Attention shifting to American election
This week, Jerome Powell was headlining as he outlined the future monetary policy framework for the world’s most important central bank. Next week, it’s over to the U.S. Office of Labor Statistics as it releases the August labor report. The next few job reports could be crucial when they come ahead of the November election, with President Donald Trump hoping for the public to trust him on the economy over former Vice President Joe Biden after the pandemic threatened to derail his re-election campaign.
Important economic events
Sunday, August 30
- Chinese manufacturing PMI
Monday, August. 31
- Fed Vice President Clarida participates in a virtual discussion hosted by the Peterson Institute for International Economics. Atlanta Fed President Bostic discusses philanthropy and an inclusive recovery hosted by the Florida Philanthropic Network.
- Italian Prime Minister Giuseppe Conte participates in the Forum for South-Eastern Europe.
- The ECB’s Head of Monetary Policy Strategy, Katrin Assenacher, discusses Facebook’s Libra cryptocurrency project and its implications for monetary policy and financial stability in a SUERF webinar.
- UK summer banking holiday.
- Chile copper production
- Colombia unemployment
- South Korea industrial production
- Japan’s industrial production, retail sales, housing starts
- Australia Melbourne Institute inflation, credit in the private sector
- New Zealand ANZ business trust
- China Caixin Manufacturing PMI
- Turkey Trade Data
- South Africa’s money supply
- German KPI
- India GDP, Italy GDP
Tuesday, Sept. 1
- US tariffs on EU goods will take effect on 1 Septemberst. The Trump administration continues to pressure the EU to settle a protracted conflict over illegal subsidies to Airbus SE.
- Fed Governor Lael Brainard will take part in a virtual discussion being held by the Brookings Institution.
- U.S. new car sales in August are expected to fall 16.8%, in part due to a low supply of popular vehicles, as automakers struggle to rebuild inventories following the closure of the pandemic factory last spring.
- US Markit manufactures PMI, ISM manufacturing, construction costs, departmental total car sales
- Unemployment: Euro area, Germany
- Production of PMI readings: UK, Brazil, Mexico, Russia, India, China, Eurozone, Germany
- UK mortgage approvals
- Australia’s RBA cash rate target, AiG performance index, BoP, building approvals
- New Zealand building permits
- GDP: South Korea, Brazil, Czech Republic, Hungary
- Japan Unemployment, Capital Expenditure, Manufacturing of PMI, Sales of Vehicles
Wednesday, September 2
- Cleveland Fed President Loretta Mester talks about the U.S. outlook and monetary policy at the 17th annual NABE Foundation Economic Measurement Seminar via video conference.
- EU chief Brexit negotiator Michel Barnier addresses a webinar co-organized by the IIEA and the European Commission Representation in Ireland. Will provide updates with status of talks between the bloc and the UK; obstacles to reaching an agreement; and key issues that will shape the future relationship.
- U.S. ADP employment change, factory orders, durable goods, Fed Beige Book
- UK Nationwide house prices
- New Zealand house prices
- South Korea CPI
- Spain’s unemployment
- Japan’s monetary base
- Australia GDP
Thursday, Sept. 3
- The Brookings Institution is hosting BOE Governor Andrew Bailey, who will talk about the future of cryptocurrencies and stablecoins.
- Chicago Fed President Charles Evans discusses US economy and monetary policy in a virtual event hosted by the Lakeshore Chamber of Commerce.
- Harvard Business School professor David Scharfstein gives a keynote address on the future of finance at the ECB’s annual research conference, chaired by central bank Executive Director Isabel Schnabel.
- Riksbank Governor Stefan Ingves speaks at UBS Nordic Financial Service Virtual Conference on Sweden’s monetary policy and the country’s banks’ economic health. First Deputy Governor Cecilia Skingsley later talks about the future of money.
- United States Original Unemployment Claims, Markit Services / Composite PMIs, ISM Service Index
- Canada’s international trade
- South Korea’s foreign reserves
- Australia trade
- PMIs: Hong Kong, Singapore, India, Japan, Russia, China, England, Eurozone, Spain
- CPI: Switzerland, Turkey
- Romania retail
- New Zealand ANZ commodity prices
- Russia gold and foreign exchange reserves
Friday, Sept. 4
- Forum The European House has its 46th annual forum in Cernobbio. Speakers include French Finance Minister Bruno Le Maire, EU Brexit negotiator Michel Barnier and German Deputy Finance Minister Joerg Kukies. Through September 6.
- The non-farm wage report is expected to show that the economy added 1.52 million jobs, down from the previous monthly gain of 1,763 million. Unemployment is expected to improve from 10.2% to 9.9%.
