Key Events This Week: All Eyes On Inflation And Earnings

While it's a fairly quiet week for the US on the data front, the US CPI report for June should be of particular interest, while the start of Q2 US bank earnings, a NATO summit and President Trump travelling to the UK to meet PM May in the aftermath of this weekend's David Davis resignation should be enough to keep markets busy according to DB's Carig Nicol. Also, with trade war officially starting last Friday, expect markets to also be on edge for signs of further escalation in the trade war.

Starting with the data, the June CPI report in the US on Thursday is likely to generate the most interest: the Powell-led Fed is clearly growing more conformable with inflation rising back to the Fed’s target, which has played out in the recent data with both the core PCE and core CPI data at and above 2%,. The consensus for the core reading on Thursday is for yet another +0.2% mom reading – the 33rd month in a row that we’ve had such a consensus (of which 18 have proven to be correct). The annual rate is also expected to rise one-tenth to +2.3% yoy which would be the highest since January 2017. Headline CPI is expected to come in at +0.2% mom and +2.9% yoy.

Aside from CPI, another inflation report will hit one day earlier, when the June PPI report hits on Wednesday and is worth watching.

It’s mainly second tier releases away from that though with May consumer credit on Monday, June NFIB small business optimism and May JOLTS on Tuesday, May wholesale inventories on Wednesday, and finally the June import price index and preliminary July University of Michigan consumer sentiment report on Friday rounding out the diary.

In Europe it’s a fairly sparse diary for data releases next week. The final June CPI revisions are due to be made on Thursday in Germany and France while on the same day it’ll be worth watching the May industrial production report for the Euro area for signs of any improvement in the hard data (which has been unusually soft of late compared to the PMIs). The July ZEW survey in Germany is due on Tuesday while May trade data is out early on Monday.

Meanwhile in Asia there are a few prints of note in China next week. Early on Tuesday we’ll get the June CPI and PPI prints. Consensus for the former is a one tenth increase to +1.9% yoy while the latter is expected to increase three-tenths to +4.4% yoy. On Friday the June trade numbers should be closely watched in light of all the trade war talk. Finally money supply and credit data for June should also be out at some stage next week.

Away from the data, there is some central bank speak to keep an eye on next week. Over at the Fed, New York Fed President John Williams is due to speak to business and community leaders on Wednesday evening. On Thursday Minneapolis Fed President Neel Kashkari (dove/non-voter) speaks in Minnesota on a panel discussing immigration issues, then later in the day Philadelphia Fed President Patrick Harker (neutral/non-voter) speaks at an economic summit in Idaho. On Friday Atlanta Fed President Bostic (neutral/voter) then holds a town hall chat in Virginia. Over at the ECB, President Draghi is due to speak to the European Parliament's Committee on Economic and Monetary Affairs in Brussels on Monday, while board member Benoit Coeure is due to speak on Sunday and Nowotny will speak on Monday. The BoE’s Broadbent is also due to speak at a conference on Monday morning, while Governor Carney is scheduled to speak on Wednesday afternoon in Boston.

The Fed will get a bit of focus next week too with the Fed’s semi-annual Monetary Policy Report to Congress due out on Friday afternoon. It’s worth noting however that Fed Chair Powell won’t testify until the following week.

Elsewhere, as mentioned at the top, US bank earnings on Friday should also be under the spotlight. Wells Fargo, JP Morgan and Citigroup will all report their Q2 earnings. Prior to that there is only a small smattering of other earnings releases including PepsiCo on Tuesday and Delta Airlines on Wednesday.

As for politics, President Trump has a busy week next week, starting with his participation at the NATO summit on Wednesday and Thursday, before travelling to the UK to meet PM May on Friday.

Finally, other things worth watching next week include German Chancellor Merkel and China PM Li Keqiang chairing a meeting of cabinet ministers from both countries on trade on Monday, Pompeo participating at the US-EU Energy Council on Tuesday, Japan PM Abe meeting European Council President Tusk and EC President Juncker on Wednesday, and Euro Area finance ministers meeting in Brussels on Thursday to discuss the EMU.

A day by day breakdown of what to expect this week, courtesy of Deutsche Bank:

  • Monday: It's a fairly quiet start to the week for data with the only overnight releases being the May current account and trade balance in Japan. In Europe we'll get the May current account and trade balance in Germany followed by Bank of France's June industry sentiment release and the July Sentix investor confidence reading for the Eurozone. In the US we'll get May consumer credit data in the evening. China's June foreign reserves will also be released during the day. Away from that, ECB President Draghi speaks to the European Parliament's Committee on Economic and Monetary Affairs in Brussels, BoJ Governor Kuroda will speak overnight at a Branch Manager's meeting, while the BoE's Broadbent will speak at a conference in London and the ECB's Nowotny will speak in Zurich. German Chancellor Merkel and Chinese PM Li Keqiang are also due to chair a meeting of cabinet ministers from both countries.
  • Tuesday: Overnight on Tuesday we get June BRC sales data in the UK along with June CPI and PPI readings in China. In Europe, we're due to get May industrial production and manufacturing production prints in France followed by May industrial production in Italy and May trade balance, industrial production, manufacturing production and construction output data all in the UK. Also worth noting is the U.K. Statistics Office publishing their first monthly estimate of GDP. Also out in the morning is Germany's July ZEW survey. In the afternoon in the US we get the June NFIB small business optimism print followed by May JOLTS job openings data. Elsewhere US Secretary of State Mike Pompeo will participate in the US-EU Energy Council.
  • Wednesday: The calendar is fairly sparse on Wednesday with the only overnight data due out being the June PPI print in Japan. There are no releases of note in Europe while in the US the most significant release is the June PPI report, while May wholesale trades sales and final May wholesale inventories are also due. Away from the data, BoE Governor Mark Carney will speak late in the afternoon on the global financial crisis at a conference in Boston while New York Fed President John Williams will speak to business and community leaders at an event in Brooklyn. Meanwhile the NATO meeting begins, continuing into Thursday, and includes participation from US President Trump, while Japan PM Abe meets European Council President Tusk and EC President Juncker.
  • Thursday: All eyes on Thursday will be on the June CPI report in the US in the afternoon. Away from that, overnight we get the June RICS house price balance in the UK followed by final June CPI prints for Germany and France in the morning. Following those we get May industrial production in the Eurozone. Also out in the US will be the June monthly budget statement along with the latest weekly initial jobless claims data. In terms of central banks, Minneapolis Fed President  Neel Kashkari will speak in a panel discussion on immigration issues and Philadelphia Fed President Patrick Harker will speak at the annual Rocky Mountain economic summit. Euro Area finance ministers are also due to meeting in Brussels to discuss the EMU.
  • Friday: It's a fairly quiet end to the week for data on Friday with the final June CPI report in Spain the only release of note in the morning. In the US we're due to get June import and exports price indices along with the preliminary July University of Michigan survey. Of more interest will be the Fed releasing its semi-annual monetary policy report to Congress. At some stage on Friday, China's June trade balance is also due out. Away from that, the BoE's Deputy Governor Jon Cunliffe will speak at an event in Kendall at noon and the Fed's Bostic will hold a town hall chat in Northern Virginia in evening. Finally President Trump is due to travel to the UK and meet PM May.

