Written Commentary
US Retail Sales and Industrial Production dominate a relatively light run of data, with Fed and ECB speakers out in force; UK & German 5-yr and US 20-yr TIPS
Germany ZEW: Expectations and Current Situation seen improving again, but French elections pose downside risks depending on data collection timing
US Retail Sales: small headline rebound seen, slightly stronger core gain, paced by Memorial Day promotional activity
US Industrial Production: rebound in ISM Production predicates anticipated bounce, above average temperatures may boost utilities
EVENTS PREVIEW
Key US activity data (Retail Sales & Industrial Production) and a deluge of central bank speakers (Fed & ECB) dominate an otherwise quite limited run of statistics and events, with Singapore Trade to digest ahead of final Eurozone CPI (seen unrevised) and Germany’s ZEW survey. An element of calm appears to be materializing in European markets about the French election risk, though the French risk premium remains very elevated, but with opinion polls suggesting that RN will not get the majority called for by RN PM candidate yesterday, while at the same time claiming that RN would be ‘serious’ about the country’s finances to reassure markets, a further push wider in govt bond spreads has for the time being been capped.
** Germany – June ZEW survey **
The ZEW survey is forecast to show Expectations rising to 49.5 from 47.1 but given the steep decline in Eurozone stock indices over the past week the risks of a much weaker than expected outturn look to be quite high, with much depending on data collection timing. The Current Conditions index is expected to remain very weak, though improving to -65.0 from -72.3, as incoming data continue to suggest the economy has troughed, and a very weak recovery is in place.
** U.S.A. – May Retail Sales, Industrial Production **
Retail Sales are forecast to show a meagre 0.2% m/m rebound in headline terms, and a more robust 0.4% m/m bounce on core metrics, with stores and auto retailers’ price cuts in response to weaker demand expected to have given a boost. As ever revisions will need to be closely watched. The rebound in the ISM’s Production sub-index and a solid 0.5% m/m rise in Manufacturing Hours imply a modest upside risk to forecasts of a 0.3% m/m rise for both Industrial Production (vs. prior flat) and Manufacturing Output (vs. prior -0.3%), with above seasonal average temperatures likely to have boosted Utilities, perhaps offset by some weakness in mining & extraction. After the initial knee-jerk reaction to the reports has been weathered, markets may choose to focus more on today’s run of six Fed speakers, and overall reaction may be tempered by some book squaring ahead of tomorrow’s Juneteenth holiday.
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