While the ongoing government shutdown, now in its second week, means even more macro data will be retained by the random number generators, central banks are up and running. This means that in the upcoming week the key event will be the release of the FOMC minutes from the last meeting at which the Fed surprised almost the entire market by not tapering asset purchases as effectively pre-announced. There are MPC meetings in the UK, Brazil, South Korea and Indonesia. The main focus, however, will be on the US political situation still. Data that will most likely be delayed this week includes the US Trade balance, JOLTs, Wholesale and Business inventories, Retail sales, PPI, Import Prices, and the Monthly Federal budget.
US Unemployment (Sep): Consensus +7.3%, previous +7.3%
US Non-Farm Payrolls (Sep): Consensus 180K, previous 169K
Monday, Oct 7
- US Fed Fisher (FOMC non-voter) speaks
- US Consumer Credit (Aug): consensus USD+12.0bn, previous USD+10.4bn
- Also interesting: Switzerland FX Reserves (Sep), Malaysia FX Reserves (30-Sep), Philippines FX Reserves (Sep), Czech Republic IP (Aug)
Tuesday, Oct 8
- US Fed speakers: Pianalto (FOMC non-voter), Plosser (FOMC non-voter)
- US Trade Balance (Aug): Consensus USD-39.5bn, previous USD-39.1bn [release provided no partial government shutdown]
- Japan CA Balance (Aug): Consensus JPY+548bn, previous JPY+577bn
- Germany Factory Orders (Aug): consensus +1.0%mom, previous -2.7%mom
- Brazil IGP-DI inflation (Sep): Consensus +1.50%qoq, previous +0.46%qoq
- Canada Merchandise International Trade (Aug): consensus CAD-0.63bn, previous CAD-0.93bn
- Also interesting: UK RICS Housing Market Survey (Sep), Canada Housing Starts (Sep), Spain IP (Aug), Switzerland CPI (Sep), Chile CPI (Sep)
Wednesday, Oct 9
- US FOMC minutes (Sep): The minutes from the September FOMC meeting will be particularly interesting, given the Committee's unexpected decision not to taper asset purchases. Subsequent to the meeting, participants described the decision as a close call. Pay attention to any discussion of what criteria the Committee will use to determine when it would be appropriate to reduce the rate of purchases, and whether the previous guidance that purchases might be completed in mid-2014 remains appropriate. In addition, discussion of how the forward guidance might be enhanced in the future?alluded to by Chairman Bernanke in the post-FOMC press conference?will be of great interest. Finally, look for any further details on the thinking behind the new fixed-rate full-allotment reverse repo facility.
- US Fed Evans (FOMC voter) speaks
- Brazil MPC: Consensus 9.50%, previous 9.00%. This will likely be the fourth consecutive and unanimous 50bp rate hike following the April split-decision 25bp initial rate hike. More than the broadly anticipated 50bp rate hike, the market will likely be looking for changes in the usually terse post-meeting policy statement for hints the Copom is getting ready to start to taper the pace of rate hikes to a more moderate 25bp at the end-November meeting.
- Germany IP (Aug): consensus +1.0%mom, previous -1.7%mom
- UK IP (Aug): consensus -0.7%yoy, previous -1.6%yoy
- UK Trade Balance (Aug): consensus GBP-2.05bn, previous GBP-3.09bn
- Also interesting: Brazil IPCA Inflation (Sep), US MBA Applications
Thursday, Oct 10
- UK MPC: Consensus has main policy tools unchanged: policy rate at 0.5% and asset purchases at GBP375bn. While the MPC is likely to note the ongoing tightening in financial conditions implied by the rise in Sterling, consensus does not expect any significant changes in MPC communication at the October meeting.
- South Korea MPC: Consensus have policy rate unchanged at 2.5%.
- US Fed speakers: Bullard (FOMC voter), Williams (FOMC non-voter)
- US Initial Jobless Claims (week ending 5 Oct): consensus 310K, previous 308K
- Japan Consumer Confidence Survey (Sep): consensus 43.5, previous 43.0
- Also interesting: Italy IP (Aug), Canada New Housing Price Index (Aug), Russia FX Reserves
Friday, Oct 11
- US Fed speakers: Powell (FOMC voter), Rosengren (FOMC voter)
- Colombia MPC minutes (Sep)
- US Univ. of Michigan Consumer Sentiment Survey (Oct): Consensus 76.0, previous 77.5
- US Business Inventories (Aug): consensus +0.3%, previous +0.4% [release provided no partial government shutdown]
- US Headline PPI (Sep): Consensus +0.2%, previous +0.3% [release provided no partial government shutdown]
- Germany Harmonized CPI (Sep, final): Consensus +1.6%yoy, previous (Flash) +1.6%yoy
- Poland CA Balance (Aug): consensus EUR-205mn yoy, previous EUR-178mn yoy
- Also interesting: US Retail Sales (Sep) [release provided no partial government shutdown], Thailand FX Reserves (4 Oct), Czech Republic CA Balance (Aug), UK construction (Aug)
Saturday, Oct 12
- China Trade Balance (Sep): consensus USD+25.2bn yoy, previous USD+28.5bn yoy
SocGen's visual summary of the above
TOP ISSUES FOR THE WEEK AHEAD
BoE on HOLD
There will be little to get excited about at this week’s BoE meeting with no policy changes in sight. Economic data should continue to confirm recovery with the September RICS data pointing to further evidence of housing recovery, the quarterly credit survey from the BoE confirming an increase of both mortgage demand and supply and a further gain in manufacturing output (we look for +0.2% mom in August).
MARKET ISSUES: Will the UK economy gaining further strength, market expectations remain for an earlier rate hike than suggested by forward guidance (late 2016/early 2017).
EURO CYCLE PEAKING
In a sign that the recent positive momentum is peaking, we expect the September Bank of France business survey to remain unchanged. Hard industrial production data due out this week, moreover, will offer an important test of just how robust a signal the improvement in euro area business confidence over the summer has been. We expect August industrial production to clock in at -1.3% yoy in Spain, -4.3% yoy in Italy and -1.0% in France. The final September inflation data is expected to confirm flash estimates with modest prints across the board.
MARKET ISSUES: The euro area is no longer in recession, but recovery is lacklustre. The initial 2014 budgets, moreover, point to further austerity and our expectation remains that financial fragmentation repair will come only slowly. The ECB’s next quarterly credit survey due on 30 October will offer an important insight on this point.
BoK SHOW CONCERN ON LOW INFLATION
The September MPC minutes hinted at some concern on low inflation and supports our base case scenario for no change at the BoK (both this week and medium term, even as the Fed prepares to tighten). As the BoK prepares to release new forecasts, we expect to see no change of the growth outlook, but a reduction in inflation.
MARKET ISSUES: Anchoring expectations for rates to stay low will be supportive for both the government bond market and equities.
BRAZIL TO HIKE 50BP
We look for a 50bp hike of the Selic rate to 9.50% at this week’s meeting driven by a bid to tame inflation. However, unlike the rates market that sees scope for an additional 135bp of hikes through April 2014, we expect Selic target to peak at 10.00% this year. The BCB is facing a challenging growth-inflation trade off. Recent hawkish statements suggest the central bank will continue its battle against inflation as it fears that this could ultimately further undermine the economy. The central bank is, moreover, warning on wage increases in excess of productivity.
MARKET ISSUES: Delays to the Fed taper plans may offer a window of opportunity for the BCB and our expectation for the Selic rate to hit 10% by year-end is above market consensus. Nonetheless, our EM Strategists warn that after an impressive comeback, further gains may prove more challenging.
Source: Goldman, SocGen