After what was arguably the busiest macro week of the summer, with all major central banks revealing their latest monetary stance, DB's Jim Reid writes that it's not easy to find the main highlight this week with a number of events that could be meaningful but could also pass without incident. Powell's semi-annual testimony to the House and the Senate on Wednesday and Thursday, respectively, should be the key event but coming so soon after the FOMC it's hard to know what he can say that will be particularly new. Around this there is plenty of Fed and ECB speak where various officials will give their nuances to the policy meetings last week (see day-by-day calendar at the end).
Given an increasing global focus on rising UK rates of late, then UK CPI (Wednesday) and the expected 25bps hike on Thursday, and associated commentary, could have a big impact on Gilts and with it global bonds. There was lots in the weekend papers about the upcoming mortgage refi wave over the next couple of years if rates stay close to current levels. So this is becoming a big topic.
Staying with rates and yields, given how much US yields rallied for a period last week after jobless claims stayed surprisingly high, this Thursday's release could be one of the data highlights of the week. The recent rise has an element of the fraudulent filings the market discovered a few weeks back, but it’s got slightly more broad-based since so this could be the first area where we see any genuine cracks in the labor markets. So all eyes on this.
Elsewhere, Global flash PMIs on Friday are always a big focus. Back in the US we have a slew of housing data including the NAHB housing market index today, housing starts and building permits tomorrow and existing home sales on Thursday. Housing is still very weak but many are seeing green shoots starting to emerge. The other key highlights are Japanese inflation on Friday and UK retail sales the same day and PPI in Germany tomorrow. In China, markets will focus on domestic banks' loan prime rates fixings tomorrow following last week's PBoC reverse repo and MLF rate cuts as well as a round of disappointing economic data amid the broader talk about the need for stimulus to support the waning recovery. The rest of the day-by-day week ahead is at the end as usual.
Asian equity markets are largely struggling at the start of the week, tracking Friday’s fall in US stocks. As I check my screens, the Hang Seng (-1.57%) is the biggest underperformer across the region with the CSI (-0.84%), the Shanghai Composite (-0.54%) and the KOSPI (-0.86%) also trading in the red. The Nikkei (-1.11%) is also down after 10 straight weeks of gains. Elsewhere, the S&P/ASX 200 (+0.66%) is bucking the wider sell off in the region.
On a positive note, US Secretary of State Antony Blinken met China's president Xi Jinping on Monday to stabilise strained ties between the world’s biggest economies, although the outcome of the meeting was lackluster at best.
A quick look at markets, S&P 500 rally finally ran out of steam on Friday, down -0.37% after 6 consecutive days of gains. This still marked a +2.58% rise on the week to the highest weekly close since April 2022. At the sector level, the S&P reversal was led by the tech sector (-0.83%) as semiconductor manufacturer Micron Technology announced about half of its China customer revenue was at risk. This followed on from China’s bar on purchases of Micron chip products in late May amid elevated geopolitical tensions. Tech underperformance was reflected in the decline of NASDAQ (-0.68%) and the FANG+ (-1.27%) indices on Friday, though they were still up by +3.25% and +4.03%, respectively, on a weekly basis. The FANG+ Index is now 3% from its all-time highs in November 2021. With the US equities sell-off coming in the latter half of the day, in Europe the STOXX 600 climbed +0.53% on Friday before the US dip (and +1.48% week-on-week).
Lastly, in commodities, oil finished up the week strong off the back of optimism over China demand. This followed a Bloomberg report that the Chinese State Council was considering a sweep of stimulus proposals to boost consumption, as well as support for sectors including property. WTI crude gained +2.29% week-on-week bringing it to $71.78/bbl (+1.64% on Friday), and Brent crude gained +2.43% to $76.61/bbl (+1.24% on Friday). The news from China also lifted copper, which climbed +2.64% in weekly terms (but down a modest -0.31% on Friday), reaching its highest level for over a month.
