there will be headwinds from very weak Business Investment, Net Exports will clearly be a drag, thus leaving Inventories (possibly a drag) and to a lesser extent Govt spending as the key balancing items.
from Marc Ostwald
** EVENTS PREVIEW **
********************
As schedules of data and events go, it does not get much busier than today's schedule, though outside of reaction to the 'disappointing' underwhelming BoJ policy decision, thin summer trading conditions and month end may serve to dampen activity, even if this could also be a prompt for some volatile price action across a number of asset classes, as has already been seen in USD/JPY, JGBs and the Nikkei. Topping the statistical agenda are the overnight run of data from Japan and Korean Industrial Production on the 'to be digested list, while ahead lies a swathe of European and NAFTA Q2 provisional GDP readings, where in pride of place eminently goes to the US and Eurozone readings, the latter also has July provisional CPI; meanwhile the UK sees June monetary and lending aggregates. On the policy side of the equation, there are the first two post FOMC meeting speakers (Williams and Kaplan), along with expected no change in Russia and a further 25 bps hike in Colombia rate decisions, but most attention will be given to this evening's EBA annual Bank Stress tests. The beleaguered energy markets will be keeping any eye out for the EIA's monthly crude oil/natural gas production report, along with the usual weekly Baker Hughes Rig Count. In respect of the BoJ decision, the 'disappointment' was above all a case of markets being wary of the BoJ's decision to review the efficacy of past monetary policy, given that the BoJ had been leaning against market expectations of a major policy move at today's meeting, which the modest revisions to its forecasts (about which one can have considerable doubts) would not have justified in any case. It can be seen as sensible, in so far as the BoJ really does need to know the details of the fiscal package, before it makes any further significant policy moves. That said, the noises from 'sources' close to the BoJ policy committee have for some time been going in the direction of questioning the benefits of its QQE measures, and that does raise questions about what policy action might be undertaken. It has to be added that if there any clear doubts about the efficacy of unconventional policy measures, then this would also put the outlook for BoE MPC policy under something of a cloud.
** Eurozone - July prov. CPI **
- Yesterday's higher than expected German CPI/HICP readings already imparted some upside risk to the expected 0.1% y/y headline reading and a marginal drift in core CPI to 0.8% y/y from June's 0.9%, which the smaller than expected fall in Spanish HICP (-0.6% m/m vs. forecast -0.8%) only adds to, even if this would hardly have the ECB breaking sweat. Nevertheless, as was/is the case with Germany, the run of flat/negative m/m 2015 readings falling out of the comparison in August through December will be rather more decisive in terms of the policy outlook, even if the recent setback in oil prices (if sustained) should help to temper the upward drift.
** Europe - Q2 prov. GDP / Bank Stress Tests **
- While preliminary Q2 GDP readings from Germany and Italy (both due 12th August) will not be published today, the French, Spanish, Austrian, Belgian and Eurozone readings should offer a relatively comprehensive picture on growth trends in Euro area. The consensus looks for a marked slowdown from Q1's mild winter related jump of 0.6% q/q to a close to underlying trend rate of 0.3% q/q, which would in turn see the y/y rate decelerate modestly to 1.5% y/y from 1.7% y/y, which will certainly be a case of not 'punching any lights out', but a rather better performance than many had originally been expecting. Eminently anything better than expected will see the sceptics pointing to the various risks for H2 GDP, but with the French reading missing forecasts at Flat q/q 1.4% y/y, this looks to be an unlikely outturn. Given that the Swedish GDP reading was also a very substantial miss at just 0.3% q/q against forecasts of 0.6%, with Q1 revised down to 0.4% q/q from 0.5%, it would seem that 0.2% q/q will be about the best that can be achieved for the Eurozone, and even that would be contingent on a very strong contribution from Germany. This may all prove to be rather moot, if the EBA's bank stress tests prove to be unsettling, or lack credibility. The EBA chairman has already noted that European banks have a whopping EUR 1.0 Trln of non-performing loans (NPLs), and it has also been noted that the current stress tests have not been modelled to account for the long-term impact of negative interest rates, and are per se intrinsically deficient, i.e. not very credible.
** U.S.A. - Q2 advance GDP **
- While the consensus forecasts looks for a 2.5% SAAR pace, the Atlanta Fed GDPnow model, which was updated after the much wider than expected Goods Trade deficit yesterday, suggests just 1.8%, with some forecasters likely to have revised their forecasts closer to 2.0%. The details will as ever be important, with Personal Consumption expected to accelerate from a very sluggish 1.5% in Q1 to 4.4%, which would be the strongest reading since Q2 2005! Housing Investment should also make a positive contribution, but there will be headwinds from very weak Business Investment, Net Exports will clearly be a drag, thus leaving Inventories (possibly a drag) and to a lesser extent Govt spending as the key balancing items.
from Marc Ostwald
