The markets month ahead: key events for your trading diary in October

Get a look at the coming month’s important market-moving events with our October trading preview. 

Economic events to watch in October 

OPEC-JMMC meetings – Monday 4th October  

The month begins in earnest with OPEC-JMMC meetings. OPEC+ comes together for its monthly policy talks. No shocking surprises are expected this month. Instead, we’ll probably see a rubber-stamping of the planned output increase of 400,000 bpd.  

RBA rate statement – Tuesday 5th October  

The Reserve Bank of Australia releases its newest rate statement at the start of the month. Markets forecast no hike for the foreseeable future. The cash rate will probably stay at its historic low. 

RBNZ rate statement – Wednesday 6th October  

Joining its Australian cousin in starting the month with a rate decision is the Reserve Bank of New Zealand. Economists think an increase in the 0.2% cash rate will come – but not the 0.5% increase forecast. 

US nonfarm payrolls – Friday 8th October 

Jerome Powell and the Fed, plus the wider markets, will be watching the month’s NFP data carefully. August’s data missed the mark by miles – will September’s stats point towards a US labour market surge? 

US CPI data – Wednesday 13th October 

Consumer Price Index rises cooled in August, backing the Fed’s stance that current high prices are all transitionary. Month-on-month price gains slowed to 0.3%. September’s CPI stats are released on Wednesday 13th of October. 

US retail sales data – Friday 15th October 

Retail sales across America picked up an unexpected bump in August. Sales were up 0.7% according to the Census Bureau. Observers were calling for a 0.7% decline, driven by rising Delta-variant COVID cases. Will we see an upward swing in September too? 

UK CPI data – Tuesday 20th October 

UK inflation is running hot. Last month’s report showed it growing at the fastest rate since records began, rising at 3.2%. It may be all transitionary, but if inflation punches above the Bank of England’s 4% target, then the UK’s central bank may be forced to act. 

European PMIs – Friday October 22nd 

Brace for the monthly European flash PMI blitz with all the key economic activity indicators from France, Germany, and the EU all inbound. Eurozone composite PMI readings for September missed expectations of 58.5 coming in at 56.1. Still in growth, but it looks like activity is starting to slow. 

Bank of Canada rate statement – Wednesday October 27th 

The first rate statement of Justin Trudeau’s third term comes this month. Governor Tiff Macklem and co. stuck to their guns in September, keeping the 0.25% rate in place and the QE pace the same. It’s probable October’s statement will bring much the same. 

ECB Press Conference – Thursday October 28th  

The European Central Bank scaled back its bond-buying programme in September in a bid to cool soaring inflation. Its October moves will likely all come down to how EU CPI reacted to the change. Rates stayed at 0% and it’s likely they will in the mid-term. 

Major economic data 

Date  Time (GMT+1)  Asset  Event 
Mon Oct-04  8:00am  EUR  Spanish Unemployment Change 
  All Day  All  OPEC Meetings 
  All Day  All  OPEC-JMMC Meetings 
       
Tue Oct-05  4:30am  AUD  RBA Rate Statement 
  4:30am  AUD  Cash Rate 
  Tentative  JPY  BOJ Gov Kuroda Speaks 
  3:00pm  USD  ISM Services PMI 
       
Wed Oct-06  2:00am  NZD  Official Cash Rate 
  2:00am  NZD  RBNZ Rate Statement 
  1:15pm  USD  ADP Non-Farm Employment Change 
  3:30pm  OIL  Crude Oil Inventories 
       
Thu Oct-07  1:30pm  USD  Unemployment Claims 
  3:00pm  CAD  Ivey PMI 
       
Fri Oct-08  1:30am  AUD  RBA Financial Stability Review 
  1:30pm  CAD  Employment Change 
  1:30pm  CAD  Unemployment Rate 
  1:30pm  USD  Average Hourly Earnings m/m 
  1:30pm  USD  Non-Farm Employment Change 
  1:30pm  USD  Unemployment Rate 
  Tentative  USD  Treasury Currency Report 
       
Tue Oct 12  3:00am  CNH  GDP q/y 
  3:00am  CNH  Retail Sales y/y 
  10:00am  EUR  ZEW Economic Sentiment 
  10:00am  EUR  German ZEW Economic Sentiment 
  3:00pm  USD  JOLTS Job Openings 
  6:00pm  USD  10-y Bond Auction 
       
