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A Look At Global Economic Events In The Upcoming Week
Week in Review, from Thomas Stolper at Goldman Sachs
US slowdown Attention continued to focus on the deceleration in US activity, with very weak US housing data, durable goods orders and the second reading for US GDP the key data points for the week. In the event, July existing home sales fell more than twice as fast as expected by consensus and the pace of growth in Q2 was revised down from 2.4% qoq annualized in the advanced release to 1.6% qoq in the second print. While this was slightly above consensus and our forecast, the pace of final demand growth was revised down from 1.3% qoq initially to 1.0% qoq in the latest release. Our US team sees implications for Q3 growth from this release as slightly negative, worth noting given our already substantially below consensus growth outlook for the US. Finally, durable goods orders also pointed to continued weak final demand.
Decoupling The flash reading for the August manufacturing PMI for the Euro zone fell to 55.0 from 56.7, a sharper deterioration than expected by consensus (56.1). However, the orders to inventories ratio remained broadly stable, underpinning our relatively constructive outlook for Euro zone GDP. Moreover, the August IFO continued to rise on strong current conditions and economies on the German periphery also show strong growth, as indicated by the August KOF for Switzerland, which remains very high despite coming off slightly the recent record levels.
Markets and policy The market spent much of the week looking for direction, with EUR/$ not sure which way to go, and $/JPY moving briefly below 85 on weak US housing data, but unable to hang on. Governor Bernanke’s speech at Jackson Hole, which acknowledged weak data but also stated that conditions for a recovery next year “remain in place,” finally gave the market direction, with 10y Treasury yields rising 15 bps on a perceived reduced likelihood of QE, while EUR/$ and $/JPY both moved higher as markets – reassured by the relatively benign view on growth – put risk back on.
Week Ahead
Additional BoJ easing? JPY strength continues to be in focus with the stepped up comments and rhetoric from Japanese officials the past few weeks. BOJ Governor Shirakawa is scheduled to meet with Prime Minister Kan on Monday the 30th. Our Japan economists are highlighting that it is possible (around 60% probability) that the BOJ may acquiesce to the government’s call for additional easing. This comes against the backdrop of a big week of macro data (especially in the US where we are below consensus for the key data of payrolls and ISM) and this may continue to weigh on $/JPY.
US payrolls We expect a reading of -125k, below consensus of -105k and a slightly smaller fall than -131k in July. We expect private payrolls to be flat, also below consensus which expects a rise of 46k, following a rise of 71k in July. The unemployment rate is expected to rise to 9.6% from 9.5% in July. We are in line with consensus on this.
FOMC minutes The minutes will shed light on the Fed’s August 10 deliberations around its “baby step” towards unconventional easing, by announcing the re-investment of the pay-down of mortgage-backed securities into Treasuries. A Wall Street Journal article by Jon Hilsenrath hinted at substantial disagreement around this decision on the FOMC, so these minutes will be important to watch for, especially to gage the FOMC’s views on QE2.
Decoupling Because the flash PMI’s for the Euro zone are already known, we will be focusing on China’s PMI and the ISM. Our economists expect China’s PMI to show a modest rebound due to seasonality and improving fundamental growth momentum. In the US, we expect the ISM to fall to 52.0, below consensus of 53.0 and a drop from 55.5 in July. The final August reading of our GLI will also be out on Wednesday—the advanced reading showed some tentative signs of stabilization from negative momentum and we’ll be looking for further confirmation in the final reading.
Monday 30th
Poland GDP (Q2) We expect GDP to grow 3.2% yoy in Q2, in line with consensus, up from 3.0% yoy in Q1.
Canada current account (Q2) Consensus expects the current account deficit to widen to –C$10.5 bn, relative to a deficit of –C$7.8 bn in Q1.
US personal income & spending (Jul) Our US economics team flagged that the slightly better than expected second print for US Q2 GDP has slightly negative implications for Q3 GDP, due to a possible inventory overshoot. However, they caution that much will depend on monthly data to be released, with personal income and spending data for July the first notable data releases. We expect personal income to grow 0.2% mom, below consensus which expects 0.3% mom, and relative to a flat reading in June. The same numbers also hold for personal spending.
