Macroeconomics: The Day Ahead for 26 June

As month and quarter end loom, the new week gets off to a subdued statistically, with Japan’s Services PPI and Singapore Industrial Production to digest ahead of Germany’s Ifo and the US Dallas Fed Manufacturing surveys. The Bundesbank monthly report is published and there is a smattering of ECB and SNB speakers, as the ECB’s Sintra Central Banking Forum gets underway this evening. Market reaction to the short-lived Russian mutiny has been very muted outside of the fall in the RUB, with little or no reaction in energy and commodity markets, though this probably owes more to the dearth of any material news since the deal to end the mutiny was announced on Saturday, and a focus on quarter end flows.

The German economy’s woes are deepening, with the additional sharp fall in Friday’s Manufacturing PMI (41.0 vs. 43.2), compounded by the slide in the Services PMI to 50.8 from 53.9. Today’s Ifo survey is forecast to show that the upturn since October’s low of 85.1 is rapidly fading, with a further setback to 90.6 from 91.7 and April’s recent peak of 93.4, paced by a further fall in the Current Assessment to 93.5 from 94.8. Of particular note will be the extent to which the persistent weakness in Manufacturing is no longer being offset by Services and what was largely mild weather induced strength in Construction at the turn/start of the year. In its prior monthly Report, the Bundesbank had suggested Q2 GDP might pick up very modestly after Q1, despite fading support from Private Consumption, but the risk is that today’s report downgrades the outlook.

RECAP: The Week Ahead – Brief Preview:  

Statistically Eurozone CPI is expected to fall 50 5.6% from 6.1% y/y on headline, but rise to 5.5% from 5.3% y/y for core, with numerous surveys also on tap, including Germany’s Ifo (forecast 90.6 vs. prior 91.7) on Monday. US headline PCE Deflator is seen falling to 3.8% from 4.4% y/y, but core deflator is expected to be unchanged at 4.7%, with Consumer Confidence, Durable Goods Orders, New & Pending Home Sales and House Prices also on hand. China’s NBS PMIs are forecast to see Manufacturing edge up 0.2 pts to 49.0, but Services fall to 53.2 from 54.5. U.K. looks to BRC Shop Prices, Consumer Credit & Mortgage Lending, final Q1 GDP and Lloyds Business Barometer. Japan has Tokyo CPI with headline seen up to 3.4% from 3.2% y/y, and core ex-Fresh Food & Energy rising to 4.0% from 3.9% y/y. Canada has monthly GDP, while Australia’s monthly CPI is expected to fall to 6.1% from 6.8% y/y. So a busy week for inflation data, with core measures expected to remain very ‘sticky’.

Central banks: ECB holds its annual Sintra Central Banking Forum, with a raft of major central bank speakers there and elsewhere. The Fed publishes initial results of its annual bank stress tests. Sweden’s Riksbank is seen hiking 25 bps to 3.75%, and Brazil’s BCB publishes its quarterly inflation report, which may hint at rate cuts in H2 2023.

Politics: the big question is what is happening in Moscow after the weekend showdown and retreat between Prigozhin’s Wagner Group and the Russian military leadership, how much has this weakened Putin, and god forbid will it be the prompt for even more atrocities in the war in Ukraine? There is a two day EU leaders meeting on Thursday and Friday.

Commodities: Energy Institute publishes its global energy outlook, USDA Q2 grains and oilseeds stockpiles and 2023 acreage, Australia World Mining Conference, and there is the World Economic Forum’s Tianjin ‘New Champions’ summit.

Govt bond supply is led by US with $120 Bln of 2, 5 & 7-yr and USD 22 Bln of 2-yr FRN, EU sells 2 & 11-yr, Italy 2, 5 & 10-yr, U.K. 15-yr & I-L 10-yr, and Japan 2 & 20-yr.

Earnings highlights for the week according to Bloomberg News: Alimentation Couche-Tard, Constellation Brands, General Mills, Micron Technology, Naspers, Nike, Paychex, Prosus, Walgreens Boots Alliance.