Wed Oct-13  1:30pm  USD  CPI m/m 
  1:30pm  USD  Core CPI m/m 
  6:01pm  USD  30-y Bond Auction 
  7:00pm  USD  FOMC Meeting Minutes 
       
Thu Oct-14  1:30am  AUD  Employment Change 
  1:30am  AUD  Unemployment Rate 
  1:30pm  USD  PPI m/m 
  1:30pm  USD  Core PPI m/m 
  1:30pm  USD  Unemployment Claims 
  4:00pm  OIL  Crude Oil Inventories 
       
Fri Oct-15  7:00am  GBP  Retail Sales m/m 
  1:30pm  USD  Core Retail Sales m/m 
  1:30pm  USD  Retail Sales m/m 
  1:30pm  USD  Empire State Manufacturing Index 
  3:00pm  USD  Prelim UoM Consumer Sentiment 
       
Mon Oct-18  2:15pm  USD  Industrial Production m/m 
  3:30pm  CAD  BOC Business Outlook Survey 
Tue Oct-19  1:30am  AUD  Monetary Policy Meeting Minutes 
       
Wed Oct-20  7:00am  GBP  CPI y/y 
  1:30pm  CAD  CPI m/m 
  1:30pm  CAD  Common CPI y/y 
  1:30pm  CAD  Core Retail Sales m/m 
  1:30pm  CAD  Median CPI y/y 
  1:30pm  CAD  Retail Sales m/m 
  1:30pm  CAD  Trimmed CPI y/y 
  3:30pm  OIL  Crude Oil Inventories 
  10:45pm  NZD  CPI q/q 
       
Thu Oct-21  1:30pm  USD  Philly Fed Manufacturing Index 
  1:30pm  USD  Unemployment Claims 
       
Fri Oct-22  8:15am  EUR  French Flash Manufacturing PMI 
  8:15am  EUR  French Flash Services PMI 
  8:30am  EUR  German Flash Manufacturing PMI 
  8:30am  EUR  German Flash Services PMI 
  9:00am  EUR  Flash Manufacturing PMI 
  9:00am  EUR  Flash Services PMI 
  9:30am  GBP  Flash Manufacturing PMI 
  9:30am  GBP  Flash Services PMI 
  2:45pm  USD  Flash Manufacturing PMI 
  2:45pm  USD  Flash Services PMI 
       
Mon Oct-25  9:00am  EUR  German ifo Business Climate 
       
Tue Oct-26  1:30pm  USD  Core Durable Goods Orders m/m 
  1:30pm  USD  Durable Goods Orders m/m 
  3:00pm  USD  CB Consumer Confidence 
       
Wed Oct-27  1:30am  AUD  CPI q/q 
  1:30am  AUD  Trimmed Mean CPI q/q 
  3:00pm  CAD  BOC Monetary Policy Report 
  3:00pm  CAD  BOC Rate Statement 
  3:00pm  CAD  Overnight Rate 
  3:30pm  OIL  Crude Oil Inventories 
  Tentative  CAD  BOC Press Conference 
       
Thu Oct-28  Tentative  JPY  BOJ Outlook Report 
  Tentative  JPY  Monetary Policy Statement 
  Tentative  JPY  BOJ Press Conference 
  12:45pm  EUR  Monetary Policy Statement 
  12:45pm  EUR  Main Refinancing Rate 
  1:30pm  EUR  ECB Press Conference 
  1:30pm  USD  Advance GDP q/q 
  1:30pm  USD  Advance GDP Price Index q/q 
  1:30pm  USD  Unemployment Claims 
  3:00pm  USD  Pending Home Sales m/m 
       
Fri Oct-29  8:00am  EUR  German Prelim GDP q/q 
  1:30pm  CAD  GDP m/m 
  1:30pm  USD  Core PCE Price Index m/m 
  2:45pm  USD  Chicago PMI 
  3:00pm  USD  Revised UoM Consumer Sentiment 
Sat Oct-30  Day 1  All  G20 Meetings 
       