Tuesday 31st
Australia GDP (Q2) Consensus expects the economy to grow 0.9% qoq, up from 0.5% qoq in Q1. We are looking for a stronger-than-consensus outturn of 1.2% qoq.
Korea IP (Jul) Consensus expects July IP to grow 0.5% mom, relative to a reading of 1.4% mom in June. We expect IP to remain strong on robust retail sales and exports.
India GDP (Q2) Consensus expects growth to pick up to 8,8% yoy, up from 8.6% yoy in Q1. This uptick in growth looks likely to be powered by robust manufacturing growth as evidenced in the latest IP data, while the service sector has also been recording strong growth.
Brazil IP (Jul) Consensus expects IP to rise 0.5% mom, after a -1.0% mom decline in June. This would be the first positive reading for IP since March. IP has recently been depressed because of the reinstatement of the IPI tax.
Canada GDP (Q2) On the back of weaker US data, consensus has recently been revised down quite sharply to 2.5% qoq annualized for Q2 GDP, down from very strong growth of 6.1% qoq in Q1. This puts consensus below the July Monetary Policy Report by the Bank of Canada, which forecast growth of 3.0% qoq annualized for Q2, with a similar pace of activity for the rest of the year and H1 2011.
FOMC minutes The minutes will shed light on the Fed’s August 10 deliberations around its “baby step” towards unconventional easing, by announcing the re-investment of the pay-down of mortgage-backed securities into Treasuries. A Wall Street Journal article by Jon Hilsenrath hinted at substantial disagreement around this decision on the FOMC, so these minutes will be important to watch for, especially to gage the FOMC’s views on QE2.
USCase Shiller house prices (Jun) Consensus expects a rise of 0.35% mom, following on from a rise of 0.47% mom in May.
Chicago PMI (Aug) We expect a reading of 58.0, relative to consensus which expects a reading of 57.0 and the July reading which was 62.3.
Wednesday 1st
GS Global Leading Indicator (final August) We continue to monitor closely the signs from our proprietary leading indicator of the global industrial cycle. The advance GLI reading showed some stabilization in momentum (back into marginally positive territory).
China PMI (Aug) Consensus expects the PMI to rise to 51.5 in August, up from 51.2 in July. Our economists similarly expect the PMI to show a modest rebound due to seasonality and improving fundamental growth momentum. Seasonality alone in August accounts for a rise relative to July of around 0.7%.
USISM (Aug) Consensus expects the manufacturing ISM to fall to 53.0 in August from 55.5 in July. We expect an even greater fall to 52.0.
Brazil central bank meeting We expect Copom to hike the Selic target another 50 bps to 11.25%, continuing the hiking cycle that began in April. In contrast, consensus expects Copom to go on hold, ending the hiking cycle for now at 200 bps.
Thursday 2nd
Malaysia central bank meeting Consensus expects the central bank to stay on hold at 2.75%, after hiking 75 bps so far this year. We expect another 25 bps hike for the remainder of the year.
Switzerland GDP (Q2) We are looking for sequential growth of 0.7% qoq, slightly below consensus of 0.8% qoq, and below 1.0% qoq in Q1. Our forecast for Q2 GDP is +0.7%qoq (after +1.0% in Q1). As usual, uncertainty with respect to this number is high given the lack of any monthly data from the industrial sector.
Sweden central bank meeting In line with consensus, we expect the Riksbank to hike the policy rate by 25 bps to 0.75%. Beyond this meeting, we remain more hawkish than the central bank in terms of the cumulative path of monetary policy tightening.
ECB central bank meeting Consensus expects the policy rate to remain on hold at 1%.
Initial claims (Aug 28) Consensus expects 478k, relative to 473k last week.
Friday 3rd
Indonesia central bank meeting We expect BI to stay on hold at 6.5%, in line with consensus. We expect 75 bps in hikes in Q4, and another 75 bps in hikes in 2011.
