Saxo Spotlight: US Retail Sales, UK labor market, China's Activity Data, and JPY Movement in Focus – Aug 14-18 Saxo Spotlight: US Retail Sales, UK labor market, China's Activity Data, and JPY Movement in Focus – Aug 14-18 Saxo Spotlight: US Retail Sales, UK labor market, China's Activity Data, and JPY Movement in Focus – Aug 14-18

Saxo Spotlight: US Retail Sales, UK labor market, China's Activity Data, and JPY Movement in Focus – Aug 14-18

Macro 8 minutes to read
APAC Research

Summary:  This week's focus centers on growth data, particularly US retail sales and that UK labor market data will likely show some signs of cooling. Investors will closely monitor China's activity data, credit risks in the property sector, and debt-like wealth management products. The Japanese yen's movement is being closely monitored, with potential intervention by the Ministry of Finance through the BOJ as the USDJPY has broken above the critical level of 145. US earnings will highlight Cisco and retailers, while Chinese overseas-listed companies, including Tencent, Meituan,, and Xiaomi, have a packed earnings calendar.

US retail sales may see a one-off surge but weakness likely to set in

While the markets continue to embrace the soft landing narrative, Fed’s data-dependent mode has made them extremely sensitive to any incoming data releases. Last week’s data suggested it may be too early to put inflation concerns on a backburner, and this week’s focus will primarily be on growth data as July US retail sales is reported on Tuesday. Bloomberg consensus expects July retail sales to see an uptick and come in at 0.4% MoM from 0.2% previously, while the control measure that feeds into the GDP is seen at 0.5% MoM from 0.6% in June. Headline may be boosted by one-time items such as Amazon Prime Day or July 4 holiday spending as well as higher gasoline prices boosting the value of gasoline station sales. However, retail sales could likely fall towards the end of the year as excess savings of the lower and middle income groups are getting depleted and rising credit risks suggest household financial stress could elevate. Sustained weakness in same store sales growth from Johnson Redbook for July also suggest headwinds to retail sales could be building. FOMC minutes from the July meeting will also be released on Wednesday, and may preach disinflation but there will likely be little consensus on peak rates.

China activity data is expected to come in weak in July

China’s retail sales are anticipated, according to the Bloomberg survey, to increase to 4% Y/Y in July from 3.1% in June due to a low base last year. This implies, however on a month-on-month annualized basis, retail sales fell 17.2% in July. The recovery in in-person services was likely to be offset by a decline in auto sales.

Industrial production growth in China is expected to tick down to 4.3% Y/Y in July from 4.4% in June. Weak export data released last week and high-frequency data such as steel output tend to suggest potential downside surprises.

The year-to-date growth in fixed asset investment is expected to slow to 3.7% Y/Y from 3.8% as construction PMI was weak in July. The year-to-date growth in property investment is expected to contract further to -8.1% Y/Y from -7.9%.

Country Garden, Chinese developers, and wealth management products to monitor closely

After missing two coupon payments of its offshore USD bonds and suspending trading of its onshore Yuan bonds, Chinese developer Country Garden plans to hold meetings with creditors to seek an extension of debts and other debt restructuring measures to stay afloat amid a USD7.6 billion loss in the first 6 months of the year and mounting debt maturities. The news has sent yet another shockwave to the credit and equity markets concerning the distress in the Chinese property sector. The development in Country Garden and the extent of the spillover effects will be a focus for investors.

Additionally, the headlines that Zhongrong Trust missed payments on some of its wealth management products added fuel to the worries about a surge in credit events in China that might become more systemic. Beyond property developers, investors should closely monitor the development in the wealth management product space and trust companies.

Japanese yen (JPY) on intervention watch: Q2 GDP and July CPI on the radar

Japanese yen has once again been a victim of higher Treasury yields last week, and USDJPY started the week breaking above the 145 handle to fresh highs since November at 145.22. The 145 barrier brings fear of Japanese authorities intervening to support the yen, but lack of any verbal interventions so far suggest that the patience levels of Japanese authorities may have gone up. That may be put to test however if Japan’s data this week comes in stronger than expected which, together with yet higher Treasury yields, prompts further yen depreciation. Q2 GDP due on Tuesday is expected to show strengthening economic activity, with Bloomberg consensus expecting annualized growth of 2.9% QoQ from 2.7% in Q1. However, if this is predominantly driven by net exports and not consumer spending, then the Bank of Japan’s focus on wage growth could continue to postpone tightening expectations. Friday’s July CPI could also bring upside surprise after July’s Tokyo CPI rose faster than expected and energy prices as well as tourism demand is raising concerns about further gains in price pressures.

