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Trading  | May 22, 2017

The key highlights in the coming week are the Fed minutes, the Eurogroup meeting on Greece, the OPEC meeting and Bank of Canada rate decision. We also get GDP releases in the US, Eurozone, and UK, while a murder (or gaggle) of Fed speaker will highlight virtually every single day, starting with 4 today. Also there will be monetary policy meetings in Colombia, South Africa, Korea, Hungary, Thailand and Ukraine. Ratings in Kuwait&Qatar

In the US, key economic releases this week are the durable goods report and Q1 GDP revision on Friday. The minutes of the May FOMC statement will be released on Wednesday at 2PM. In addition, there are several scheduled speaking engagements by Fed officials this week

Detailed event breakdown:

  • Looking for dovish signs in the Fed minutes? The minutes on the May statement will be closely watched as the market tries to assess the potential of a communication tweak. The last statement dismissed the impact of weak 1Q GDP and March consumer inflation. With recent data being on the weak side, a dovish sign in the minutes may put emphasis on downside risks.
  • Also watch for Eurogroup meeting on Greece and OPEC: A Eurogroup meeting is scheduled for 22 May. All eyes will be on the outcome because of Greece. Markets are optimistic that a compromise can be reached on Greece – we remain sceptical. Red lines around debt relief and IMF participation are the same and there is potential for complications in the run-up to the summer redemptions.
  • Our commodity strategists cover the likely outcome at next week’s OPEC meeting. We think that Saudi, Russia, and most OPEC members will try sending the oil price forward curve in backwardation/ensuring no further drops in spot oil prices. Staying the course with ongoing cuts remains the most likely course of action as OPEC meets.
  • The week ahead in Emerging Markets: here are monetary policy meetings in Colombia, South Africa, Korea, Hungary, Thailand and Ukraine. We forecast Colombia’s BANREP to cut 25bp and Ukraine’s NBU to cut 50bp. Sovereign ratings reviews in Kuwait and Qatar.

In other data

  • In the US, we mainly await 1Q GDP (2nd release), home sales, durables & capital goods orders and FOMC Meeting Minutes. We also hear from a number of FED speakers.
  • In the Eurozone, we wait for PMIs and GDP prints along with German IFO.
  • In UK, the main release is 1Q GDP on Thursday.
  • In Japan, Manufacturing PMI, trade balance and CPI are the main releases. BOJ’s Kuroda speaks in Tokyo.
  • In Canada, focus is on the Bank of Canada Rate Decision.
  • In Australia, main releases include skilled vacancies and construction.
  • In Scandies, we get unemployment data for both and PPI in Sweden. Norges Bank Governor Olsen speaks.
  • In Switzerland, sight deposits are the only release of consequence.


And here is a detailed breakdown of just the US events, together with estimates, courtesy of Goldman:

Monday, May 22

  • 10:00am Philadelphia Fed President Harker (FOMC voter) speaks: Philadelphia Fed President Patrick Harker will deliver the commencement speech at Thomas Jefferson College on the topic of physical and economic wellbeing.
  • 10:30am Minneapolis Fed President Kashkari (FOMC voter) speaks: Minneapolis Fed President Neel Kashkari will deliver welcoming remarks at the Opportunity and Inclusive Growth Conference in Minneapolis.
  • 7:30 pm Fed Governor Brainard (FOMC voter) speaks: Fed Governor Lael Brainard will speak at the Opportunity and Inclusive Growth Conference in Minneapolis on the topic of “Opportunity and Inclusion in Strengthening the US Economy.” Speech text and audience Q&A is expected.
  • 09:10 pm Chicago Fed President Evans Speaks (FOMC voter) speaks: Chicago Fed President Evans will speak at a private symposium in Shanghai. Speech text is expected.

 Tuesday, May 23

  • 9:00am Minneapolis Fed President Kashkari (FOMC voter) speaks: Minneapolis Fed President Neel Kashkari will hold a media Q&A session.

    09:45 AM Markit Flash US manufacturing PMI, May preliminary (consensus 53.1, last 52.8); 09:45 AM Markit Flash US services PMI, May preliminary (consensus 53.3, last 53.1)

  • 10:00 AM New home sales, April (GS -3.5%, consensus -1.8%, last +5.8%): We estimate new home sales fell 3.5% in April, retracing some of its 5.8% March increase, as we believe the combination of constrained inventories and the decline in single-family permits are suggestive of a pullback, despite a favorable fundamental backdrop. Additionally, note that March new homes sales showed minimal impact of Winter Storm Stella.
  • 10:00 AM Richmond Fed manufacturing index, May (consensus +15, last +20)
  • 3:00 pm Minneapolis Fed President Kashkari (FOMC voter) speaks: Minneapolis Fed President Neel Kashkari will speak on the topic of “Homeownership in Indian Country” at a roundtable event.
  • 5:00 pm Philadelphia Fed President Harker (FOMC voter) speaks: Philadelphia Fed President Patrick Harker will speak on the economic outlook at the Harvard Club of New York.

