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Trading  | September 10, 2018

The week’s calendar is packed full of notable events for markets. The highlight according to DB’s Craig Nicol is “Super Thursday” where we’ve got the ECB, BoE and CBT policy meetings to look forward to, as well as another monthly US CPI report. A steady stream of Fedspeak and the potential for more trade headlines concerning possible tariffs by the US on $200bn of Chinese imports, should make for plenty of food for thought for markets. On top of that, there’s also monetary policy meetings in Argentina and Russia and a meeting between the Presidents of Russia and China to watch for.

Touching on those central bank meetings first, for the ECB on Thursday, consensus is that absent any serious unanticipated events in the interim, the ECB will confirm that net purchases will be phased out in the final quarter of this year at the meeting. With the risks to the outlook from trade protectionism and market volatility not yet materializing to any great degree yet, staff forecasts are likely to be largely unchanged – small downward revisions at most – and the criteria determining the exit from QE satisfied. Some economists however expect the ECB to still send the signal that an “ample” or “substantial” degree of monetary accommodation will remain the ECB objective. This will be transmitted via forward guidance on reinvestments and policy rates. The market will also be interested in Draghi’s response to any questions about Italy, however our view is that he would likely respond by quashing any suggestion that the ECB runs differential monetary policy for a given member state depending on local conditions.

Shortly before the ECB on Thursday, will be the Central Bank of Turkey policy meeting, which takes on greater focus in light of the recent turmoil in the country. The market is expecting a 325bp hike in the one-week repo rate to 21% after inflation jumped to 17.9% last month and the Central Bank committed to act. The CBT is expected to raise the repo rate to 22% while also returning back to full funding from the policy rate. See the following report for a deep-dive into Turkey and our views going forward.

Probably the least exciting meeting on Thursday will be the BoE, where the market expectation is for no change in policy  following the 25bps hike at the last meeting. Given that we’ll get July GDP data earlier in the week for the UK, the BoE’s view on how Q3 GDP is tracking might be of most interest, along with the latest Brexit newsflow.

It’s also worth noting that the Central Bank of Argentina also meets on Tuesday (no consensus expectation for the meeting with the policy rate at 60%) and the Central Bank of Russia meets on Friday (expected to stay on hold at 7.25%). Much like Turkey and EM generally, given the huge falls in the Argentine Peso and Russian Ruble lately and the feed through to inflation these meetings take on a bit of added focus. Thursday also features the big data event of the week with the August CPI report in the US due. At the time of writing, the consensus is for a +0.2% mom core reading and +0.3% mom headline print. The former (which is the 35th month in a row we’ve had a +0.2% consensus) would likely be enough to hold the annual rate at +2.4% yoy and therefore at the post-crisis high. Next week will actually feature a number of global inflation prints. On Monday we’ll get the August CPI and PPI reports in China, Wednesday the August PPI report in the US while in Europe we’ll get final August CPI prints in Spain (Wednesday), Germany (Thursday), France (Thursday) and Italy (Friday).

Other potentially significant data releases to highlight in the US next week includes August retail sales (+0.6% mom headline and +0.5% mom ex auto and gas expected), August industrial production (+0.4% mom expected) and the preliminary September University of Michigan consumer sentiment reading all on Friday.

In Europe it’s worth keeping an eye on the July industrial production print and July employment report in the UK on Monday and Tuesday respectively, while the September ZEW survey in Germany is also out on Tuesday. The July Euro area industrial production report is then out on Wednesday. Finally in China we’ll get August retail sales, industrial production and fixed asset investment data on Friday and August trade data tomorrow. In EM land Turkey’s Q2 GDP print on Monday should be a big focus with the consensus expectation for a big drop from +7.4% yoy to +5.3% yoy.

