The “good news is bad news” trade is in full effect in stocks and bonds this week. The still-solid ISM report that included a pick up in employment, albeit alongside further declines in prices paid, added to the tighter than expected jobless claims data to pressure Treasury yields higher and Wall Street lower, NFP beat expectations and the participation rate ticked higher. Markets continue to price in a more hawkish FOMC. Global concerns over the bearish impacts of central bank tightening, rising rates and now by news of more lockdowns in China. ………………………………………………………………………………………………………………………….
Have a look at the most important events of the coming days in our usual weekly publication.
Monday – 05 September 2022
OPEC-JMMC meeting attended by representatives from the 13 OPEC members and 11 other oil-rich nations.
PMI (GBP, GMT 08:30) – The Composite PMI is expected to rise in August to 52.8 from 50.9 due to a growth in Services, however this still presents contraction once again in UK.
Tuesday – 06 September 2022
Event of the Week – Interest Rate Decision & Statement (AUD, GMT 04:30) – The RBA is expected to raise interest rates past the 4% mark in 2023 after surging retail sales and a recasting of interest rate expectations in the wake of the US Federal Reserve’s hawkish stand against inflation. For September’s meeting speculations are set for a 50 bps rate hike.
ISM Services PMI (USD, GMT 14:00) – The ISM Services PMI is expected to fall to 56.0 from 56.7 in July, versus a 2-year low of 55.3 in June that was last seen in February of 2021, an all-time high of 68.4 last November, an 11-year low of 41.8 in April of 2020, and an all-time low of 37.8 in November 2008. We’re seeing a broad 9-month producer sentiment pull-back from robust peaks in November of 2021. Despite the ongoing sentiment downdraft, the economy is still benefiting from the energy price pull-back and reduced Fed tightening fears, while businesses face ongoing pressure to restock inventories as supply chain pressures abate.
Wednesday – 07 September 2022
Monetary Policy Report Hearings (GBP, GMT N/A)
Gross Domestic Product (AUD, GMT 01:30) – GDP is the economy’s most important figure. The final Q2 GDP for Australia is expected to increase at 0.5% q/q down from 0.8% q/q, with the headline rate lower at 2.9% y/y from 3.3% y/y.
Event of the Week – Interest Rate Decision & Statement (CAD, GMT 15:00) –Canada is struggling with the same dilemma of increasing rates into slowing growth. The BoC is coming off of its uber-aggressive 100 bp boost in July, the largest increase of central banks in this cycle. Moderation is expected at its next meeting on September 7 with the decision seen between 75 bps and 50 bps. A 50 bp hike is possible given the dive in employment and housing, and as the BoC indicated that the front-loading into the summer should help it avoid ongoing hefty increases and more severe and widespread slowing across the economy.
FOMC Members Mester & Brainard Speeches (USD, GMT 14:00 & 15:55)
Gross Domestic Product (JPY, GMT 23:50) – The final Q2 GDP for Japan is expected to contract at -0.3% q/q from 0.5% q/q, with headline at -1% y/y from 2.2% y/y.
Thursday – 08 September 2022
Event of the Week – Interest Rate Decision, Statement and Conference (EUR, GMT 12:15 & 12:45) –The recession risks are rising, the EUR is under pressure and European gas prices are going through the roof. Electricity production is being curtailed by work at French nuclear power stations and worsened by a drought that is putting limits on river transport and complicating power generation in Norway. The dovish camp will fight against another 50 bp move in this situation, although with inflation driven up to a large extent by supply constraints, an easy monetary policy stance will do little to support growth, but drive inflation up further. With the Fed sticking to a very hawkish message, the EUR also remains at risk. It now seems the hawks will force a discussion of a 75bp move to get the dovish camp to back a 50bp compromise.
Friday – 09 September 2022
Consumer Price Index (CNY, GMT 01:30) – Chinese inflation for August is seen steady at 0.5% m/m with headline higher at 2.9% y/y from 2.7% y/y.
Employment Data (CAD, GMT 13:30) – Canada’s employment report is expected to recover from the negative -30.6k level from last month to a positive 10k reading. The Unemployment rate is expected to remain unchanged at 4.9%.
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