With earnings season in full swing as some 20% of the S&P is expected to report, the quieter macro picture moves to the backburner especially with the Fed now silent for a long time. Looking at key central banks events, at the Turkey central bank meeting this week, Goldman expects that the bank is more likely to deliver a moderately hawkish “surprise” and hike the lending rate by 100bp to 7.5% (7.0% for primary dealers), and leave the key policy (1-week repo) and the borrowing rates unchanged at 4.5% and 3.5%, respectively. Among the other central bank meetings this week, benchmark rates are expected to remain unchanged in New Zealand, Philippines and Colombia, in line with consensus, while a 25bp cut is expected to be announced at the Hungary MPC meeting.
Monday, 22 July
- US Existing Home Sales (June): GS: +4.0%, consensus at +1.4% mom, previous +4.2% mom
- Also interesting: Hong Kong CPI
Tuesday, 23 July
- Turkey MPC: Expect the CBRT to deliver a moderately hawkish surprise, hiking the lending rate by 100bp to 7.5%
- Nigeria MPC: consensus expects policy unchanged at 12%
- Hungary MPC: consensus expects 25bp cut to 4%
- Euro Area Consumer Confidence (July): consensus at -18.3, previous -18.8
- Also interesting: US Richmond Fed Survey, Euro Area Consumer Confidence, Brazil CA Balance, Argentina Trade Balance, New Zealand Trade Balance, Singapore CPI
Wednesday, 24 July
- China Flash PMI (July): consensus at 48.5, previous 48.2
- Euro Area Flash PMIs (July)
- Australia CPI (Q2): consensus at +0.5% qoq, previous +0.4% qoq
- New Zealand MPC: consensus expects policy unchanged at 2.5%
- US New Home Sales (June): Consensus at +1.7%, previous +2.1%
- Also interesting: Japan Trade Balance, South Africa CPI, Mexico CPI (INPC) inflation
Thursday, 25 July
- US Durable Goods Orders (June): Consensus at +1.2% mom, previous +3.7% mom
- UK GDP (Q2): Consensus at +1.4% yoy, previous +0.3% yoy
- Philippines MPC: Consensus expects policy unchanged at 3.50% yoy
- Also interesting: US Initial Claims, Spain unemployment, Brazil unemployment, Mexico GDP (IGAE), South Korea GDP, Sweden unemployment
Friday, 26 July
- US U Michigan Consumer Confidence (July, final): consensus at 84.0, previous 83.9
- Japan CPI (June): consensus at +0.1% yoy, previous -0.3% yoy
- Colombia MPC: consensus expects overnight lending rate unchanged at 3.25%
- Also interesting: Mexico MPC minutes and Trade Balance
Global events down in tabular format from SocGen:
Also from SocGen, here is a list of the top issues for the week ahead:
YET A REFORM STEP IN CHINA
Friday afternoon, China announced the removal of the floor on lending rates. The move, already built into our central scenario, is part of a broader effort to reform the Chinese economy and although the immediate impact will be limited, it is nonetheless welcome and not insignificant. This week, we look for the flash manufacturing PMI (HSBC) to clock in slightly lower at 48.
MARKET ISSUES: The authorities have resisted the temptation to given into renewed monetary stimulus with the inevitable risks this brings of hard landing. Structurally weaker Chinese growth prospects have now become consensus in financial markets.
CONTINUED EUROPEAN FINANCIAL FRAGMENTATION
Weekend press expressed excitement at German Finance Minister Schaeuble’s statement that “the most important task is to strengthen growth and create jobs”. He also noted that, “healthy, sustainable public finances” are a prerequisite for jobs growth in the euro area. Press reports suggest that G20 leaders could set specific country debt targets for 2016 at the next G20 meeting in September. Indeed, based on these statements we would be reluctant to conclude any new shift in the German stance. To our minds, fast track banking union could make a real difference to the euro area outlook, but the timetable outlined remains slow.
The quarterly bank lending survey from the ECB (Wednesday) will give a snapshot of lending conditions across the region and we expect to see continued signs of financial fragmentation. Moreover, while the manufacturing PMI is set to see some further improvement in July, it is expected to remain below the 50-level at 48.9, albeit slightly higher than the previous reading of 48.6. Our below consensus scenario of -0.8% GDP growth in 2013 and +0.4% in 2014 is consistent with a further 1pp gain in the PMI composite this year and 2ppp by end-2014.
MARKET ISSUES: The weak growth outlook leaves the euro area vulnerable; even more so as progress on institutional reform remains too slow for comfort (albeit fast for politics).
US STILL ON SUSTAINABLE RECOVERY
In the US, a jump in the Markit flash PMI to 53.5 from 51.9 will be further evidence of recovery. Looking ahead, we expect to see continued improvement of the US economy and although it is still early to set a specific forecast for the employment report due to be released on 2 August, we see little reason to see any marked deviation for the near 200K average of the past three months of non-farm payrolls.
MARKET ISSUES: The upcoming FOMC meeting on 30-31 July will come with no press conference or forecast update. We do not expect any taper announcement at that meeting, but look instead to September.
Source: Goldman, SocGen