Summarizing the above is the following table from ING:

If that wasn’t all then there’s also a steady slate of Central Bank speakers next week. On Saturday Boston Fed President Eric Rosengren is due to speak at the Boston Fed’s annual conference along with former Treasury Secretary Lawrence Summers. On Monday, Atlanta Fed President Raphael Bostic is to speak at an event in Georgia on the economic outlook. On Tuesday the ECB’s Daniele Nouy is due to speak. Wednesday will see St Louis Fed President James Bullard and Governor Brainard speak at separate events. On Thursday, we’ve then got Bostic again when he makes a speech in Mississippi on the economic outlook and monetary policy, while the Fed’s Randal Quarles testifies to the Senate Banking Committee. Finally, on Friday we’ve the BoE’s Mark Carney, Fed’s Rosengren and Fed’s Charles Evans all slated to speak.

In terms of other potentially interesting events to keep an eye on next week, on Sunday Sweden will hold parliamentary elections with recent polls suggesting that it will be difficult for either of the two traditional political blocs to form a majority with support for populist parties on the rise. On Monday, EU Chief Brexit Negotiator Michel Barnier is due to speak in Slovenia, while EU and US Trade Chiefs Malmstrom and Lighthizer are set to meet with the view of progressing on lowering trans-Atlantic commercial barriers. Russia President Putin and Japan PM Abe are also due to meet on Monday. On Tuesday the European Parliament is due to debate the possibility of applying strong sanctions against Hungary. Russia President Putin will also meet China President Xi Jingping in Russia. On Wednesday European Commission President Jean-Claude Juncker is set to deliver the State of the Union address. Super Thursday also features an IMF Conference on Sovereign Debt and a Moody’s Conference featuring comments from South African Finance Minister Nhlanhla Nene.

Here is a daily summary of key events courtesy of Deutsche Bank:

  • Monday: It’s a busy start to the week on Monday. Overnight, we’ll get the August CPI and PPI reports in China as well as the final Q2 GDP revisions and July trade balance in Japan. In Europe we’ll get the August Bank of France industry sentiment print while in the UK data due out includes the July trade balance, July industrial and manufacturing production, and the July GDP reading. The September Sentix investor confidence print for the Euro area is also due in the morning while it’s also worth keeping an eye on Turkey’s Q2 GDP print. In the US, the only data release is July consumer credit. Away from that the Fed’s Bostic will be speaking on the economic outlook. EU Chief Brexit Negotiator Michel Barnier is also due to speak at the Bled Strategic Forum while EU and US Trade Chiefs Cecilia Malmstrom and Robert Lighthizer are scheduled to meet. Russia President Putin is also due to meet Japan PM Abe.
  • Tuesday: With no data in Asia overnight on Tuesday the focus in Europe will be the August employment report in the UK and ZEW survey for September in Germany. In the US we’ll get the August NFIB small business optimism reading, final July wholesale trade sales and inventories data and July JOLTS job openings. Away from that the ECB’s Nouy is scheduled to speak while European Parliament will debate on applying sanctions against Hungary. Russia and China President’s Putin and Xi Jinping are also scheduled to meet in Vladivostok while Argentina’s rate decision is due.
  • Wednesday: It’s a fairly quiet day for data on Wednesday. With nothing of note in Asia, in Europe we’ll get the final August CPI revisions in Spain and July industrial production for the Euro area. In the US the August PPI report is the only data of note. Later on the Fed’s Bullard and Brainard are scheduled to speak at separate events while the Fed will release the Beige Book. European Commission President Jean-Claude Juncker will also delver the State of the Union address.
  • Thursday: Things pick up again on Thursday with the big central bank highlights being the BoE, ECB and CBT monetary policy meetings. The main data highlight will be the August CPI report in the US. Other notable data includes the final August CPI revisions for Germany and France and the latest weekly initial jobless claims and August monthly budget statement in the US. The Fed’s Bostic is also scheduled to speak on the economy and monetary policy in the evening while the Fed’s Quarles testifies to the Senate Banking Committee. The IMF will also be hosting a conference on sovereign debt with Managing Director Christine Lagarde delivering opening remarks. Also of potential interest could be South African Finance Minister Nhlanhla Nene and Moody’s Vice President Lucie Villa’s speech at the Moody’s sub-Saharan Africa summit.
  • Friday: It’s a busy end to a busy week on Friday. Overnight we get August retail sales, industrial production and fixed assets investment data in China. In Europe the highlights include the final August CPI revisions for Italy, and July trade balance and Q2 labour costs for the Euro area. In the US the week ends with the August retail sales report, August import and export price index, August industrial production, manufacturing production and capacity utilization, July business inventories and finally the preliminary September University of Michigan survey. Elsewhere the BoE’s Carney and Fed’s Rosengren and Evans are slated to speak during the day. Russia’s Central Bank meeting is also worth keeping an eye on.

