** EVENTS PREVIEW **
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A very quiet start to the week awaits, at least in terms of scheduled data and events, which features little more than housing data, with China posting another surge in Property Prices, which may in part have been driven by attempts to beat upcoming curbs if accompanying sales are anything to go by, while the UK Rightmove House Asking Prices saw a solid rebound of 0.7% m/m for a 4.1% y/y pace. The final item will be the US NAHB Housing Market Index, with the consensus looking for a no change reading at a solid 60. The pre-BOJ and Fed vigil offers the opportunity to digest the as ever excellent BIS quarterly review, in which it warned that "dissonant markets" may be underestimating risks to stability, and that record low bond yields, high stock prices, subdued volatility "cast a pall" over asset valuations, with risks to financial system posed by low bank stock valuations, signs of money market stress. It added that equity markets are showing signs of "exuberance" post-Brexit. See
http://www.bis.org/publ/qtrpdf/r_qt1609a.htm. There are also the Berlin state election results to digest, in which the CDU took another drubbing at the ballot box, while the AfD once again benefitted from previous non-voters to gain 11.5% of the vote, though almost exclusively in the former East Berlin areas, while both the Greens and Die Linke were the beneficiaries of voter dissatisfaction with the CDU and SPD in the West Berlin area, and thus underlining the now very fractured profile of German politics. Oil markets should find themselves on a slightly better footing after the OPEC Secretary General opened the possibility of an extraordinary meeting, if participants at the IEF forum in Algeria can get close to a production cap agreement, which Venezuelan President Maduro has suggested is close; even if this has been heard time and time again, and verbal intervention when oil prices are teetering also appears ever more frequent.
The Week Ahead (Updated)- Bullet point highlights: 19 to 23 September 2016
- Central banks dominate the week, above all the Fed and the Bank of Japan, though there are also rate decisions in Egypt, Ghana, Indonesia, Kenya, New Zealand, Nigeria, Norway, Paraguay, Philippines, South Africa and Turkey (see calendar below for expected policy actions). There are a number of ECB speakers throughout the week, and the ECB will also conduct the second of its TLTRO operations.
- Fed: no change is expected from current 0.25-0.50%, though there is a strong chance that there will be additional dissenters to Esther George, most probably Loretta Mester. A fresh 'dot plot' is seen lowering the rate trajectory yet again, the question is what happens to the Fed's forecasts (see recap of June 2016 forecasts attached), with the consensus expecting the GDP forecasts to be tweaked slightly lower. Friday's CPI data leaves the Fed in a difficult position, with sticky 'core CPI' elements: most notably Housing (OER) 0.3% m/m 3.8% yy/y, Services 0.3% m/m 3.0% y/y/, Medical Care 1.0% m/m 4.9%, which underlines that "low" headline CPI is only due to Food 0.0% y/y & Energy -9.2% y/y, the latter will start to unwind quite rapidly into the end of the year. A September hike cannot be ruled out completely, above all given the fact that a November meeting hike looks to be off the table, given its proximity to the election.
- Bank of Japan - the big question: is the biggest risk that the BoJ's policy committee cannot form a majority for any of the policy ideas that have been floated? The consensus looks for no change in rates or in the ¥80 Trln annual Monetary Base target increase. The BoJ has floated so many balloons in terms of what changes it might make as a consequence of its comprehensive review of its QQE policy that there is a great deal of uncertainty about changes might be made. The 2.0% CPI target is expected to be retained, but with a more flexible timeline. There has been plenty of chatter from BoJ sources about a 'reverse twist' operation, and some changes to its ETF purchases are also seen, as well as a rate cut of up to 20 bps. Sources also indicate that there are three different camps on the nine person policy committee, one group (including Kuroda) is said favour a rate cut, another would prefer to increase the QE volume, while a third group would prefer neither. Some thoughts on the 'reverse twist' option, in which the BOJ would trim purchases of long duration bonds and increase short duration bonds, can be found here:
(via TipTV earlier).
- Data highlights - in truth not many: flash PMIs, Japan Trade Balance, China Property Prices, UK PSNB, US Housing Starts & Existing Home Sales and Canada CPI & Retail Sales.
- Government bond auctions - a relatively modest week in Eurozone features Belgian 10 & 30-yr and a German 5-yr, while the UK sells a new 2047 Gilt, while the US sells 10-yr TIPS, and there is no supply in Japan due the Monday and Thursday public holidays. Corporate supply likely to be subdued in light of the BoJ and Fed "event risk".
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Main Economic Data & Events - 20 to 23 September, 2016
from Marc Ostwald