- American unemployment
- Canada’s unemployment
- UK Markit / CIPS Construction PMI
- Russia CPI
- Germany factory orders
- Hungary’s industrial production
- Australia’s retail sales
- Singapore retail
Sovereign Rating Updates:
- Denmark (Fitch)
- Ukraine (Fitch)
- Finland (S&P)
- Spain (DBRS)
The Fed’s major policy shift of average inflation targeting could keep interest rates anchored until the next framework policy review in five years. The Fed also signaled that employment could strengthen and the economy could warm up without creating an unjustified rise in inflation. The short-term focus for the Fed will remain in the labor market, and the economic rebound has been meticulously slow. The non-farm wage report is expected to show that wages rose by 1.52 million, and that unemployment rose to 9.9%. Job growth continues, but the pace is somewhat disappointing given all the key and fiscal stimulus pumped into the economy.
The ISM Manufacturing survey will also pay close attention, which is expected to rise slightly from 54.2 to 54.4. Richmond production index better than expected to be able to read may suggest that ISM data will impress.
Now that both the Democratic and Republican national conventions are in the books, the focus will be on the polls and whether President Trump can turn away from the leadership of the former VP-Bid. With the first presidential debate at the end of the month, the weeks leading up to it will be an intense campaign.
The economic rebound in the region has been encouraging in recent months, but peaks in Covid cases in France, Italy, Spain, Germany and elsewhere have been a cause for concern, with the UK finding it appropriate to add quarantine restrictions to those who returns from many countries across the country block. The PMIs have already begun to slide, and the final reading next week may raise these concerns.
The UK apparently has two weeks to salvage a post-Brexit deal, according to EU sources, with Michel Barnier and David Frost planning emergency talks next week. The EU is apparently growing frustrated by Britain’s refusal to clarify the country’s post from Brexit on state aid, and the United Kingdom claims it will not be forced to do so by Brussels. As the British September target approaches, and the EU’s October deadline is not far off, there are now crunchy talks about us if no agreement is reached.
“We are by no means dry fire,” was the message from Bank of England Governor Andrew Bailey as he spoke at the Federal Reserve’s virtual symposium traditionally held in Jackson Hole. Bailey was eager to stress the availability of policy tools, including negative interest rates, and the MPC should be required to use them. Interest rates are currently at 0.1% and the asset purchase program is at £ 745 billion, the latter of which is expected to rise later in the year.
Trade relations have temporarily thawed slightly with the United States. Probably to be a temporary situation, but confidence-building nonetheless. Chinese data contains official and unofficial PMIs, which are expected to continue to show China’s recovery on the right track. An unexpectedly negative set of results could see China stocks move significantly lower.
Hong Kong retail sales are expected to be dismal as the economy remains in deep recession. Arrests under new security law speeding up undermining international confidence in the territory.
This has been ignored by stock markets that concentrate on upcoming IPOs such as Ant Financial, proving that money speaks.
Covid-19 continues to devastate the domestic economy and increases fears of growth as the stability of the banking system. The rupee has resumed its slide and investors are getting nervous and the consumer will continue to show signs of weakness as the virus spreads to the rural economy.
India’s GDP should fall back to 3.1% by the middle of the week, a welcome recovery from Q1 but still far below what is needed to lift the economy from recession. INR and the Indian financial stocks will remain unloved.
It looks like the New Zealand covid-19 eruption will come under control and lift the currency and stocks. However, an expanded Auckland shutdown will weigh on data in the coming weeks. RBNZ is considering negative interest rates, and further signs of deterioration with the outlook will increase expectations for further easing.
Heavy data week against the backdrop of deteriorating trade relations with China with constant probes, investigations and restrictions on non-nuclear Australian imports.
RBA on Tuesday will remain unchanged, but expect more guidance on the dovish outlook. Negative rates are not a policy option. If mentioned will be sharply AUD negative.
GDP on Wednesday will confirm that Australia’s recovery is on track despite the Victoria shutdown.
Negative development or printing from any or all of the above will weigh on the Australian stock markets, but not the currency, which is a story in the US Dollar.
Japan releases industrial production, retail sales and Jibun Manf. PMi in a busy week for data. Everyone is expected to confirm that Japan remains in recession with domestic demand lukewarm and exporters struggling with recessions internationally. The government is considering further stimulus measures.
All attention, however, will be on the dismissal of Prime Minister Abe for health reasons. The Nikkei fell sharply on Friday, but the effects are likely to be temporary. Economic policy will not change significantly, but succession uncertainty weighs on Japanese equities and holds the Yen steady.
The oil production in the Gulf of Mexico was spared by Hurricane Laura, and much of the production was to start running normally within a week. As most of the hurricane-related gains slowly disappear, the oil appears to be returning to the frustrating area.
The primary driver of oil prices will now fall back to the demand outlook. Frustratingly slow reopening efforts and fears of the next wave of Covid-19 will continue to weigh on expected expectations.
It’s been an ugly three weeks for gold. The Fed’s new stance on inflation helped drive government returns and the dollar higher, while gold prices fell. Despite the initial move higher for the dollar, the downtrend should continue as the Fed will remain accommodative for years to come. Gold volatility remains high, but light trading volumes could see the $ 1900- $ 2000 range hold.