Finally, focusing only on the US, Goldman expects that the key economic releases this week are the CPI report on Thursday, and the retail sales and industrial production reports on Friday. There are several scheduled speaking engagements by Fed officials this week, including a speech by Fed Governor Brainard and Senate testimony by Vice Chairman for Supervision Quarles

Monday, September 10

  • 12:00 PM Atlanta Fed President Bostic (FOMC voter) speaks: Atlanta Fed President Raphael Bostic will discuss the economic outlook at the Albany Chamber of Commerce. Audience Q&A is expected.
  • 03:00 PM Consumer credit, July (consensus +$14.4bn, last +$10.2bn)

Tuesday, September 11

  • 06:00 AM NFIB small business optimism, August (consensus 108.1, last 107.9)
  • 10:00 AM JOLTS Job Openings, July (consensus 6,675k, last 6,662k)
  • 10:00 AM Wholesale inventories, July final (consensus +0.7%, last +0.7%)

Wednesday, September 12

  • 08:30 AM PPI final demand, August (GS +0.2%, consensus +0.2%, last +0.0%); PPI ex-food and energy, August (GS +0.2%, consensus +0.2%, last +0.1%); PPI ex-food, energy, and trade, August (GS +0.2%, consensus 0.2%, last +0.3%): We estimate a 0.2% increase in headline PPI in August, reflecting relatively firmer core prices, weaker food prices, but higher energy prices. We expect a 0.2% increase in both core measures of PPI, reflecting a continuation of the average recent trend in producer prices. We do not expect a meaningful impact on prices from the tariffs that went into effect in late August.
  • 09:30 AM St. Louis Fed President Bullard (FOMC non-voter) speaks: Federal Reserve Bank of St. Louis President James Bullard will speak about the U.S. Economy and Monetary Policy at the CFA Society in Chicago.
  • 12:45 PM Fed Governor Brainard (FOMC voter) speaks: Fed Governor Lael Brainard will speak at the Economic Club of Detroit about the economy and monetary policy. Audience Q&A is expected.
  • 02:00 PM Beige Book, September FOMC meeting period: The Fed’s Beige book is a summary of regional economic anecdotes from the 12 Federal Reserve districts. The July Beige book reported growth at a moderate pace across the country and noted a positive outlook for overall near-term growth, though business contacts in all districts expressed concerns related to trade policy. Contacts reported labor shortages across a wide range of occupations, and continued tightness in the labor market led businesses to increase wages. Consumer price increases were moderate across districts, though most reported significant increases in input prices. In the September Beige book, we look for additional anecdotes related to trade policy uncertainty, price inflation, and wage growth.

