Expect market activity to be muted in the week ahead, late summer malaise
hanging on with the passing of the dog days of summer around mid-August. Mostly
second-tier data in the week ahead and a dearth of Fed-speakers so far on the
heels of the prior week’s annual economic symposium in Jackson Hole.
Monday should be very quiet with no lead-in from London, markets closed for
national bank holiday (U.S. markets closed next Monday for Labor Day holiday),
data limited to Dallas Fed manufacturing index at 1030ET followed by Treasury
auctions of $51B 13-week and $45B 26-week bills at 1130ET and the $36B 2-year
note auction at 1300ET.
Data picks up Tuesday with inventory and trade gap numbers, Redbook retail
sales, Case-Shiller Home Price Index and the release of August Consumer
Confidence, 126.5 est vs. 127.4 prior).
Barclays economists expect the consumer confidence index "to have fallen
slightly to 126.5 in August, from 127.4 previously. Nevertheless, this would be
consistent with another month of solid consumer sentiment given the continued
strength in the stock markets and improvements in labor markets.
RBS NatWest economists, on the other hand, expect consumer confidence "to have
remained mostly steady in August, as ongoing strength in the employment
situation may have continued to offset concerns over tariffs."
Tuesday includes the second leg of Treasury supply with the $37B 5-year note
auction followed by $17B 1Y11M FRN and $31B 7-year note auctions on Wednesday.
Aside from largely second-tier and weekly data rounding out the week, MNI’s
Chicago PMI report is out on Friday, still expanding at 63.0 est, but scaling
back from 65.5 prior read.
Barclays economists cautioned that "recent policies aimed at putting tariffs on
imports from China are likely to negatively affect manufacturing sentiment as
captured by the regional and national surveys, in our view."
MNI ANALYSIS: Fed Officials Agree On Monitoring Data
Most Federal Reserve system presidents agree on the need to gradually raise
interest rates but uncertainty over how best to measure the degree of economic
slack means monetary policy should be closely tied to incoming data, Fed
Chairman Jerome Powell said at the Jackson Hole monetary forum on Friday.
In a speech which came days after President Donald Trump criticized the Fed for
raising interest rates, Powell said there was no sign of inflationary
overheating but that the central bank would react energetically if this were to
"While inflation has recently moved up near 2%, we have seen no clear sign of an
acceleration above 2%, and there does not seem to be an elevated risk of
overheating," he said in the speech. "If the strong growth in income and jobs
continues, further gradual increases in the target range for the federal funds
rate will likely be appropriate."
Fed research indicates "no single, simple approach to monetary policy is likely
to be appropriate across a broad range of plausible scenarios," Powell said,
referring to uncertainty regarding estimates of full employment and of the
neutral rate of interest.
For more, please see Friday’s 1911ET Main Wire post.
Calendar of next week’s market data and events (prior, estimate):
– Aug 27 Aug Dallas Fed manufacturing index (32.3, –) 1030ET
– Aug 27 US TSY $45B 26W BILL Auction (912796QL6) 1130ET
– Aug 27 US TSY $51B 13W BILL Auction (912796PT0) 1130ET