Brazil GDP (Q2) Consensus expects GDP to grow 0.7% qoq non annualized, a return to a more normal pace of growth after the blistering 2.7% qoq pace in Q1 and 2.3% qoq in Q4.
Nonfarm payrolls (Aug) We expect a reading of -125k, below consensus of -105k and a slightly smaller fall than -131k in July. We expect private payrolls to be flat, also below consensus which expects a rise of 46k, following a rise of 71k in July. The unemployment rate is expected to rise to 9.6% from 9.5% in July. We are in line with consensus on this.
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Great work...none of it matters.
I'll wake up, grind some coffee, turn on the tube, and see the S&P futures up 10 handles. The Asian markets are already on board tonight.
They are going for it, again (and probably again, and again, and again).
I'm so numb to it now that I only shrug. It's well beyond fraudulent now; It's just fiction.
http://www.youtube.com/watch?v=Fd4VSkj0Wks
wont have to wait to wake up tomorrow, it is already up 8.5
I'm stunned. Who would have guessed it? It's the same old pile of shit I've been seeing for 2 years. It's not going to stop. They'll keep gunning it forever, literally.
I'm fucking done with it. Period. I had some put contracts that looked golden until...you fucking guessed it, Friday. Now, they just ram it even further away from the TA bullshit levels.
It's just way beyond anything worth being involved in. Sad, sick, pathetic, but, nonetheless, very true.
I would have bet my left AND right nut that they'd go for it again on Monday. They did. Yipee.
told you so :)
I started long positions a week ago when everybody made fun of it and I think they'll double in the next 2 weeks. :)
I think Benny B. will stop proposing QE's after QE7. Untill then, I'll buy every dip.
Same for oil. Every time it touches 72$ = BUY! 82$ = SELL
you're wasting your breath, boilermaker just doesn't ' get it'.
he thinks when his mistaken position loses it's a fraudulent conspiracy against him.
oh well, we need people to sell at the lows so we can buy i guess.
maybe he'll cover his short at the next technical resistance, since he doesn't believe in paying attention to charts either.
The Japanese will nuke their ccy and all risk is on ...bitchez..
Nikkei is up 3.2%. I am out of this market. If all the work Denninger and Tyler put into their credit Debt charts and analysis are correct, Then the whole charade will implode. If the Fed and Gs find a way to keep it going, Which they are, Then these charts are nothing but nice Photoshop designs that i can use as wallpaper in my bedroom. Happy shorting.
Yep, it's just as real as puff the magic dragon. We're just way way way off into the twight zone now. It's fucking worthless.
Here's a bit of good news, that should make OPEC shit........
I love making OPEC shit.
http://www.thenational.ae/apps/pbcs.dll/article?AID=/20100827/BUSINESS/708279837/1050
ONE of the largest oilfields in the world, in our yard, and Canada's, not counting Alaska,who needs OPEC?.
"Leigh Price, a geochemist working for the US Geological Survey (USGS), wrote a paper proposing that most oil from Bakken shale was still trapped in the Bakken Formation. He suggested the “cream” in the cookie contained up to 500 billion barrels of crude"
500 billion barrels eh,,, lets see, oil cunsumption is ~89 million barrels a day...~1 billion barrels every ~12 days - can somebody run the numbers?
http://seekingalpha.com/article/198095-no-substitute-for-oil-on-the-horizon-mark-leggett
They're painting the tape for end of month, what did you expect? Reversal Tuesday. I see this article didn't find the ADP payroll # Wed worth listing.
You might be right; you might be wrong. What is absolutely right is that this is now a total crock of stank. There is no place for retail investors or even traders in this bullshit game. This is strictly for the FED to play with themselves. Nothing more.
The bakken field is literally in my backyard. TG.
I can't short/put this market either. I am always early to these parties it seems. Get up, make the coffee, scratch my nuts, and watch the bots do all the work.
Australia's Real Estate and Economy are Safe as (Straw) Houses
....in a bushfire.