Sun Oct-31  1:00am  CNH  Manufacturing PMI 
  Day 2  All  G20 Meetings 

Stocks look to end week on a high as travel stocks catch tailwind

European markets on a firmer footing on Friday – FTSE 100 made a bold move at the open to recapture the week’s intraday high at 7,093 struck on Monday before pulling back, still trades up roughly half of one percent in early trade. This comes after a lacklustre session on Wall Street – Nasdaq up a touch, S&P 500 down a touch after the textbook bounce off the 50-day SMA on Thursday. Cyclicals were higher along with real estate, while basic materials and energy declined as oil pulled back from its highs and precious and some other metals took a hit. Stock markets on either side of the pond now just in the green for the week, Nasdaq just a tad lagging at the moment. Better session for the Hang Seng but still down 5% for the week.

 

Airlines and associated travel stocks are among the top performers this morning on hopes for the relaxation of international travel rules. Ministers are looking to scrap the need for the double-jabbed returning to the UK to take PCR tests, whilst the traffic light system would be scrapped. This would remove a huge blockage for the industry, though what hoops you need to go through once you get to your destination is another matter… ‘your papers please’…’I just wanted a sandwich!’. Anyway, shares in the likes of TUI and IAG rose around 4%. SSP – which does the sandwiches – up 3%. WH Smith +2%.  Informa – which does conferences – also benefitted as it ought to make business travel less of a headache for those HR teams. Not all travel shares were up – EasyJet fell another 1%. HSBC rallied on two upgrades. IHG also got a boost as Berenberg upgraded to buy. Wickes rose 5% after Deutsche Bank raised the stock to buy. 

 

UK retail sales missed expectations in August, but people are spending more on doing things than they are stuff. We had 18 months locked up to order patio sets and games consoles. Now is the time to get out and go the pubs, restaurants or whatever it is you like to do. 

 

After bemoaning the lack of FX volatility earlier this week, yesterday saw it reappear. The main story was a stronger dollar, which rose to its highest in three weeks after some surprisingly good US data. US retail sales rose +0.7% vs –0.8% decline expected, which signalled resilience among consumers as delta fears start to ebb and perhaps indicates spending will start to improve as US households unwind savings again after a period of caution. JPMorgan’s latest spending data report showed consumer spending well above July/August levels. More good news for the US economy emerged as the Philly Fed manufacturing index jumped as price pressures eased. 

 

And now an FT report claiming the European Central Bank is far closer to raising rates than official communiques indicate has the market guessing. The report cites an internal memo saying the ECB is on track to hike rates in about two years’ time, a year earlier than forecast. EURUSD has caught some bid after hitting its weakest since late August but this could just as well be about a paring of dollar gains after an outsize move yesterday. I would not be surprised if the ECB were to keep schtum over a possible earlier rate hike, as it won’t want the euro to rally, however such a hawkishness would go against everything we have come to learn about the ECB over the last decade. It maybe reflects internal concerns that inflation will be stickier than central banks admit right now and that they will be forced into adopting a less accommodative stance presently. On that note, markets are keen to see what the Bank of England does next week to get a grip on inflation.

 

EURUSD: potential inverted head and shoulders but near-term momentum with bears – note bearish MACD crossover. Current price action is tracking a well-worn channel. If a test of 1.6660 fails then we look to recover 1.19. If this gets taken out first and confirmed, looking for 1.22.

Gold was hammered yesterday as the dollar rose and Treasury yields spiked on the better US data. Whilst neither of the data sets should materially alter the Fed’s decision next week, they do nudge things in favour of the USD and spikier yields. The MACD indicator again provided us with a good signal last week for a short. Could be a shakeout of the weaker hands before resumption of attack on $1,830.

Manipulation continues to stoke the market

Yesterday I talked at length about the stock trading of Robert Kaplan, the head of the Dallas Fed, which obviously posed some questions about conflicts of interest. Now the quiet uproar this caused has forced Kaplan and his pal Eric Rosengren, the Boston Fed president, to do something. Both will sell all individual stock holdings by Sep 30th and reinvest in passive funds. “While my personal saving and investment transactions have complied with the Federal Reserve’s ethics rules, I have decided to address even the appearance of any conflict of interest by taking the following steps,” Rosengren said. Ok sure, but it just has a bad smell to it.

