Written Commentary
South Korea Q3 GDP, UK BRC Shop Prices and US Consumer Confidence the focal points as markets pause ahead of Mag7 earnings, rash of central bank policy decisions and Trump/Xi meeting.
- U.K.: BRC Shop Prices offer further evidence that inflation risks are more to the downside than the upside
- Germany: Consumer Confidence setback paced by wild and anomalous swings in Income Expectations, pointing to survey sampling issues
- U.S.A.: Consumer Confidence expected to edge lower, all eyes on ‘labour market differential’ in the absence of official data, disconnect with equity market strength eye-catching
EVENTS PREVIEW
Outside of the overnight South Korea Q3 GDP and US Consumer Confidence, the statistical schedule lacks a little in the way of market moving heft, with UK BRC Shop Prices, German GfK Consumer Confidence and India’s Industrial Production the other items of any interest. ECB’s Panetta and Riksbank’s Bunge are the only central bank speakers (and Panetta will not talk about policy as the ECB is in its pre-meeting blackout period), with the ECB’s Bank Lending and Consumer Inflation Expectations surveys also on tap. There is a further barrage of corporate earnings, with Bank of China, Gangfeng Lithium, Nippon Gas, Nomura and Ping An Insurance among the highlights in Asia; BNP Paribas, HSBC, Iberdrola and Novartis in Europe, while the US looks to Mondelez, Seagate Technology, United Health and UPS.
In terms of the overnight news, the lower than expected UK BRC Shop Price Index (1.0% y/y) was paced by a faster than expected fall in still elevated Food Prices (3.7% y/y vs. prior 4.2%), though the BRC’s comments about fierce competition amongst retailers, and widespread discounting should underscore that the risks on UK inflation, outside of administered prices, are to the downside. The primary upside risk that is emerging is that the alarming level of incompetence in successive UK governments precipitates a sharper fall in the GBP, as the spectre of a political vacuum looms ever larger, and discourages both domestic and foreign investment in the economy. The German GfK Consumer Confidence fall sits uncomfortably with last week’s surge in the Services PMIs. However it was primarily due to a sharp setback in Income Expectations (2.3 vs. prior 15.1 and 4.1) that have been very volatile in recent months, which perhaps points to survey sampling problems, given that broadly stable inflation, and few signs of any material changes in the economic outlook (despite all the hype around German government spending) would normally suggest broadly steady income expectations. Comments from Japan’s new Economy Minister Kiuchi talking up the potential advantages of a weaker JPY would appear to put him at loggerheads with Finance Minister Katayama, who has argued that the JPY should be materially higher (125-130 vs. USD) and offers the potential for conflicting govt guidance on FX. That said, it is the MoF, not the Economy Ministry, which dictates FX policy. Be that as it may, the chances of a BoJ rate hike this week look to be close to zero, given that BoJ governor Ueda is never one to push back on, let alone challenge Japan’s political leadership.
** U.S.A. – Oct Consumer Confidence **
Consumer Confidence is expected to ease to 93.4 after dropping quite sharply from 97.8 to 94.2 in September, which saw the Labour Differential (Jobs Plentiful minus Hard to Get) fall to 7.8, its lowest reading since February 2021, and in the absence of official labour data will be the focal point of today’s report. That said, it is worth noting that the long-standing, relatively strong correlation between a strong equity market and Consumer Confidence does appear to be breaking down, underlining the scale of the increasing social divide.
To view the full report and to sign up for daily market commentary please email admisi@admisi.com
Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
© 2021 ADM Investor Services International Limited.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.