Thursday, September 13

  • 08:30 AM CPI (mom), August (GS +0.29%, consensus +0.3%, last +0.17%); Core CPI (mom), August (GS +0.22%, consensus +0.2%, last +0.24%); CPI (yoy), August (GS +2.81%, consensus +2.8%, last +2.95%); Core CPI (yoy), August (GS +2.36%, consensus +2.4%, last +2.35%): We estimate a 0.22% increase in August core CPI (mom sa), which would leave the year-over-year rate stable at +2.4%. Our forecast reflects a rebound in apparel prices given lean inventories and solid back-to-school shopping trends. We also estimate relatively stable shelter inflation measures: while alternative rent growth measures have softened, vacancy rates remain low and imputed utility costs should support the owners’ equivalent rent category. We also expect higher used car and lodging prices. On the negative side, we expect another decline in medical care commodities prices, reflecting recently announced prescription-drug price freezes. We do not expect a meaningful boost from the second tranche of tariffs on Chinese goods ($16bn imposed on August 23), as they were concentrated on industrial inputs and capital goods (as opposed to consumer products). We look for a 0.29% increase in headline CPI (mom sa), reflecting a boost from energy prices.
  • 08:30 AM Initial jobless claims, week ended September 8 (GS 205k, consensus 210k, last 203k); Continuing jobless claims, week ended September 1 (consensus 1,710k, last 1,707k): We estimate initial jobless claims rose by 2k to 205k in the week ended September 8, following a 10k decline the previous week. We expect the timing of the Labor Day holiday to temporarily lower claims, in line with its impact in previous years. Initial jobless claims continue to decline steadily, and we believe there is scope for this trend to continue.
  • 10:00 AM Vice Chairman for Supervision Quarles (FOMC voter) appears before the Senate Banking Committee; Fed Governor Randal Quarles will testify to the Senate Banking Committee about the implementation of the Economic Growth, Regulatory Relief, and Consumer Protection Act.
  • 01:15 PM Atlanta Fed President Bostic (FOMC voter) speaks: Atlanta Fed President Raphael Bostic will discuss the economic outlook and monetary policy in a speech in Jackson, Mississippi. Audience Q&A is expected.
  • 02:00 PM Monthly budget statement, August (consensus -$183.0bn, last -$76.9bn)

Friday, September 14

  • 08:30 AM Retail sales, August (GS +0.3%, consensus +0.4%, last +0.5%); Retail sales ex-auto, August (GS +0.4%, consensus +0.5%, last +0.6%); Retail sales ex-auto & gas, August (GS +0.3%, consensus +0.5%, last +0.6%); Core retail sales, August (GS +0.3%, consensus +0.4%, last +0.5%): We estimate that core retail sales (ex-autos, gasoline, and building materials) rose at a moderate pace in August (+0.3% mom sa). We expect weaker growth in the non-store category following strong growth in mid-summer, but a boost from higher apparel spending due to solid back-to-school shopping trends. We estimate 0.3% and 0.4% respective increases in the headline and ex-auto measures, with the difference due to a modest decline in auto sales. Upward revisions to the personal saving rate have boosted our outlook for consumer spending growth over the next couple of years.
  • 08:30 AM Import price index, August (consensus -0.3%, last 0.0%)
  • 09:00 AM Chicago Fed President Evans (FOMC non-voter) speaks: Chicago Fed President Charles Evans will speak in Fort Wayne, Indiana. He is expected to discuss current economic conditions and monetary policy. Audience Q&A is expected.
  • 09:15 AM Industrial production, August (GS +0.6%, consensus +0.3%, last +0.1%); Manufacturing production, August (GS +0.6%, consensus +0.4%, last +0.3%); Capacity utilization, August (GS +78.3%, consensus +78.3%, last +78.1%): We estimate industrial production rose 0.6% in August, largely driven by further increases in both auto and non-auto manufacturing. We expect capacity utilization to edge up by two tenths to 78.3%.
  • 10:00 AM Business inventories, July (consensus +0.5%, last +0.1%)
  • 10:00 AM University of Michigan consumer sentiment, September preliminary (GS 97.0, consensus 96.8, last 96.2): We estimate the University of Michigan consumer sentiment index increased by 0.8pt in the preliminary estimate for September, reflecting continued strength in high-frequency consumer surveys. The report’s measure of 5- to 10-year inflation expectations rebounded to 2.6% in August, at the upper end of its 12-month range.
  • 10:00 AM Boston Fed President Rosengren (FOMC non-voter) speaks: Boston Fed President Eric Rosengren will present a paper he coauthored with fellow Boston Fed economists titled “Should the Fed Regularly Evaluate its Monetary Policy Framework?” at the Brookings Institute in Washington DC. Audience Q&A is expected.

Source: DB, Goldman

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