 

Stocks are nursing a slight bounce after a tough week, but the downside is open. The FTSE 100 found support at the 7,000 marker, testing its lowest in almost a month but holding the recent range for the time being. US markets were lower for a 4th straight day, the Dow Jones losing more than 150 points, the S&P 500 off by half of one percent and now a little over 1% below the all-time highs. A dovish European Central Bank has eased some concerns. 

 

The ECB did little to rock the boat, announcing a modest taper, but this was not exactly hawkish. PEPP will be conducted at a slightly slower pace, but this is all just tinkering at the edges.  Stocks found some bid, the euro also rose a touch but turned around – just a hint of noise, no new direction or anything to change the mind of any investors out there. Lagarde stressed it’s not a taper but ‘recalibration’ of PEPP.  

 

Message on rates clearly dovish and signalling they are going to look through ‘transitory’ spikes in inflation: “The Governing Council expects the key ECB interest rates to remain at their present or lower levels until it sees inflation reaching two per cent well ahead of the end of its projection horizon and durably for the rest of the projection horizon, and it judges that realised progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilising at two per cent over the medium term. This may also imply a transitory period in which inflation is moderately above target.” 

 

Although inflation forecasts were revised higher, inflation in 2023 is still seen back down to 1.5% – so no signs of a rate hike in my lifetime…I reckon I could get round a table 8 times a year with my mates and say ‘shall we buy more bonds?’ and they would say ‘yeah, let’s buy more bonds’. It’s not monetary policy, it’s just outright repression, manipulation and ultimately a form of theft. 

 

And if you want to see what mega central bank action does – BofA reports today in their Flow Show that the annualized inflow to global stocks in 2021 of $1tn is greater than the cumulative inflow of prior 20 years ($0.8tn). 

 

Stagflation: UK economic growth slowed sharply in July – the reopening burst bust. Output rose by just 0.1% in July, missing expectations for +0.6% expansion.  

 

US initial jobless claims hit their lowest since the pandemic at 310k, whilst continuing claims also fell slightly. 

 

Oil weakened but then recovered some ground after China said it would auction off some state crude reserves to help refiners. WTI remains in a tight range as the market looks for fresh catalysts from the demand unknowns. Near-term downtrend remains in force.

Spot Oil Chart 10.09.2021

European stocks rally as US breaks for Labor Day holiday

European stock markets edged higher this morning towards the top of recent ranges at the start of what’s set to be a fairly quiet day as US markets are shut for the Labor Day holiday. Meanwhile, this week’s European Central Bank meeting looms in the near distance. Investors are still digesting the huge jobs report miss last Friday and what it means for the Federal Reserve’s plans to scale back its bond purchases. Stocks just about fell and the dollar was weaker in the wake of the report, whilst gold rallied. It was far from a straight line down for stocks though as large cap growth and tech helped the Nasdaq Composite to rally 0.21% whilst the Dow Jones fell by the same amount. 

 

This morning the main indices are heading higher by around half of one percent. The euro is lower against the dollar as the latter catches some bid in early trade. Data from Germany has been mixed, with factory orders +3.4% vs -0.7% expected, while the construction PMI slipped deeper into contraction territory at 44.6, a three-month low.

 

Stagflation: Friday’s US jobs report was bad, indicating growth rolling over and delta taking its toll on the reopening of the economy. With revisions to the last two months the net add was not as bad as the headline print, but it was nevertheless a poor signal for the US economy at this stage. Of note, employment in leisure and hospitality was unchanged, after increasing by an average of 350,000 per month over the prior 6 months. 

 

One jobs miss does not mean the economic recovery is in trouble, but it could foster a more cautious approach among the FOMC members, who could be apt to delay plans to taper asset purchases. Or rather they may prefer to wait and see how the data goes into November. Against the backdrop of warning consumer confidence and stalled jobs growth, the chances of the Fed announcing a taper of bond purchases at its September meeting have receded but does mean it won’t start later in the year.  The question is to what extent rising cases of the delta variant in the US hit the rebound. 

 

Looking ahead to this week, the Reserve Bank of Australia is in a pickle over its plans to taper asset purchases. Ongoing lockdowns make it likely the central bank will reverse its previously announced taper, leaving bond purchases at A$5bn a week.  

