Written Commentary
Relatively light run of data and events to end the week: digesting Singapore Q2 GDP, German & Indian WPI, Swedish CPI jump, hawkish comments from Fed’s Waller, new RBA governor; US Import Prices, Michigan Sentiment and start of Q2 earnings season ahead
US Import Prices seen echoing softening inflation message from CPI and PPI, but need to note risks from dollar slide and rebound in energy and commodity going forward
- US Michigan Sentiment: falling inflation, dip in gasoline prices expected to give marginal boost; inflation expectations in focus
EVENTS PREVIEW
The week ends on something of an anti-climax, though markets will clearly be wanting to ride out on a high after the US inflation data inspired relief rally. There are Singapore’s advance Q2 GDP, Swedish CPI (much higher than expected, keeping pressure on the Riksbank) and India’s WPI to digest, while ahead lie US Import Prices and provisional a Michigan Sentiment, Canada’s Manufacturing and Existing Home Sales, and Brazil’s Retail Sales. The events schedule is very light with the G20 meeting of Finance Ministers and Central Bank deputies being the highlight. As such the spotlight will be on the official start of the US Q2 earnings, with the usual cast of financials as the highlights: JP Morgan Chase, Citi, Blackrock, State Street and Wells Fargo. Overall Q2 earnings are seen down between -6.4% (Refinitiv) and -7.2% (Factset), though with a big drag from the Energy sector, in stark contrast to a strong quarter for Consumer Discretionary, as the attached graphic highlights. There will be particular focus on margins & pricing power, retained earnings, planned layoffs, tightening credit conditions, and how often inflation and AI implementation is mentioned.
Next week sees a busy run of major statistics from the US, China and the UK, little in the way of central speakers (the Fed will be in purdah ahead of the July 26 FOMC rate decision), with rate hikes expected in South Africa (+25 bps to 8.50%), Russia (+50 bps to 8.0%), while both China’s 1-yr MTLF and 1 & 5-yr Loan Prime Rates (LPR) are expected to be unchanged. The US has Retail Sales. Industrial Production, NY & Philly Fed Manufacturing, NAHB Housing Index, Housing Starts and Existing Home Sales. China has Q2 GDP, Retail Sales. Industrial Production, Fixed Asset Investment, Unemployment and Property Investment and Sales. The UK looks to CPI, RPI and PPI, ONS House Prices, PSNB, CBI Industrial Trends, Retailing and GfK Consumer Confidence surveys. Elsewhere there are Japan’s National CPI and Trade, Australia has Unemployment July RBA minutes, Canada CPI and Retail Sales, while the Eurozone sees final June HICP, German PPI and French Business Confidence.
** U.S.A. – June Import Prices, July Michigan Sentiment **
Import Prices are expected to echo CPI and PPI in signalling easing inflation pressures, with headline seen down -0.1% m/m, and ex-Petroleum down 0.2%, per se reinforcing markets renewed pricing of a policy pivot early in 2024. But perspective is needed, firstly there are the hawkish comments from Fed’s Waller overnight suggesting two further rate hikes depending on the CPI/PCE deflator outturns in coming months, secondly, the anticipated pivot has precipitated a sharp fall in the US dollar index, as well as a bump higher in oil and other commodity prices, all of which will be somewhat inflationary. July provisional Michigan Sentiment is seen edging up on to 65.5 from 64.4 premised on inflation edging lower, which should be reflected in inflation expectations; however, higher mortgage rates may provide some offset, even if they are set to fall given the recent drop in bond yields.
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.