Finally, here is Goldman's forecast for the week together with sellside consensus:

The key economic release this week is the CPI on Thursday. There are several scheduled speaking engagements by Fed officials this week, including a speech by New York Fed President Williams on Wednesday. Additionally, the Federal Reserve will publish the July 2018 Monetary Policy Report to Congress on Friday ahead of Chairman Powell’s testimony to Congress the following week.

Monday, July 9

  • 03:00 PM Consumer credit, May (consensus +$12.0bn, last +$9.3bn)

Tuesday, July 10

  • 06:00 AM NFIB small business optimism, June (consensus 105.8, last 107.8)
  • 10:00 AM JOLTS job openings, May (consensus 6,660k, last 6,698k)

Wednesday, July 11

  • 08:30 AM PPI final demand, June (GS +0.2%, consensus +0.2%, last +0.5%); PPI ex-food and energy, June (GS +0.2%, consensus +0.2%, last +0.3%); PPI ex-food, energy, and trade, June (GS +0.2%, consensus +0.2%, last +0.1%): We estimate a 0.2% increase in headline PPI in June, reflecting firmer core prices, as well as higher food and energy prices. We expect a 0.2% increase in the core PPI, reflecting an expected pullback in the trade services category.
  • 10:00 AM Wholesale inventories, May final (consensus +0.4%, last +0.5%)
  • 04:30 PM New York Fed President Williams (FOMC voter) speaks: New York Fed President John Williams will speak with business and community leaders in Brooklyn. Audience Q&A is expected.

Thursday, July 12

  • 08:30 AM Initial jobless claims, week ended July 7 (GS 230k, consensus 226k, last 231k); Continuing jobless claims, week ended June 30 (last 1,739k): We estimate initial jobless claims edged down by 1k to 230k in the week ending July 7, 5k above the prior four-week moving average. We expect the temporary boost from auto plant shutdowns to continue this week. Continuing claims — the number of persons receiving benefits through standard programs — have rebounded modestly in recent weeks after a sizeable decline over the previous two months.
  • 08:30 AM CPI (mom), June (GS +0.22%, consensus +0.2%, last +0.2%); Core CPI (mom), June (GS +0.19%, consensus +0.2%, last +0.2%); CPI (yoy), June (GS +2.97%, consensus +2.9%, last +2.8%); Core CPI (yoy), June (GS +2.29%, consensus +2.3%, last +2.2%): We estimate a 0.19% increase in June core CPI (mom sa), which would boost the year-over-year rate by one tenth to +2.3%. Our forecast reflects the impact of a tobacco tax in New York City, as well as a modest expected rebound in used car prices. On the negative side, we look for a pullback in the lodging away from home category. We look for a 0.22% increase in headline CPI (mom sa), reflecting an acceleration in the food and energy categories.
  • 08:30 AM Minneapolis Fed President Kashkari (FOMC non-voter) speaks: Minneapolis Fed President Neel Kashkari will participate in a panel on immigration issues with audience Q&A in Worthington, Minnesota. The event will be webcast.
  • 12:15 PM Philadelphia Fed President Harker (FOMC non-voter) speaks: Philadelphia Fed President Patrick Harker will speak at the Rocky Mountain Economic Summit. Audience Q&A is expected.
  • 02:00 PM Monthly budget statement, June (consensus -$80.0bn, last -$146.8bn)

Friday, July 13

  • 08:30 AM Import price index, June (consensus +0.1%, last +0.6%)
  • 10:00 AM University of Michigan consumer sentiment, June preliminary (GS 98.3, consensus 98.0, last 98.2): We estimate the University of Michigan consumer sentiment index edged up by 0.1pt in the preliminary estimate for July, reflecting a further rise in high-frequency consumer surveys. The report’s measure of 5- to 10-year inflation expectations rose to 2.6% in June, near the upper end of its 12-month range.
  • 11:00 AM Federal Reserve Board to publish July 2018 Monetary Policy Report to Congress
  • 12:30 PM Atlanta Fed President Raphael Bostic (FOMC voter) speaks: Atlanta Fed President Raphael Bostic will hold a town hall meeting at the University of Virginia Northern Virginia Center.

Source: Deutsche Bank, BofA, UBS, Goldman