Written Commentary
- Inflation data dominates end of week schedule, as attention turns to US CPI and Fed, ECB, BoE & SNB meetings next week; smattering of central bank speakers, USDA WASDE report
- China: food price base effects drive CPI fall; PPI underlines weakness in domestic demand, leaves scope for PBOC policy easing, though other factors of far greater importance
- US PPI: further modest ‘normal’ rise to pace further deceleration in yr/yr rates, offer support for Fed slowing pace of rate hikes
EVENTS PREVIEW
As markets hone in on next week’s Fed, BoE, SNB & ECB policy meetings, a busier day for statistics has inflation readings front and centre in various countries: with China and Norway’s CPI and PPI to digest ahead of UK BoE 1-yr Inflation Expectations and US PPI, with preliminary December US Michigan Sentiment also on the slate. There is a smattering of central bank speakers, while Agricultural Commodity markets will look to the monthly USDA World Agricultural Supply and Demand Estimates (WASDE). Next week’s schedule has those central bank meetings and a wealth of data from the US (CPI, Retail Sales, Industrial Production; NFIB, NY & Philly Fed surveys), China Retail Sales, Industrial Production, FAI, Property Investment) and UK (monthly GDP, CPI, RPI, Unemployment, Average Earnings, Industrial Production, Trade, Construction Output, Retail Sales), which are accompanied by G7 ‘flash’ PMIs, Japan’s Q4 BoJ Tankan survey & Trade, Australian Unemployment and German ZEW survey. There is also an EU leaders’ Summit, while OPEC publishes its monthly outlook report.
** China – November PPI & CPI **
While PPI was unchanged at -1.3% y/y vs. a forecast of -1.5% y/y, this was primarily due to the benign base effects of the past year coming to an end in October, with the underlying components continuing to signal deflation above all in the goods sector. CPI slid back to 1.6% y/y from October’s 2.1%, bang in line with forecasts, and paced exclusively by a sharp base effect driven drop in Food prices to 3.7% y/y from 7.0%. Obviously, this continues to offer the PBoC scope to ease policy further, but a) it will be mindful of not widening US and other Asian rate differentials for fear of adding to pressure on the CNY, and b) it is not rate levels which are weighing on corporates, but credit availability and regulatory interventions.
** U.S.A. – November PPI, December Michigan Sentiment **
The consensus looks for another very ‘normal’ (i.e. pre-pandemic) 0.2% m/m increase for both headline and core PPI, with the core ex-Trade measure seen up just 0.1%, which thanks to very benign base effects would see headline drop to 7.2% y/y from 8.0%, while core seeing a similar 0.8 ppt drop to 5.9%. The latter would continue a run of sequential drops since peaking at 9.7% y/y in March, underlining that pipeline pressures have eased very substantially, and very likely to continue to through Q1 2023, though they still remain high by comparison to the pre-Covid decade (see chart), but certainly justify the Fed easing up on the pace of rate hikes. December Michigan Sentiment is seen little changed at a depressed 56.8, though the fall in gasoline prices may provide a slight boost, but ahead of the FOMC meeting, it will be the 1-yr and long run inflation expectations that get most attention, with both measures seen unchanged at 4.9% and 3.0% respectively.
To view the full report and to sign up for daily market commentary please email admisi@admisi.com
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.
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.
© 2022 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.
