Summary Of Global Events In The Week Ahead
Summer is over, and now the real scramble for performance begins with just 3 weeks left in the quarter. Here is a look at the key economic events in the upcoming week, from around the world.
From Thomas Stolper and Mark Tan at Goldman Sachs
Summer comes to a close and markets swing back into full gear again following the Labour day weekend in the US. The political temperature in Europe, latest round of Eurozone IP data and China data at the end of the week will be in focus. We also get a few interesting central bank meetings from around the world.
Post summer blues in the Eurozone? We’ll be watching closely for signs of rising political tension in the Eurozone, with the upcoming few weeks critical in gauging the political risks surrounding the pending implementation of key reforms in a number of Eurozone countries. The first milestone will be the September 7th general strikes planned in France in response to a parliamentary debate about the much needed increase of the retirement age. The potential for negative headlines and rising political uncertainty is one of the reasons why we have been cautious not to sound the all clear for the Euro just yet. Outside of this, we think fundamentals (relative cyclical growth outlook, structural impediments in the US and the BBoP picture etc) still point to considerable support for EUR/$ strength, as reflected in our 6 and 12 months forecasts of 1.35 and 1.38 respectively. We’ll also get the latest on the cyclical momentum in the Eurozone with the first batch of hard data for Q3 in the form of IP data. We expect the industrial recovery to have continued across the Eurozone, but the moderation in momentum we have seen in the surveys will likely also translate into slightly softer IP growth going forward.
Central bank meetings Australia, Canada, Korea, South Africa, Peru, Japan and the UK all hold central bank meetings this week. Our Australia economists are looking for a possible hawkish shift in tone for the RBA this week, reflecting the stronger activity recently. We are still expecting 100bps of hikes over the next year (with 25bps to come in November, although we are not ruling out October). This is considerably more hawkish than market pricing and is the rationale behind our recently initiated trade recommendation to pay AUD rates via 5Y swaps. In Canada, we are expecting a 25bps hike, in-line with consensus. We will be focused on the accompanying statement, which could be dovish given the recent downside risks for the US outlook. In Japan, we are not expecting any major surprises from the BoJ after having just announced their additional easing measures last week.
China data We’ll get trade data and possibly money and credit data starting on Friday. For trade, we expect August exports growth to fall by around 2% and imports growth to remain largely unchanged on a yoy basis (the implied mom annualized growth rates are -10% for both exports and imports). Meanwhile, the trade surplus is likely to remain high. Money and credit growth should likely show a modest rebound in both yoy and mom terms in August. The slew of monthly Chinese activity data also comes the following week, which will allow our China economists a clearer read on the risks to their current 2010 GDP forecasts.
US bank holiday
BoJ meeting We do not expect any major announcements here given the additional easing measures announced last week.
RBA meeting In view of the strength of the recent domestic data on GDP and retail sales, we expect the RBA to shift its rhetoric to a more hawkish tone at some stage over the next few weeks. Our central view is that a November rate hike is most likely the next step in the tightening cycle, but an earlier move in October cannot be ruled out.
German manufacturing orders (Jul) We expect a decline of -0.5%mom after a +3.2% rise last month.
General Strike in France Given the latest announcements from trade unions, large parts of public services, including public transport are at risk of being shut down for 24 hours, while the French parliament starts debating the planned pension reforms.
Japan machinery orders (Jul) Recovery is very slow for machinery orders (private-sector orders excluding shipping and electric power), which are a leading indicator for capex. We only forecast a flat mom path in July after a 1.6% rise in June.
German and Spain IP (Jul) We expect IP to have grown by +0.5%mom in the former, and 0.3%mom in the latter.
Bank of Canada meeting We continue to forecast a 25bp hike (in-line with consensus), although our conviction level is not especially high given the recent deterioration in the growth news (particularly in the US).
Fed beige book This survey of regional economic conditions will provide a cross-check on recent economic indicators, which have begun to surprise to the upside relative to downgraded forecasts.
Our September FX Monthly publication is scheduled for release
Korea central bank meeting Our forecast is for at most another 25-bp hike in 2010, in either September or October. Our baseline scenario remains a 25-bp hike in October but we do not rule out a September hike, given the hawkish comments from Bank of Korea officials.
Bank of England meeting No change to rates expected.
South Africa central bank meeting We expect a 50bps cut in rates to 6%, in-line with consensus.
US trade balance (Jul) The deficit in June (-$49.9bn) was much deeper than the second-quarter average. Our estimate for July is for only a slight narrowing to -$48bn, suggesting downside risk to the trade contribution to third-quarter GDP growth.
US initial claims Consensus expects stabilization at +470k following the fall to +472k last week.
Peru central bank meeting We expect a 50bps hike to 3%, in-line with consensus
Australia employment report (Aug) This month's jobs survey will be distorted by hirings associated with the holding of the Federal Election in the month. Though it is hard to be precise, prior elections have also resulted in a noticeable lift in participation, which we suspect will prevent a big fall in the unemployment rate. We are expecting +55k of jobs added vs consensus of +25k. We expect the unemployment rate to stay at 5.3% vs consensus of 5.2%.
China Money and credit (Aug) (Sep 10-15) We expect money and credit growth to show a modest rebound in both yoy and mom terms in August.
China Trade (Aug) We expect August exports growth to fall by around 2% and imports growth to remain largely unchanged on a yoy basis ( which would imply sequential mom growth rates of -10% annualized for both exports and imports ). Meanwhile, the trade surplus is likely to remain high.
France and Italy IP (Jul) We expect +0.6%mom in France and +0.4% in Italy.
Canada employment report (Aug) Consensus is expecting a +17.8k increase in jobs from -9.3k previously. Unemployment rate expected unchanged at 8%.