After last week's event-a-palooza, where the headlines, the spin, the erroneous HFT trading, and the propaganda (Draghi is too cold; Draghi is too hot; Draghi is just right) just refused to stop, we finally enter the summer proper where all of Europe is on vacation, as is congress. Add on top of this a very light macro event week and an earnings season which has seen the bulk of companies already report, and we expect the volume in the coming 5 days to be among the lowest recorded in 2012, and thus in the past decade. Which of course means that the cannibalization among the market makers will continue as more and more firms succumb to "trading anomalies."
Goldman recaps the key macro events in the coming week, few as they may be:
In the upcoming week, we enter the less data-intensive period of the month. There are few major data releases, which could change investors' take on the global business cycle. However, there are a number of central bank meetings, with the RBA, BOJ the most important ones, together with the inflation report from the BOE. But we will also get rate decisions in Korea, Indonesia and Peru. On the data front we will look at the US trade balance and China CPI numbers.
Most of the focus in the week ahead will likely remain on the ECB decision, including the political debate across the Eurozone that usually follows important announcements. We expect continued headline-induced volatility and some focus on the "if" and "when" of any additional support for Spain.
Mon 6 Aug
- Indonesia GDP
Tue 7 Aug
- Australia RBA Cash Rate Announcement: Consensus expects a flat rate of 3.50% for August.
- United Kingdom Industrial Production: We expect a decline to -4.3% yoy from -1.6% yoy previously.
- Germany Factory Orders: Consensus expects a decline to -0.8% mom from 0.6% mom previously.
- Also interesting: Switzerland Harmonised CPI, US Consumer Credit, Italy GDP.
Wed 8 Aug
- Brazil IBC-BR Monthly Real GDP: We expect an increase to 1.5% yoy from 1.1% yoy previously.
- Brazil Inflation - IPCA (IBGE): We expect an increase to 5.17% yoy from 4.92% yoy for July.
- Germany Trade Balance: Consensus expects a decline to 14.6B from 15.3B previously.
- United Kingdom Bank of England Inflation Report
- Germany Industrial Production: Consensus expects a decline to -0.8% mom from 1.6% mom for June.
- United States Non-Farm Productivity (Q2): Hours worked and nonfarm output point to a solid gain in productivity in the second quarter. We expect +1.1% compared to consensus at +1.4% and Q1 at -0.9%.
- Also interesting: Japan Current Account Balance.
Thu 9 Aug
- Indonesia Central Bank Meeting: Consensus expects the reference rate to stay flat at 5.75%.
- Japan Monetary Policy Meeting: Consensus expects the target rate to remain unchanged at 0.10%.
- Peru Central Bank Meeting: We expect the Central Bank to keep the policy rate on hold at 4.25% yoy.
- South Korea Central Bank Meeting
- China CPI: With some agricultural prices moving higher in recent months, it will remain key to watch the extent to which rising inflation restricts the ability of policymakers in China to used stimulus to boost growth.
- China Industrial Production: Consensus expects an increase to 9.7% yoy from 9.5% yoy for July.
- United Kingdom Trade Balance: We expect an increase in the deficit to 2.9bn comparing to -2.7bn previously.
- United States Trade Balance: We forecast that the nominal trade deficit remained unchanged in June as imports and exports appear flat on the month. Consensus expects a decline to the deficit from -$48.7B to -$47.6B for June.
- US Initial Jobless Claims: After a number of swings in recent weeks, this number continues to deserve close monitoring.
- Also interesting: China Retail Sales, Mexico INPC Headline Inflation.
Fri 10 Aug
- China Trade Balance: Consensus expects a decline to 8.2% from 11.3% in exports and an increase to 7.4% from 6.3% in imports for the month of July.
- Australia RBA Statement on Monetary Policy
- Germany CPI: Consensus expects an unchanged 1.7% yoy for July.
- France Industrial Production: Consensus expects an increase to -1.8% yoy from -3.5% yoy for June.
- Also interesting: United Kingdom Producer Prices, India Industrial Production
And for those only curious what happens in Europe, here is the full event calendar for the next two months courtesy of Deustche Bank. Enjoy the quiet August. In September things get really fun.
August:
- 7 August: Italian Q2 GDP flash estimate. A weak figure would reignite the ‘austerity versus growth’ debate (DB forecast –0.8% qoq).
- 13 August: Italy auction. Bill
- 14 August: Italy auction. Bonds
- 14 August: Euro area Q2 GDP flash estimate, from Eurostat.
- Mid-August: French Constitutional Court/Fiscal Compact. In Mid-August the French Constitutional Court is due to rule whether the Fiscal Compact, which euro area countries are due to endorse by the start of 2013, needs to be ratified into the French Constitution. If so, a joint vote by the French Assembly would be required. Signals are that this would happen in September if required.