– Aug 27 US TSY $36.000 BLN 2Y NOTE Auction (9128284Y3) 1300ET
– Aug 28 Jul advance goods trade gap (-$67.9B, –) 0830ET
– Aug 28 Jul advance wholesale inventories 0830ET
– Aug 28 Jul advance retail inventories 0830ET
– Aug 28 25-Aug Redbook retail sales m/m (0.2%, –) 0855ET
– Aug 28 Jun Case-Shiller Home Price Index (0.2, –) 0900ET
– Aug 28 Aug Richmond Fed Mfg Index (20, –) 1000ET
– Aug 28 Aug Conference Board confidence (127.4, 126.5) 1000ET
– Aug 28 Aug Dallas Fed services index (21.1, –) 1030ET
– Aug 28 US TSY $37B 5Y NOTES Auction (9128284X5) 1300ET
– Aug 29 24-Aug MBA Mortgage Applications (4.2%, –) 0700ET
– Aug 29 Q2 GDP (2nd) (4.1%, 4.0%) 0830ET
– Aug 29 Q2 GDP Price Index (3.0%, 3.0%) 0830ET
– Aug 29 Jul NAR pending home sales index (106.9, –) 1000ET
– Aug 29 24-Aug crude oil stocks ex. SPR w/w (-5.84m bbl, –) 1030ET
– Aug 29 US TSY $17B 1Y-11M FRN NOTE Auction (9128284Y53) 1130ET
– Aug 29 US TSY $31B 7Y NOTE Auction (9128284Z0) 1300ET
– Aug 29 Jul farm prices (0.1%, –) 1500ET
– Aug 30 25-Aug jobless claims (210k, 214k) 0830ET
– Aug 30 Jul personal income (0.4%, 0.3%) 0830ET
– Aug 30 Jul current dollar PCE (0.4%, 0.2%) 0830ET
– Aug 30 Jul total PCE price index (0.1%, 0.2%) 0830ET
– Aug 30 Jul core PCE price index (0.1%, –) 0830ET
– Aug 30 26-Aug Bloomberg comfort index (58.6, –) 0945ET
– Aug 30 24-Aug natural gas stocks w/w 1030ET
– Aug 30 29-Aug Fed weekly securities holdings 1630ET
– Aug 31 Aug ISM-Milwaukee Mfg Index (61.66, –) 0900ET
– Aug 31 Aug MNI Chicago PMI (65.5, 63.0) 0945ET
– Aug 31 Aug Michigan sentiment index (f) (95.3, 95.3) 1000ET
– Aug 31 Q3 St. Louis Fed Real GDP Nowcast 1100ET
– Aug 31 Q3 NY Fed GDP Nowcast 1115ET
MNI POLICY: ECB On Track For Autumn 2019 Hike, Minutes Show – ECB policymakers
call for "patience, prudence and persistence"
European Central Bank minutes showed it on track for a rate hike in September or
October 2019, in an account of its July monetary policy meeting which revealed
few surprises but also concern over global trade disputes.
For more, please see Thursday’s 0859ET Main Wire post.
EUROZONE TIMELINE OF KEY EVENTS
– Aug 27 German IFO climate index at 0800GMT
– Aug 28 French Aug consumer confidence at 0645GMT
– Aug 28 Eurozone M3 money supply at 0800GMT
– Aug 28 Italy Aug ISTAT confidence at 0800GMT
– Aug 28 ECB Praet, "Monetary and Macroprudential Policy Interactions" 33rd
Annual Congress of European Economic Association, in Cologne, Germany at 1100GMT
– Aug 29 German Aug GfK consumer confidence at 0600GMT
– Aug 29 French Q2 GDP 2nd estimate at 0645GMT
– Aug 29 French Jul consumer spending at 0645GMT
– Aug 30 German import/export numbers at 0600GMT
– Aug 30 German ILO unemployment rate at 0600GMT
– Aug 30 Spain Aug flash CPI at 0700GMT
– Aug 30 Eurozone economic sentiment at 0900GMT
– Aug 30 German Aug flash inflation at 1200GMT
– Aug 31 German July retail sales at 0600GMT
– Aug 31 French Jul CPI at 0645GMT
– Aug 31 Spain Jul retail sales at 0700GMT
– Aug 31 Eurozone Jul unemployment at 0900GMT
– Aug 31 Italy Aug flash CPI at 0900GMT
– Aug 31 Eurozone flash CPI at 0900GMT
– Aug 31 Italy final Q2 GDP at 1000GMT
– Aug 31 ECB Guindos, Cursos de La Granda, Univ of Oviedo, in La Granda, Spain
– Aug 31 Fitch Italy rating review
EUROZONE BOND ISSUANCE
Germany and Italy are the only issuers coming to the EGB market this week.
Italy will kick off issuance this week with a tap of the Mar-20 CTZ for
E1.25-1.75bn on Tuesday.
