A Look At Events In The Week Ahead: All About Greece Part 2

From Goldman Sachs

Week in Review

Markets remained glued to events in Greece last week starting with the Eurogroup finance minster meeting at the beginning of the week, the vote of confidence in the Greek Government, which they won, to the Eurogroup summit at the end of the week, which approved the Greek Medium-Term Fiscal Strategy. The latter will be subject to a parliamentary vote in the coming week. Despite all the too-ing and fro-ing over Greece, the Euro really hasn’t done that much. It remained essentially range-bound, as did most other currencies, including the Dollar. Cyclical assets broadly matched this pattern. The US Wavefront Growth basket has climbed off its lows, but bond yields generally declined last week.

Week Ahead

Greece will remain the main focus of attention. As it stands at the moment, the Greek Parliament will begin to debate the medium-term fiscal plan and the implementation laws on Monday. Voting on the legislation will occur on Wednesday for the Medium-Term Fiscal Strategy and Thursday for the implementation law. After the government won a vote of confidence, the assumption is that the required legislation will pass through parliament. However, reports that several PASOK members will potentially vote against the measures will likely add to the uncertainty ahead of the outcome of the parliamentary vote.

On the assumption that Greece passes the required legislation, on July 3, the Eurogroup will authorise the disbursement of the fifth tranche of the current package, and on July 11, will unveil the new funding package for Greece. Again on the assumption that Greece passes the required legislation, the macro data will become front and center on Friday, given it is the first day of the month we will get the release of PMIs globally. We already have a flavour of business sentiment given the downside surprises delivered by the Empire survey, Philly Fed, and the HSBC China Flash PMI, as well as the Euroland Flash PMIs. As usual, we will release the final reading of the GLI for June after the US ISM, which is expected to soften further.

Monday 27 June

US Core PCE (May): We expect a rise of 0.24% mom against consensus expectations of a 0.2% rise, which is equivalent to the last reading.

Tuesday 28 June

US Consumer Confidence (Jun): We expect a slight decline to 59.0 fro 60.8; consensus expects a reading of 61.0.
Also of interest: Korea BoP (May), Japan retail trade (May), Philippines trade balance (Apr), Third reading of UK Q1 GDP, German CPI.

Wednesday 29 June

Greek Fiscal Consolidation Vote I: Parliamentary votes on a €28 billion, five-year austerity package of tax hikes and spending cuts agreed with the European Union and the International Monetary Fund. The session starts at 10 a.m. Athens time (0700 GMT) and will conclude sometime in the afternoon with a vote.

Japan IP (May): We forecast the May Industrial Production Index to rise 5.0% mom, after rising 1.6% mom in April. The May reading is likely to affirm that production is on track for a solid recovery. Consensus expects a rise of 5.5% mom.

Also of interest: Swiss KOF indicator, Euroland business and consumer confidence,

Thursday 30 June

India BoP Q4 FY 2011: We expect the current account deficit to come in at 2.2% of GDP in 4QFY11, similar to the 2.1% of GDP in the previous quarter, mainly due to higher-than-expected merchandise exports growth.
Taiwan Central Bank Meeting: We expect the central bank to hike its policy rate by 12.5bp in the upcoming policy meeting, as does the consensus. We forecast another 12.5bp rate hike in the September meeting, and one 25bp hike for the December meeting, and another 62.5bp of total hikes in 2012, taking the policy rate to 2.875% by end-2012 (from the current level of 1.75%).

Greek Fiscal Consolidation Vote II: Parliament votes on a separate implementation law spelling out the fiscal measures in more detail -- potentially more difficult as the laws will cover individual privatisations, tax steps, and spending cuts.
Euroland CPI Flash (Jun): We expect the headline reading to remain steady at 2.7% in June. We continue to forecast a peak in inflation at just under 3.0% later this year.

US Chicago PMI (Jun): We expect a decline to 55.0 from 56.6, consensus expects a reading of 54.0.
Also of interest: Korean IP (May), Korean Business confidence (Jul), US Claims.

Friday 1 July

Global Business Surveys:

China PMI: We expect the official PMI to fall by around 1 percentage point in June, from 52.0 in May.
US ISM (Jun): We expect a decline to 52.0 from 53.5, indeed the Philly Fed index suggests some risk of a sub-50 reading. Consensus expects a reading of 51.7.
Japan Tankan (Q2): Consensus expects the large manufacturers index to fall to -7 after a reading of 6 previously and the large non-manufacturers to fall to -4 from 3.
Indonesia CPI (Jun): The last print was 5.98%yoy on headline and 4.64%yoy on core.
Thailand CPI (Jun): We expect inflationary pressures to continue to build in Thailand. We expect June headline CPI inflation to come in at 4.3%yoy, above the consensus and previous reading of 4.2%yoy.
Korean CPI: Consensus expects a rise to 4.3% from 4.1% previously.
Japan CPI (May/June): National CPI for May is expected to rise by 0.2%yoy after 0.3% previously. Tokyo CPI for June is expected to decline by 0.1% equivalent to the previous print.
Korean Trade data (Jun): Consensus expects exports to rise by 17.6%yoy down from 23.5%yoy previously.
Also of interest: Japan Vehicle sales (Jun).

Sunday July 3

Eurozone Finance Ministers to hold an extraordinary meeting.