- 16 August: Spain auction. Bonds
- 20 August: Greek bond redemption. Greece is due to repay EUR3.1bn of GGBs. Following the PSI, these would be GGBs owned by the ECB and EIB. While agreement on how to reconfigure the second loan programme is unlikely before September, it is unlikely the EU will hold-out from paying funds to Greece to repay the ECB/EIB. In a consolidated sense, theofficial sector’s exposure to Greece remains the same, but the creditor changes (to the EFSF). Alternatively, Greece could issue T-bills and the Greek banks could absorb them with the assistance of ELA from the Greek central bank which is what the media reports would indeed happen.
- 21 August: Spain auction. Bills
- 28 August: Spain auction. Bills
- 28 August: Italy auction. Bonds
- 29 August: Italy auction. Bills
- 30 August: Italy auction. Bond
- End-August: DBRS rating on Spain/Ireland. By the end of August, the DBRS ratings agency is due to have concluded its review of Spanish and Irish sovereign ratings.
September:
- September: Moody’s due to conclude review of Spanish sovereign rating. Logically Moody's should wait until there is clarity on direct recap before making a decision on Spain’s rating. Since governments have not made progress fleshing out a direct recapitalisation facility — indeed, have created some ambiguity as to whether it will be non-recourse— there is a distinct risk that Moody's, in another move to be “ahead of the curve”, decides to downgrade Spain within the next 3 months. Moody’s currently rates Spain Baa3, the lowest investment grade rating.
- September: Detailed bottom-up Spanish bank stress tests due for publication.
- 6 September: Spain auction. Bonds
- 6 September: ECB Governing Council meeting. The markets will be hoping for clarity on the modalities of the new bond purchasing scheme as well as how the ECB intends to address the seniority question. The new ECB staff forecasts will be released. There is a strong chance of the GDP growth forecasts being revised down, giving the ECB a basis to cut interest rates. We expect a 25bp refi rate cut, but assuming the ‘quantitative’ arrangements announced on 2 August materialise, there may be less pressure on the ECB to consider a negative deposit rate.
- 11 September: Greece auction. Bills
- 12 September: German Constitutional Court ESM ruling. The German Constitutional Court is to rule on the complaints lodged against the ESM and fiscal compact. The chances of the ESM being vetoed are low. However, the Court might again strengthen the German Parliament’s prerogatives as regards future European integration (see Focus Germany, 20 July). Germany is the last approval needed for the ESM tocome into effect. Then the first instalment of the capital has to be paid by the ESM members within 15 days of the ESM treaty entering into force. There are three other countries where Constitutional Court queries are outstanding — France, Austria and Ireland. France’s Constitutional Court will be deciding by mid-August. Neither Austria (which may take another 3-6 months) nor Ireland are large enough to hold back the ESM — the ESM will come into force when countries representing 90% of the subscribed capital have approved it. Both Germany and Francehave an effective veto power in that case.
- 12 September: Dutch Election. In April, the VVD/CDA minority government failed when Geert Wilders' PVV party withdrew its support amid negotiations for the 2013 austerity budget. A crisis was averted when three smaller parties came forward to give support to a budget, but an early election was unavoidable. Domestic austerity and European crisis issues will likely play important roles in the election. Opinion polls point to the antiausterity Socialist Party now being the most popular party in the Netherlands. Unlike France, Dutch politics remains fragmented. Despite the support, there is no guarantee the Socialists will end up in power. Nevertheless, the success of the Socialists’ ‘antiausterity’ message could influence Dutch policymaking in general. The Queen has an amount of discretion in choosing who to offer the mandate for rule. The trouble is, none of the ‘standard’ coalition combinations currently secures a majority. Forming a new government could take time, measured in months. In the meantime the outgoing (minority) government remains responsible for policy. The danger is this might impede Europe’s ability to achieve real progress on integration in the latter stages of 2011.
- 12 September: Italy auction. Bills
- 13-14 September: G20 Finance Ministers and Central Bankers meeting. In Mexico.
- 13 September: Italy auction. Bonds
- 14-15 September: Eurogroup/ECOFIN meetings. This is very likely the finance ministers meeting when adjustments to Greece's second loan programme will be considered. The remaining EUR23bn recapitalisation of the Greek banks is due to complete by the end of September, assuming a positive review of the loan programme. This is also when finance ministers should have their first discussion on the proposals for a common bank supervisory regime under the ECB. Any delays, with knock-on delays for a direct bank recapitalisation mechanism, will disappoint the market. Options for a reconsideration of Ireland’s legacy bank bailout policies may also be discussed (decision not due until October ECOFIN meeting).
- 18 September: Greece auction. Bills
- 18 September: Spain auction. Bills
- 20 September: Spain auction. Bonds
- 25 September: Spain auction. Bills
- 25 September: Italy auction. Bonds
- 26 September: Italy auction. Bills
- 27 September: Italy auction. Bonds