Markets will continue to look to Fedspeak

September 26, 2016

Lots of speeches from all around the globe this week, but focus now turns to the US Presidential election, with all eyes on Monday’s Trump-Clinton debate (up to 20% of US voters remain undecided). It’s believed that the debate “winner” could garner enough support to become the next president of the United States. That perception would have important implications for the various sectors of the economy supported by Trump or Clinton, including financials, defense, biotech, and energy to name a few, rise or fall with their candidate’s fortunes. There’s also plenty more central bank-speak to be had from the FOMC, ECB, BoJ, BoC, and RBA, along with discussions from oil ministers in Algeria where reportedly the Saudis are seeking a credible solution to help stabilize the oil market. Global asset markets, including bonds, stocks, oil, and gold, were in rally mode last week thanks mostly to central banks, with the effects from the FOMC and BoJ noted above, while weak European data added to beliefs the ECB could add to its already simulative posture.

United States:  The markets will continue to look to Fedspeak for direction this week, (12 FOMC members including Yellen and Fischer are due to speak this week) along with the debate. But, there’s also a full slate of Treasury supply (over $200 bln) to be digested heading into quarter-end.  Though Fedspeak and supply will dominate, there’s plenty of important data too. August new home sales (Monday) should is forecast dropping 12.1% to a 0.575 mln pace (median 0.597 mln), after solid gains since March, and largely erasing the 12.4% July jump to 0.654 mln. The September Chicago PMI (Friday), one of the most current stats, is seen bouncing back to 53.0 (median 51.9) after falling a total of 5.3 points to 51.5 in August, from 56.8 in June (which was the highest since January 2015). Durable orders should decline 1.0% in August (-1.0%) after July’s 4.4% rebound, from -4.2% in June. The August Advance goods trade report (Thursday) should post a wider $62.7 bln deficit (-$62.3 bln) from $59.3 bln previously. That would be a further weight on growth. September consumer confidence (Tuesday) may drop to 98.0 after surging 4.4 points to 101.1 in August (the best reading since September 2015). The final print on September consumer sentiment from the University of Michigan survey (Friday) should show little change from the 89.8 preliminary (median 90.0).

Canada: The light slate is highlighted by July GDP (Friday), expected to expand 0.2% m/m following the 0.6% m/m surge in June. The August industrial product price index (Friday) is seen slipping 0.2% (m/m, nsa) after the 0.2% gain in July. The raw materials price index is projected to decline 1.0% in August after the 2.7% tumble in July. BoC Governor Poloz delivers a lecture (Monday).

Europe: German Ifo Business Climate index is anticipated to 106.3 for September from 106.2 in August. he European Commission’s Eurozone Economic Confidence is seen steady at 103.5. German jobless numbers are expected to decline by -2K in September, versus August’s -7K, which should leave the jobless rate unchanged at 6.1%. Similarly, the August unemployment rate is expected to remain steady at 10.1%. At the same time, inflation rates remain very low, German HICP rising to 0.5% y/y from 0.3% y/y, French HICP also to 0.5% y/y from 0.4% y/y and Italian HICP to 0.1% y/y from -0.1% y/y, which should leave the Eurozone CPI at 0.4% y/y, up from 0.2% y/y. There is a host of ECBspeak this week. Draghi’s speech at the European Parliament (Monday) highlights. Other policymakers speaking this week include Coeure, Nowotny, Mersch, Praet, Ingves, Hansson, and Olsen.

UK: This week’s calendar brings a flurry of post-Brexit vote data. However, lately investors have been looking beyond the now evident rebound in activity from the post-EU referendum dip, to a still highly uncertain future trading relationship the UK will have with the EU. Data this week include, BBA mortgage approvals for August (Monday), expected at +37.0k from 37.7k in June (median same), the September CBI distributive sales survey (Tuesday), expectations for the headline realized sales reading to dip to +5 from +9 (median same), which would mark a correction after the biggest month-to-month jump in August on record. Monthly BoE lending data for August is also up (Thursday). The September Gfk consumer confidence survey (also Thursday) for September is seen jumping to a -5 reading from -7. The third estimate of Q2 GDP (Friday) is expected to be unrevised at 0.6%.

China: September Caixin/Markit manufacturing PMI (Thursday) is expected steady at 50.0.

Japan: The week kicks off on Tuesday with August services PPI, which we forecast will be up 01% y/y from the prior 0.4%. August retail sales (Thursday) are seen down 2.5% y/y from the previous 0.6% rise for large retailers, and down 1.0% y/y from up 1.5% overall. The remainder of releases come on Friday, beginning with August national CPI, which is seen unchanged at -0.4% y/y overall, and steady at -0.5% y/y on a core basis. September Tokyo CPI is expected steady at -0.5% y/y while the core reading is seen falling to -0.5% from -0.4%. August unemployment is penciled in at an unchanged 3.0%, as is the offers/seekers ratio, at 1.37. August personal income and PCE are due, with the latter expected to fall 2.5% y/y from the previous -0.5% reading. Preliminary August industrial production is forecast to rise 0.3% y/y versus the previous -0.4%, while August housing starts are seen up 5.0% y/y from the prior 8.9% increase. August construction orders will also be released.

Australia: The calendar is sparse this week. Reserve Bank of Australia Assistant Governor Malcolm Edey delivers a speech (Wednesday). The data docket has HIA new home sales on Friday.

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