Saxo Spotlight: What’s on investors and traders radars this week?
APAC Strategy Team
Summary: The week’s focus will be on the U.S. CPI scheduled to release on Wednesday. The strong employment report in the U.S. last Friday casted doubts about the aggressive pricing of rate cuts next year. All eyes will be on the CPI data to gauge how the tug of war between Fed's inflation fighting and the market's recession fear evolves. In Asia, the focus will be the July aggregate financing and credit data from China.
Can the US CPI release boost the USD?
The highly-watched US inflation data is on the radar in the week ahead, and the debate on inflation peaking vs. higher-for-longer will be revived. Meanwhile, the Fed has recently stayed away from providing forward guidance, which has now made all the data points ahead of the September 21 FOMC meeting a lot more important to predict the path of Fed rates from here. Bloomberg consensus expects inflation to slow down from 9.1% YoY in June to 8.8% YoY last month, but it will be more important to think about how fast inflation can decelerate from here, and how low it can go. We also get a preliminary print of the August University of Michigan sentiment this week, which may continue to signal the pain inflicted on the consumer from the escalating price pressures. That will also include a gauge of inflation expectations for one year, as well as the longer term.
Fed speakers to continue to push back on market’s easing expectations for next yearMore Fed speaker will be on the wires this week, starting with Chicago President Charles Evans who discusses the economy and monetary policy. Evans is not a voter this year, but he votes in 2023. He said last week a 50bps rate hike is a reasonable assessment for the September meeting, but 75bps is a possibility too if inflation does not improve. He expects 25bps from there on until Q2 2023 and sees a policy rate between 3.75-4% in 2023, which is in line with Fed’s median view of 3.8% for 2023, but above the 2.9% that the market is currently pricing in. Minneapolis Fed President Neel Kashkari, also not a voting member this year, is also up again this week after his comment last week that it is unlikely that Fed will cut rates next year. Mary Daly, another usually dovish Fed President, also returns this week after pushing back on easing expectations last week.
China’s PPI inflation is set to ease while CPI is expected to pick up in JulyThe median forecasts form economists being surveyed by Bloomberg are 4.9% (vs June: 6.1%) for PPI and 2.9% (vs 2.5% for June. The higher CPI forecast is mainly a result of a surge in pork prices by 35% in July from June. On the other hand, PPI is expected to continue its recent trend of deceleration due to a low base and fall in material prices. The convergence of the gap between PPI and CPI is likely to benefit downstream manufacturing industries.
Aggregate financing in China is scheduled to release between Aug 9 and 15As new home sales decelerated during the month, mortgage loan growth was likely to be weak in July. Bond issuance may come in lower in the July data versus June when local governments rushed to issue infrastructure special bonds. Local governments were told to use up all their issuance quotas by the end of June. Part of these weaknesses in the month of July may be offset by a rise in bank lending to support infrastructure construction.
Japan’s eco data will show the impact of the latest virus wave
Japan’s July data will begin to show the fresh highs we have seen recently in Covid-19 cases, which are now reaching over a million per week. The Eco Watchers Survey for July will be due today, and likely to show deteriorating current conditions and expectations index. July producer prices are also due in the week, and will show some easing due to the base effects. However, underlying pressures remain amid the higher import costs due to the weaker yen, and consumer prices could continue to be pressured higher as well as firms pass on these rising costs.
Key economic releases & central bank meetings this week
Monday Aug 8
U.S.: New York Fed survey of consumer expectations
Tuesday Aug 9
U.S.: Unit Labor costs (Q2) & Nonfarm productivity
Philippines: GDP (Q2)
Malaysia: Industrial production (Jun)
U.S.: CPI (Jul)
Japan: PPI (Jul)
China: CPI (Jul) & PPI (Jul)
Germany: CPI (Jul)
Italy: CPI (Jul)
Thailand: Bank of Thailand policy meeting
Thursday Aug 11
U.S:. Initial & continuous jobless claims
U.S.: PPI (Jul)
Singapore: GDP (Q2, final)
Friday Aug 12
U.S.: U of Michigan consumer sentiment (Aug) & 5-10yr Inflation expectation
France: CPI (Jul, final)
U.K.: GDP (Q2)
U.K.: Industrial production (Jun)
Malaysia: GDP (Q2)
India: CPI (Jul)
India: Industrial production (Jun)
Sunday Aug 9-15
China: Aggregate financing (Jul)
Key company earnings releases this week
Monday Aug 8
BioNTech SE (BNTX:xnas), AIG (AIG:xnys), Tyson Foods (TSN:xnys), Suncorp (SUN:xasx), China Unicom (00762:xhkg)
Tuesday Aug 9
Coinbase (COIN:xnas), Warner (WMG:xnas), REA (REA:xasx), China Tower (00788:xhkg), Flat Glass (06865:xhkg)
Wednesday Aug 10
Walt Disney (DIS:xnys), Commonwealth Bank of Australia (CBA:xasx), Vestas Wind (VWS:xcse), Techtronic (00669:xhkg), Wharf (00004:xhkg), Lenovo (00992:xhkg)
Thursday Aug 11
NIO (NIO:xnas), Cardinal Health (CAH:xnys), Capitaland (9CI:xses), Telstra (TLS:xasx), QBE Insurance (QBE:xasx), Siemens (SIE:xetr), Deutsche Telekon (DTE:xetr), Hapag-Lloyd (HLAG:xetr), RWE (RWE:xetr), China Mobile (00941:xhkg), SMIC (00981:xhkg), Li Ning (02331:xhkg)
Friday Aug 12
Zijin Mining (02899:xhkg), Galaxy (00027:xhkg), Sands (01928:xhkg)
Q4 Outlook 2022: Winter is coming
- Winter is coming to the financial markets as central banks are tightening their grip. How spring will look is still a question.
European energy crisis: it will get worse before it gets betterThe winter in Europe will be tough, but whether the result is political chaos or sustainable, innovative solutions is still undecided.
A difficult and volatile quarter awaitsAs the year draws to an end, commodities continue to be at centre stage of the world with growth pockets political uncertainty.
The bright side: crises drive innovationThe positive spin on crises is that they come with solutions. It is worrisome that deglobalisation may be a response to this crisis.
Green transformation in China: renewable energy and beyondGoing green, China needs to span numerous energy sources to ensure stability, as every source comes with a challenge.
Asia: Intermittent solutions, but a faster renewable adoption curveAsian energy supply is being squeezed. This and the adoption of renewables may change the investment sentiment in the region.
FX: A Fed thaw needed to deliver a sustained USD turn lowerThe US Dollar can keep momentum when the Federal Reserve continues to tighten, leaving the rest to play to their drum.
Autumn can become ugly for equities and bond holders. Comfort for Dollar longsTechnical analysis suggests that equities could face a tough Q4 as could fixed income. US Dollar positions could provide some upside.
The next stock market sector to watch, with stocks going nuclearAs the world scrambles to find affordable, sustainable energy, nuclear is getting attention from politicians and investors alike.
The crypto space is getting cold when the hype disappearsCryptocurrencies face a winter of their own as retail investors and governments are asking tough questions.
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