Does the UK growth cheer have legs? Jobs and inflation data to confirm

UK’s Q2 GDP surprised to the upside last week, but the markets are still more worried about wage and inflation dynamics to see the end of the tightening cycle draw closer. Labor market data will be out on Tuesday and will likely show some signs of cooling in the labor market, but wage pressures, particularly in the private sector, are unlikely to ease enough to support the case for a pause at the September meeting. July inflation print is also out on Wednesday where disinflation trends may be more apparent given household energy bills declined sharply in the month amid the resetting of the OFGEM price cap. However, services CPI is the bigger focus for Bank of England and holiday season may have kept it elevated. If that drives core CPI to come in higher than expected, we could see BoE’s September rate hike getting fully priced in as compared to ~70% chance for now.

Australia unemployment and NZ central bank announcement may not reverse the pressures on cyclical currencies

The procyclical currencies AUD and NZD have been the underperformers MTD and QTD amid the listless Chinese recovery and the heightening credit risks for the US economy. Meanwhile, no further rate hikes are being priced in for RBA or Reserve Bank of New Zealand at this point. Australia’s labor market data is out on Thursday and may show continued risks of a tight labor market, aiding inflationary pressures which face upside risks in H2 on a sharp rise in electricity tariffs in July and unfavourable base effects. This may bring scope for some correction in AUD unless China data disappoints in a far bigger way. The RBNZ announcement is due on Wednesday and rates are likely to stay unchanged with inflation softening and unemployment rate rising since the July meeting. However, the bank will likely reaffirm that the OCR will need to remain at a restrictive level for the foreseeable future.

US earnings spotlight: Cisco and retailers; busy calendar for Chinese companies

One of the foci of earnings announcement this week in the US is CISCO, shedding light on the significant corporate investments in networking equipment and solutions. Furthermore, the results, particularly the forward-looking evaluations provided by Home Depot, Walmart, and Target, offer valuable insights into the well-being of the US consumer sector. The expansion of precision agriculture within Deere is also a key point of interest for investors.

Chinese companies listed overseas have a heave earnings calendar ahead, featuring prominent tech giants like Tencent, Meituan,, and Xiaomi, in addition to major Chinese state-owned banks and leading players in the oil industry. This confluence of earnings reports from China's notable entities holds significant importance for investors.

Earnings this week:

MON: Meituan, Xiaomi, AAC, PetroChina, Sinopec, China Molybdenum, Agricultural Bank of China, China Construction Bank, Postal Savings Bank of China, China Galaxy Securities, PICC, Trip.Com, Ke Holdings, Great Wall Motor,

TUE: Home Depot, Suncor, Agilent Technologies, Alcon, SATS

WED: CISCO, Target, TXJ, Tencent,, JD Health, HKEX,

THU: Walmart, Applied Materials, Ross Stores, Adyen, Bilibili, Lenovo, Kingdee, CNOOC

FRI: Deere, Estee Lauder, Palo Alto, Hangzhou Hikvision Digital


Key economic events this week:

TUE: US Retail Sales (Jul), US Empire State Survey (Aug), German ZEW (Aug), UK Earnings (Jun), UK unemployment (Jun), Japan GDP (Q2), China Retail Sales (Jul), China Industrial Production (Jul), China Fixed Assets Investment (Jul)

WED: US Fed FOMC Minutes (Jul), US Housing Starts & Permits (Jul), US Industrial Production (Jul), Eurozone Industrial Production (Jun), Eurozone GDP (Q2, preliminary), UK CPI, RPI & PPI (Jul), Reserve Bank of New Zealand policy meeting

THU: US Philly Fed Survey (Aug), US Manheim Used Vehicle Value Index, Japan Exports (Jul), Japan Machinery Orders (Jun), Norges Bank policy meeting, Singapore Non-oil Domestic Exports

FRI: UK Retail Sales (Jul), Japan National CPI (Jul)


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