Next up, on Wednesday, Germany will reopen Oct-23 0.0% Bobl and looks to issue
Finally, on Thursday, Italy will sell medium/long-term BTPs with issue details
being announced on Monday though expected to be 5/10-Yrs.
Following the dry spell in August the issuance calendar is starting to fill up
again with multiple issues planned for the week beginning September 3.
There are no redemptions this week, but there are E6.7bn in coupon payments (by
Italy). This will leave cash low positive by around E0.8bln, compared with flat
last week (no issuance, minimal coupons/redemptions).
T-bill issuance is expected to pick up slightly this week to E11.0bln from
E10.5bln last week, with France, Italy, and Greece scheduled to come to market.
France begins the week’s issuance on Monday afternoon, selling new 3-month Nov
28, 2018 BTF for E2.4-2.8bln, ap 6-month Jan 16, 2019 BTF for 0.7-1.1bln, and
tapping 12-month Aug 14, 2019 BTF for E0.4-0.8bln, for a total of 3.5-4.7bln.
On Wednesday, Greece sells E875mln of 26-week T-bills.
Also on Wednesday, Italy sells 6-month Feb 28, 2019 BOT for E6bln.
T-bill redemptions this week are due from France E5.2bln, Italy E6.0bln, Greece
E1.4bln, and the Netherlands 4.1bln, for a total of E16.8bln.
This will leave net cash flow at an estimated negative E5.8bln, compared with
positive E1.0bln last week.
The coming week throws up an improved data calendar from last week but still
fairly limited as the UK goes on holiday on Monday and again there are no
planned appearances from central bank policy makers.
The data sees only three scheduled releases.
On Wednesday, the British Retail Consortium releases the August monthly shop
price index. July witnessed the lowest rate of shop price deflation since
December 2017, falling by 0.3% on a y/y basis.
Thursday sees the Bank of England release the money and credit data for the
month of July. Mortgage approvals were previously 66,000. Net consumer credit
was stg1.57 bn, a touch down from stg 1.58 bn in May. Net lending on dwelling
was up slightly from stg3.77 bn in May to stg3.85bn in June. On the money supply
side of the data, the M4 money supply previously grew by -0.3% m/m and 1.7% y/y.
The conclusion of the data is the Gfk monthly consumer confidence index on
Friday. The index dropped in July to -10 from -9 previously.
31-Aug 0100/0900 *** Aug CN CFLP Manufacturing PMI 51.2 —
31-Aug 0100/0900 ** Aug CN CFLP Non-Manufacturing PMI 54.0 —
MNI China Money Week: China At Policy Crossroads In Trade Spat — Beijing faces
choice over whether to downgrade its deleveraging drive.
A combination of verbal U.S. pressure on the PBOC to prevent further currency
weakness and the imposition of tariffs weakening China’s economy and yuan
fundamentals is putting Beijing in a tough spot, with its options looking
increasingly binary at this stage.
One path is to continue along the road of monetary accommodation and associated
currency weakness, kick the can of deleveraging further down the road, and watch
trade relations with its biggest export market deteriorate further.
Alternatively, China could adopt more prudent monetary and fiscal policy aimed
at encouraging deleveraging and supporting the yuan by preventing a further
widening of China-U.S. interest rate expectations, as well as adopting measures
to open up the economy to U.S. investment in order to assuage Washington’s
concerns over trade imbalances.
The dilemma comes as President Donald Trump in an interview on Monday accused
China of manipulating its currency to make up for having to pay tariffs imposed
by Washington. Just yesterday, trade talks between the U.S. and China failed to
end with any agreement or even a future date for further talks. The U.S. also
added to its growing list of Chinese import tariffs, which was met by a swift
tit-for-tat response by Beijing.
Japanese officials remain vigilant against the impact of the U.S.-China trade
dispute on Japan’s exports while no direct impact has been detected in recent
They are also paying attention to foreign exchange rates. Although the yen
remains relatively weak, renewed safe-haven yen buying would hurt domestic stock
prices and sentiment.
