Modest run of data has disappointing Singapore Exports and UK Retail Sales, awaiting Eurozone final CPI and US Michigan Sentiment; ECB speakers and ‘Quadruple Witching’; Russia elections
UK Retail Sales: loss of momentum continues; switch back to services on re-opening and high infection rate a drag; labour market developments a bigger factor for MPC
US Michigan Sentiment: marginal rebound expected, retail sales jump suggests some upside risks, but gasoline price rise a potential drag
EVENTS PREVIEW
The data and events calendar to end the week is very modest, with disappointing Singapore Exports and UK Retail Sales to digest ahead of final Eurozone CPI and the US preliminary Michigan Sentiment, along with a smattering of ECB speakers, an expected no change rate decision in Nigeria, while Russia kicks off its parliamentary elections, which conclude on Sunday. It is also ‘quadruple witching; with equity and index options expiries in Europe and the U.S. Wholesale energy prices continue to be extraordinarily volatile, as can be seen on the array of attached charts. But what is also striking is how the sharp swings in oil prices have also dictated the bigger swings in the S&P 500 over the past 3 months, even if the narrative remains a very fickle one, initially with oil price moves seen as a proxy for better / worse growth prospects, and latterly inflation risks.
Next week will be dominated by central bank policy meetings, with the focus on the Fed and the BoE, and rather less on the BoJ, while Turkey’s TCMB faces yet another round of political pressure to reduce rates. Politically the week is bookended by elections in Canada (Monday) and Germany (Sunday), with opinion polls suggesting a period of political gridlock in both, before some form of ruling coalition can be established. Statistically there are the ‘flash’ G7 & Australia PMI readings, along with numerous surveys in the Eurozone and the UK, including Germany’s Ifo, while the US has a raft of housing data, and Brazil has IPCA IBGE Inflation; the OECD will also publish its latest Interim Economic Outlook.
U.K. – Aug Retail Sales
The run of disappointing UK activity data continues with the unexpected 0.9% m/m setback meaning that sales have fallen for four consecutive months, though still leaving sales 4.6% higher than the February pre-pandemic level, above all thanks to the 9.3% m/m jump in April. Outside of a modest 0.7% m/m gain for Clothing & Footwear, all other sub-categories fell, and the weakness doubtless reflects some rebalancing of personal spending from goods to services, as the economy re-opened fully, as well as a drag from the high level of infection rates. While no changes to Base Rate or QE volumes are expected at next week’s meeting, the CPI data still leaves the possibility that one or other MPC member (with new Chief Economist Huw Pill being touted as a hawk) joins Saunders in voting for a QE reduction. The MPC majority will almost certainly be cautious about making any changes to policy until some data becomes available about the impact of the termination of the furlough scheme at the end of this month, despite labour market developments proving to be a lot better than many had feared.
U.S.A. – Sep Michigan Sentiment
The divergence between Michigan Sentiment and Consumer Confidence has been eye catching, with the setback in Consumer Confidence in August still leaving it at a solid level, just as the Michigan measure plumbed a new pandemic & 10-year low of 70.3, attributed above all to the rapid spread of the delta variant, and weaker labour and spending data. If yesterday’s sharp rebound in Retail Sales (above all the 2.5% m/m in the core Control Group measure), that is in part being attributed to the expanded child tax credit programme, that started to be disbursed in mid-July, then there may be a sharper rebound than the consensus for a dead cat bounce to 72.0.
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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.
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