Macroeconomics: The Day Ahead – 9 October 2020
Good Morning: The Long & the Short of it and The Bigger Picture
Written by Marc Ostwald, ADMISI’s Global Strategist & Chief Economist
- Overarching themes of pandemic and politics likely to dominate over modest run of data; digesting China Services PMI, Japan Wages & Spending, UK GDP and activity data, French Production; awaiting Italy Production and Canada labour report; smattering of central bank speakers
- UK GDP & activity data: recovery momentum waning sharply despite fiscal incentives; infection rate rise to muffle rebound going forward
- Canada labour data: solid Employment gain expected, but lagging behind expected Q3 GDP surge
- Week Ahead: US and China data dominate, US Q3 earnings season kicks off
The focus remains firmly on the US election, pandemic and Brexit, and today’s run of data will, aside from the run of UK activity indicators, to get any real traction. From the overnight session, there are China’s Caixin Services PMI, Japan’s wages, UK GDP, Index of Services & Industrial Production (also from France, and Italy later this morning) to digest, while ahead lie Brazilian IPCA inflation and Canadian labour data. On the policy side of the equation, India’s RBI left rates unchanged as expected (unsurprising given stubbornly high CPI), with today’s speaker roster including BoE’s Haldane and Fed’s Barkin and Evans, all of whom have spoken recently. The US and China top next week’s run of statistics, with the former seeing Retail Sales, CPI, PPI, and NY Fed, Philly Fed & NFIB surveys, while China looks to Trade, credit and inflation data, with labour data due in the UK, adn the US Q3 earnings season kicks off with the usual run of major financials. The real challenge economically for markets is the impotence of monetary policy in the face of the pandemic, and the seeming inability of the political fraternity to craft anything more than ‘spaghetti principle’ (throw enough against the wall and some will stick) fire fighting fiscal policies. The bigger challenge is as Boston Fed’s Rosengren noted yesterday: “Clearly a deadly pandemic was bound to badly impact the economy. However, I am sorry to say that the slow build-up of risk in the low-interest-rate environment that preceded the current recession likely will make the economic recovery from the pandemic more difficult”. “The increased risk build-up, such as the reaching-for-yield behavior in commercial real estate or increased corporate leverage, make economic downturns including this one more severe. These are issues that I and others spoke about quite extensively in the years before the pandemic hit, in particular with respect to questions about the need for accommodative interest rates when the economy was doing well, and the potential for a build-up of financial stability risks.” In other words, the analogy is that global economy is suffering from antibiotic resistance, made all the more ironic sadly by the desperate search for an effective Covid-19 vaccine(s).
Of the overnight data, the mortgage lending binge in Australia (Housing Finance surging a further 12.9% m/m after July’s 8.8%) and has more than recovered all of the April/May slump. The UK GDP, Services, Manufacturing and Construction Output all turned out lower than expected. It suggests that despite the boost from the ‘eat out’ campaign, the recovery momentum has lost ground substantially, with the 8.0% q/q in the Jun-Aug period underlining that the road back from the Q2’s precipitous -19.8% q/q is going to be an arduous one, particularly with the recent infection rate surge likely to weigh on the recovery in September and October data. As has been the case for some months, Canada’s labour data look likely to mirror the US report, with Employment growth seen slowing to 150K, while the Unemployment Rate is seen dropping to 9.8% from 10.2%, and as elsewhere implying that labour demand is likely to lag a long way behind an expected 45% q/q SAAR recovery in Q3 GDP, which given uncertainties related to the pandemic, the US election and a rather sluggish recovery in the energy sector should not come as a great surprise.
To view the full report and to sign up for daily market commentary please email firstname.lastname@example.org
The information within this publication has been compiled for general purposes only. Although every attempt has been made to ensure the accuracy of the information, ADM Investor Services International Limited (ADMISI) assumes no responsibility for any errors or omissions and will not update it. The views in this publication reflect solely those of the authors and not necessarily those of ADMISI or its affiliated institutions. This publication and information herein should not be considered investment advice nor an offer to sell or an invitation to invest in any products mentioned by ADMISI.
© 2020 ADM Investor Services International Limited.
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.