Here is a day-by-day calendar of events, courtesy of Deutsche:
Monday June 19
- Data: US June NAHB housing market index, Canada May raw materials and industrial product prices
- Central banks: ECB's Villeroy speaks
Tuesday June 20
- Data: US June Philadelphia Fed non-manufacturing activity, May housing starts, building permits, Japan April capacity utilization, Italy April current account, Germany May PPI, ECB April current account, Eurozone April construction output
- Central banks: Fed's Williams and Bullard speak, ECB's Rehn, Simkus and Vujcic speak
- Earnings: FedEx
Wednesday June 21
- Data: UK May CPI, PPI, RPI, public finances, April house price index, EU27 May new car registrations, Canada April retail sales
- Central banks: Fed Chair Powell appears before House Financial Services Panel, Fed's Goolsbee speaks, BoJ minutes of April meeting, BoJ's Adachi speaks, BoC's summary of deliberations, ECB's Kazimir, Schnabel and Nagel speak
Thursday June 22
- Data: US Q1 current account balance, May leading index, existing home sales, Chicago Fed national activity index, June Kansas City Fed manufacturing activity, initial jobless claims, France June manufacturing, business confidence, Eurozone June consumer confidence
- Central banks: BoE decision, Fed Chair Powell appears before Senate Banking Panel, Fed's Waller, Bowman, Mester and Barkin speak, BoJ's Noguchi speaks Earnings: Accenture
Friday June 23
- Data: US, UK, Japan, France, Germany and Eurozone June PMIs, US June Kansas city Fed services activity, UK June GfK consumer confidence, May retail sales, Japan May CPI, nationwide and Tokyo department store sales
- Central banks: Fed's Bullard and Mester speak, ECB's Vujcic and De Cos speak
- Earnings: CarMax
* * *
Finally, focusing on the US, Goldman writes that there are no key economic data releases this week, but there are several speaking engagements from Fed officials, including Chair Powell’s semi-annual congressional testimony on Wednesday and Thursday. Governors Barr, Waller, and Bowman and presidents Bullard, Williams, Goolsbee, Mester, and Barkin are also scheduled to speak.
Monday, June 19
- Juneteenth National Independence Day. NYSE will be closed. SIFMA recommends bond markets also remain closed.
- 10:00 AM NAHB housing market index, June (consensus 51, last 50)
Tuesday, June 20
- 06:30 AM St. Louis Fed President Bullard (FOMC non-voter) speaks: St. Louis Fed President James Bullard will speak at the Barcelona School of Economics Summer Forum on "Optimal Macroeconomic Policies in a Heterogeneous World." Presentation slides are expected to be made available. On May 22, Bullard said, “I think we’re going to have to grind higher with the policy rate in order to put enough downward pressure on inflation and to return inflation to target in a timely manner…I’m thinking two more moves this year – exactly where those would be this year I don’t know – but I’ve often advocated sooner rather than later.”
- 08:30 AM Housing starts, May (GS -1.5%, consensus -0.1%, last +2.2%): Building permits, May (consensus +0.6%, last -1.4%)
- 11:45 AM New York Fed President Williams (FOMC voter) and Fed Governor Barr speak: New York Fed President John Williams and Fed Governor Michael Barr will discuss culture and leadership at the Fed’s 2023 Governance and Culture Reform Conference. A moderated Q&A is expected. On May 19, Williams said, “The main longer-term consequence from the pandemic period is a reduction in potential output, but the imprint on r-star appears to be relatively modest…Importantly, there is no evidence that the era of very low natural rates of interest has ended.” On May 16, he added, “We’ve got to make our decisions and then watch what happens, get that feedback, see how the economy’s behaving.”
Wednesday, June 21
- 10:00 AM Fed Chair Powell speaks: Fed Chair Jerome Powell will deliver his semi-annual congressional testimony before the House Financial Services Committee. During his June FOMC press conference on June 14, Powell said that the main reason for the shift up in the dots is the disappointingly slow decline in core inflation so far this year. The other key takeaway from the June meeting is that FOMC participants see a more moderate pace of tightening as appropriate now that the funds rate is closer to its likely peak. We think this likely means that the FOMC envisions hiking every other meeting instead of at consecutive meetings, though Powell was careful to say that participants had not discussed that approach.
