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Week ahead: Fed set to announce tapering?
All eyes are on the Federal Reserve and whether it will use this week’s September FOMC meeting to announce its long-awaited tapering of asset purchases. Meanwhile a hot inflation reading last week will have the Bank of England thinking about whether it should be pivoting to a more hawkish position.
Fed to announce QE taper?
Whilst markets do not expect the Federal Reserve to race towards tapering asset purchases, there is a broad consensus in the market that it will begin dialling back the pace of its QE programme from November. That means this week’s meeting may be an appropriate moment for the Fed to give the market fair warning.
Last week’s CPI inflation clouded the outlook a touch – it was a little softer than expected, giving the Fed some more breathing space. More importantly, the very weak August jobs report suggests the Fed might not want to nail its colours to a November taper launch just yet. It could signal it still believes that tapering is appropriate this year without giving a fixed schedule.
Investors will be most interested in how policymakers assess the pace of the labour market recovery, and whether they believe inflationary pressures are becoming less transitory than they thought. Close attention will be paid the latest round of economic projections for a guide on whether the Fed is changing its mind on the pace of inflation and growth.
Bank of England responds to hot inflation print
The Bank of England will need to respond to biggest jump in inflation on record when it convenes this week. Inflation accelerated to 3.2% in August from 2% in July, well above the central bank’s 2% target. Could this force the BoE to tighten monetary policy sooner than had been expected? A hawkish-sounding Bank of England would be a boost for sterling.
Eco data to watch
In addition to the above, markets will be on the hook for a raft of economic data releases this week, including Thursday’s round of flash PMIs for the euro area, UK and US. The Bank of Japan is due to meet, with governor Kuroda recently remarking that the central bank will further relax monetary policy such as by reducing interest rates, if necessary.
Nike, FedEx earnings
The earnings calendar is light but there are updates from Nike and FedEx among others. Nike posted very strong Q4 results in June, sending the stock to a record high. Q4 sales rose 96% against the year-ago quarter and were up 21% compared to 2019. Margins are also improving fast as the company’s pivot to supplying consumers directly pays off. “FY21 was a pivotal year for NIKE as we brought our Consumer Direct Acceleration strategy to life across the marketplace,” CEO John Donahoe said. But shares have come off lately amid worries about supply chain problems, with millions of units of lost production in Vietnam due to covid.
“Over its history, Nike’s stock has been most tightly correlated with sales growth, so with growing evidence that sales will likely stall, we believe Nike’s stock will at best tread water until more clarity is had around its manufacturing issues, and at worst suffer from reduced sales guidance and ensuing multiple compression,” BTIG analysts said in a note downgrading the stock to neutral.
Also look out for earnings from Adobe, General Mills and Costco.
Major economic events
|Mon Sep 20||12:01am||GBP||Rightmove HPI m/m|
|All Day||JPY||Japan Bank Holiday|
|All Day||CNH||China Bank Holiday|
|7:00am||EUR||German PPI m/m|
|Tentative||EUR||German Buba Monthly Report|
|3:00pm||USD||NAHB Housing Market Index|
|All Day||CAD||Canada Federal Election|
|10:00pm||NZD||Westpac Consumer Sentiment|
|Tue Sep 21||All Day||CNH||China Bank Holiday|
|2:30am||AUD||Monetary Policy Meeting Minutes|
|GBP||Public Sector Net Borrowing|
|11:00am||GBP||CBI Industrial Order Expectations|
|2:00pm||CNH||CB Leading Index m/m|
|3:30pm||AUD||CB Leading Index m/m|
|Tentative||NZD||GDT Price Index|
|Wed Sep 22||Tentative||JPY||Monetary Policy Statement|
|Tentative||JPY||BOJ Policy Rate|
|Tentative||JPY||BOJ Press Conference|
|2:00pm||CHF||SNB Quarterly Bulletin|
|USD||Existing Home Sales|
|3:30pm||Oil||Crude Oil Inventories|
|7:00pm||USD||FOMC Economic Projections|
|USD||FOMC Monetary Policy Statement|
|7:30pm||USD||FOMC Press Conference|
|Thu Sep 23||12:00am||AUD||Flash Manufacturing PMI|
|AUD||Flash Services PMI|
|All Day||JPY||Japan Bank Holiday|
|Tentative||EUR||German Import Prices m/m|
|8:15am||EUR||French Flash Manufacturing PMI|
|EUR||French Flash Services PMI|
|8:30am||CHF||SNB Monetary Policy Assessment|
|CHF||SNB Policy Rate|
|EUR||German Flash Manufacturing PMI|
|EUR||German Flash Services PMI|
|9:00am||EUR||Flash Manufacturing PMI|
|EUR||Flash Services PMI|
|EUR||ECB Economic Bulletin|
|9:30am||GBP||UK Flash Manufacturing PMI|
|GBP||UK Flash Services PMI|
|12:00pm||GBP||Bank of England monetary policy decision|
|1:30pm||CAD||Core Retail Sales m/m|
|CAD||Retail Sales m/m|
|USD||US unemployment Claims|
|2:45pm||USD||US Flash Manufacturing PMI|
|USD||US Flash Services PMI|
|3:00pm||USD||CB Leading Index m/m|
|3:30pm||Nat Gas||Natural Gas Storage|
|Fri Sep 24||12:01am||GBP||GfK Consumer Confidence|
|12:30am||JPY||National Core CPI y/y|
|1:30am||JPY||Flash Manufacturing PMI|
|7:00am||EUR||German GfK Consumer Climate|
|9:00am||EUR||German ifo Business Climate|
|3:00pm||USD||New Home Sales|