* * *

Wednesday, May 24

  • 09:00 AM FHFA house price index, March (consensus +0.5%, last +0.8%): Consensus expects the FHFA house price index to rise 0.5% (mom sa) in March on top of a 0.8% gain in February. The FHFA house price index has a wider geographic coverage than the S&P/Case-Shiller home price index, but is based only on properties financed with conforming mortgages. On a year-over-year basis, FHFA home prices rose 6.4% in February.
  • 10:00 AM Existing home sales, April (GS -2.5%, consensus -1.1%, last +4.4%): We look for a 2.5% drop in April existing homes sales, following last month’s 4.4% gain. Regional housing data released so far suggest a moderate retrenchment in closed homes sales, somewhat sharper than the 0.8% drop in March pending homes sales (which represent contract signings). Existing home sales are an input into the brokers’ commissions component of residential investment in the GDP report.
  • 02:00 PM FOMC Minutes from the May 2-3 meeting: The May FOMC meeting did not contain any significant surprises. The FOMC’s post-meeting statement acknowledged, but downplayed weak GDP growth in Q1, noting that it expects the slowdown to be “transitory,” and made no changes to the discussion of balance sheet policy. We will look for further discussion of the soft March inflation data in the minutes. The minutes should also provide more detail on the balance sheet outlook from a timing and operational perspective. We expect little change in the discussion of the funds rate outlook, however, based on Fed speeches since the meeting.
  • 6:00 pm Dallas Fed President Kaplan (FOMC voter) speaks: Dallas Fed President Robert Kaplan will speak at the C.D. Howe Institute Annual Directors’ Dinner. in Toronto.
  • 6:30 pm Minneapolis Fed President Kashkari (FOMC voter) speaks: Minneapolis Fed President Neel Kashkari will speak at a town hall in Ashland, Wisconsin sponsored by the Chamber of Commerce.

* * *

Thursday, May 25

  • 08:30 AM U.S. Census Bureau Advance Economic Indicators Report: Advance goods trade balance, April preliminary (GS -$64.9bn, consensus -$64.7bn, last -$64.2bn); We estimate the goods trade deficit widened $0.7bn to $64.9bn in April. While imported container volumes appeared to slow, export port traffic fell more dramatically, suggestive of renewed deterioration in the trade balance. We expect minimal impact of oil prices on the nominal petroleum deficit this month.
  • 08:30 AM Wholesale inventories, April preliminary (consensus +0.2%, last +0.2%); 8:30 AM Initial jobless claims, week ended May 20 (GS 235k, consensus 238k, last 232k); ontinuing jobless claims, week ended May 13 (consensus 1,925k, last 1,898k): We estimate initial jobless claims rebounded 2k to 235k in the week ended May 20. Claims in California appeared somewhat depressed in the prior week, and we expect a rebound in that state. Continuing claims – the number of persons receiving benefits through standard programs – have trended down further in recent weeks, suggestive of additional labor market improvement that we expect to continue.

    10:00am Fed Governor Brainard (FOMC voter) speaks: Fed Governor Lael Brainard will speak at Center for Global Development in Washington, D.C on the topic of “Global Economic Issues.” Audience Q&A is expected.

  • 11:00 AM Kansas City Fed manufacturing index, May (consensus +9, last +7)

* * *

Friday, May 26

  • 08:30 AM GDP (second), Q1 (GS +1.1%, consensus +0.9%, last +0.7%): Personal consumption, Q1 (GS +0.7%, consensus +0.4%, last +0.3%)
  • We expect a four-tenths upward revision in the second vintage of Q1 GDP report (to +1.1% qoq saar), driven by a faster pace of growth in consumption, business equipment investment, and housing investment. We look for real personal consumption to be revised up 0.4pp to +0.7%. Our forecast reflects revisions to monthly source data released since the advance GDP report, as well as the net strength in consumer spending categories of the Q1 Quarterly Services Survey (released on Friday).
  • 08:30 AM Durable goods orders, April preliminary (GS flat, consensus -1.5%, last +0.9%) : Durable goods orders ex-transportation, April preliminary (GS +0.7%, consensus +0.4%, last flat)
  • Core capital goods orders, April preliminary (GS +0.5%, consensus +0.5%, last +0.5%); Core capital goods shipments, April preliminary (GS +0.4%, consensus n.a., last +0.5%): We estimate durable goods orders were unchanged in April, as lower non-defense aircraft orders indicated by company-reported data were likely offset by continued firming in manufacturing demand more generally. Manufacturing production was strong in April, highlighted by a 1.2% increase in the capex-sensitive business equipment category. Furthermore, capital goods company results and commentary have been encouraging, with mounting evidence of accelerating growth in the industrial economy. Accordingly, we estimate solid core capex shipments and orders growth of +0.4% and +0.5%, respectively. We estimate durable goods orders ex-transportation rose 0.7%.
  • 10:00 AM University of Michigan consumer sentiment, May final (GS 97.0, consensus 97.5, last 97.7): We expect the University of Michigan consumer sentiment index to pull back 0.7pt to 97.0 in the May final estimate, reflecting the decline in the stock market and recent developments in Washington, D.C.. The preliminary report’s measure of 5- to 10-year ahead inflation expectations edged down to 2.3%, despite the early-month rebound in gas prices (which has since reversed). 10:00pm St. Louis Fed President Bullard (FOMC non-voter) speaks St. Louis Fed President James Bullard will speak at Keio University in Tokyo Japan on topic of the economy and monetary policy.

Source: GofA, Goldman

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