- 12:25 PM Chicago Fed President Goolsbee (FOMC voter) speaks: Chicago Fed President Austan Goolsbee will speak at the WSJ Global Food Forum. A moderated Q&A is expected. On June 16, Goolsbee said, “I think of it as a reconnaissance mission, pausing now to go scope it out before charging up the hill another time…The question really is: Are we on that golden path or not? Whether goods prices start coming down as we expected they were about to, and whether housing prices, the inflation rate starts coming down as we’ve kind of been expecting — those are ones are critical…We’re going to be able to do it. The North Star that the Fed is trying to do is get the inflation rate down without starting a big recession and that will be a triumph.”
Thursday, June 22
- 04:00 AM Fed Governor Waller speaks: Fed Governor Christopher Waller will deliver opening remarks at a conference hosted by the Central Bank of Ireland. Speech text is expected. On June 16, Waller said, “Core inflation is not coming down like I thought it would…Inflation is just not moving and that's going to require, probably, some more tightening to try to get that going down." He added, “It is still not clear that recent strains in the banking sector materially intensified the tightening of lending conditions” and that the US economy was “still ripping along for the most part.”
- 08:30 AM Initial jobless claims, week ended June 17 (GS 260k, consensus 255k, last 262k); Continuing jobless claims, week ended June 10 (consensus 1,785k, last 1,775k);
- 08:30 AM Current account balance, Q1 (consensus -$218.0bn, last -$206.8bn):
- 09:55 AM Fed Governor Bowman speaks: Fed Governor Michelle Bowman will deliver opening remarks at a Fed Listens event hosted by the Federal Reserve Bank of Cleveland. Speech text is expected. On May 31, Bowman said, “While we expect lower rents will eventually be reflected in inflation data as new leases make their way into the calculations, the residential real estate market appears to be rebounding, with home prices leveling out recently, which has implications for our fight to lower inflation.”
- 10:00 AM Existing home sales, May (GS -2.5%, consensus -0.7%, last -3.4%)
- 10:00 AM Fed Chair Powell speaks: Fed Chair Jerome Powell will deliver his semi-annual testimony to Congress before the Senate Banking Committee.
- 10:00 AM Cleveland Fed President Mester (FOMC non-voter) speaks: Cleveland Fed President Loretta Mester will discuss the economic outlook and monetary policy at the Cleveland Fed’s annual policy summit. A Q&A with audience is expected. On May 26, Mester said, “What I'd like to do is get...to a level of the funds rate where I could say, OK, in my mind, there's [an equal probability the next move is] up or down, whenever that move would be. And I don't think we're there yet because I think inflation has just...remained stubborn…I guess I would push back on this waiting until we get more information because … there's always more information.” She added, “In the banking industry...we have to continue to monitor that, because stress can happen and that can change relatively quickly. So we need to continue to express that, but so far I haven't seen that, I would call that excess tightening from stress in the banking industry. Most of the tightening I'm seeing in credit standards is just because of the interest-rate environment.”
- 11:00 AM Kansas City Fed manufacturing index, June (consensus -4, last -1)
Friday, June 23
- 05:15 AM St. Louis Fed President Bullard (FOMC non-voter) speaks: St. Louis Fed President James Bullard will speak at a conference hosted by the Central Bank of Ireland again on the topic of "Optimal Macroeconomic Policies in a Heterogeneous World." Speech text and slides are expected to be made available.
- 09:45 AM S&P Global US manufacturing PMI, June preliminary (consensus 48.5, last 48.4): S&P Global US services PMI, June preliminary (consensus 54.0, last 54.9)
- 01:40 PM Cleveland Fed President Mester (FOMC non-voter) speaks: Cleveland Fed President Loretta Mester will deliver closing remarks at the bank's annual policy summit. Speech text and a Q&A with the audience are expected.
Sunday, June 25
- 09:15 AM New York Fed President Williams (FOMC voter) speaks: New York Fed President John Williams will speak at the Bank for International Settlements in Basel, Switzerland. The event is closed press. The lecture and panel discussion will be posted on the bank's website following the event.
Source: DB, Goldman, BofA