Bank of Japan
Wednesday, 10:30 am JST (0130 GMT): BOJ board member Hitoshi Suzuki, a former
commercial banker, speaks to business leaders in Naha City, southwestern Japan.
Suzuki, who took office in July 2017, has voiced concern over the costs of
Wednesday, 2 pm JST (0500 GMT): BOJ Suzuki holds a news conference in Naha.
Friday, 5 pm JST (0800 GMT): The BOJ releases its Japanese government bond
purchase plans for September. The BOJ is likely to leave the frequency of its
Japanese government bond purchases in September unchanged from August and will
leave unchanged its purchase plans for each JGB maturity zone.
Wednesday, 2 pm JST (0500 GMT Tuesday): The Cabinet Office releases the August
Consumer Confidence Survey. In July, the consumer confidence index edged down
0.2 point to 43.5, posting the second straight month-on-month drop, hit by heavy
rains in southwestern regions that killed more than 200 people and destroyed
social infrastructure as well as killer heat waves that swept across the
Thursday, 8:50 am JST (2350 GMT Wednesday): The Ministry of Economy, Trade and
Industry releases preliminary July retail sales.
The MNI median forecast: +1.2% on year for the ninth straight year-on-year rise
vs. +1.7% in June.
Friday, 8:30 am JST (2330 GMT Thursday): The Ministry of Internal Affairs and
Communications releases the August central Tokyo CPI and the July unemployment
The MNI median forecasts: Tokyo core CPI (excluding fresh food) +0.8% on year
for the 14th straight y/y rise vs. +0.8% in July; Unemployment rate 2.4% vs.
2.4% in June.
Friday, 8:50 am JST (2350 GMT Thursday): The METI releases preliminary July
industrial output, its outlook for August, September. The MNI median forecast:
+0.3% on month for the first rise in three months vs. -1.8% in July.
Japanese Government Bonds
Wednesday: BOJ outright purchase operations for JGBs with a remaining life of 10
to 25 years and more than 25 years expected.
Thursday: The MOF to auction Y2.1 trillion of 2-year bonds.
Friday: The MOF to auction Y4.25 trillion of three-month Treasury discount
bills. BOJ outright purchase operations for JGBs with a remaining life of 1 to 3
years, 3 to 5 years and 5 to 10 years expected. Japanese government bond prices
are likely to remain firm on continued tight bond supply and demand conditions.
Investors remain cautious about buying bonds at low yields based on the view
that higher yields are more likely than lower yields. The 10-year JGB yield is
expected to move between 0.085% and 0.100% this week.
It’s a relatively light week with the highlight being the updated estimate for
current financial year’s capex.
After a quiet Monday, on Tuesday morning ANZ-Roy Morgan will publish weekly
consumer confidence index. The index fell sharply in the last survey ahead of
the unfolding of the political drama and it will interesting to see how
consumers are feeling following the change of prime ministership but more
importantly the events that led to the change.
On Thursday, ABS will publish capex data for Q2 where MNI median forecast is for
0.7% q/q rise which would be a small acceleration from 0.4% increase in Q1.
Estimate three for 2018-19 capex is expected at A$102 billion, a sharp increase
from A$87.7 billion in estimate two. ABS will also publish final update for
2017-18 capex. At the same time is dwelling approvals data for July where MNI
median forecast is for 3.0% m/m fall, compared with a 6.4% increase in June.
On Friday, RBA will publish private sector credit for July where expectation is
for 0.3% m/m rise, the same pace as June
No major event is due from the RBA. Data release includes private sector credit
for July, due on Friday.
The highlight of the week is ANZ’s monthly business survey for August. The
recent declines in business confidence and activity outlook was the key trigger
for the RBNZ to turn dovish in the August monetary policy update. Any further
decline would push market to increase RBNZ rate cut bets. The survey is due on
Other releases during the week include building consents data for July, due also
No major data or event is due from the RBNZ