 

The ECB meanwhile is more likely to go the other way and could announce a slower rate of PEPP asset purchases. Inflation is running at 3% and chief economist Lane has suggested the central bank could be closer to tapering than the market assumed. Hawks have their tails up a bit more these days that the European economy is in relatively good shape, but they worry about inflation. Of note this week will be the latest inflation forecasts for the bloc, which are likely to be revised higher. 

 

Oil is weaker after Saudi Arabia cut selling prices for Asia, nudging WTI and Brent down by more than 1%. The kingdom said it would reduce October official selling prices for all grades exported to Asia by at least $1 a barrel. 

Adelanto semanal: los bancos centrales, los protagonistas

La semana que viene, el panorama estará dominado por las declaraciones de tres bancos centrales, empezando por el Banco Central Europeo (BCE). Su perspectiva moderada choca con la del Banco de la Reserva de Australia (RBA) y el Banco de Canadá (BOC), los cuales han adoptado un tono más conservador recientemente. No prevemos importantes cambios en las políticas, pero avistamos sorpresas en el horizonte económico.

La última vez que pudimos conocer el parecer del BCE fue con motivo de las actas de su reunión de julio. En un mundo en el que los bancos centrales empiezan a adoptar sesgos más conservadores, el BCE aún se mantiene relativamente moderado.

El BCE anunció su primera gran política financiera estratégica en julio. Los objetivos de inflación se revisaron para procurar no mantenerlos por debajo del 2 %. Para ello, adoptaron un objetivo de inflación general específico del 2 %. Desde entonces, la inflación en la zona euro ha aumentado a un máximo de 10 años del 3 %, lo que probablemente avive a los conservadores del Consejo de Gobierno del BCE.

Hasta aquí, todo bien, pero, ¿qué ha sido de la covid-19? La pandemia aún sigue coleando, pero algunos importantes miembros del consejo del BCE confían en que ni siquiera el efecto de la variante delta propiciará una recaída en Europa.

Se esperan pocos obstáculos en el camino; el sentimiento es positivo.

«Diría que, en general, nos encontramos cerca del punto que esperábamos alcanzar en junio para todo el año», declaró Philip Lane, economista jefe del BCE, a Reuters este miércoles. «Es un panorama razonablemente bien equilibrado».

Cabe señalar que el BCE ha afirmado que mantendrá un sesgo «persistentemente acomodaticio» en adelante. Los tipos de interés probablemente se mantengan en sus actuales e insólitos mínimos. No prevemos asistir a un cambio hacia una postura más conservadora a corto plazo.

Viajamos a Australia, donde el RBA se ha mostrado bastante optimista en sus últimos comunicados. El RBA anunciará su nueva declaración de tipos el martes por la mañana y no prevemos que el banco se vaya a desviar de su rumbo actual.

Dicho esto, la reducción de su programa de compra de bonos continuará para disminuirlo a partir de septiembre. Los tipos probablemente también se encuentren en mínimos. No esperamos que suban, como pronto, hasta finales de 2022.

Casi todo depende de cuán firme sea el rumbo que tome la economía australiana al avista del aumento de los casos de coronavirus y los confinamientos de zonas aisladas.

«El consejo esta preparado para responder si aumentan las malas noticias en el frente sanitario, en caso de que eso dé lugar a un revés aún mayor para la recuperación económica», declaró el RBA en su acta de la reunión de agosto. «A día de hoy, la experiencia dicta que, cuando se contienen los rebrotes del virus, la economía se recupera rápidamente».

El gobernador Lowe y compañía han afirmado que no es probable que se produzca una rescisión, aunque las perspectivas de crecimiento se han revisado para este año: el RBA prevé que el crecimiento anual en 2021 ronde el 4 % —una previsión inferior al 4,75 % pronosticado en un primer momento—, pero aumentará al 4,25 % a finales de 2022.

El broche final al festival de declaraciones de bancos centrales lo pondrá el BOC, uno de los bancos centrales más conservadores del mundo, que no ha tardado en reducir su programa de compra de bonos, aunque mantiene su tipo a un día en el 0,25 %.

El BOC sí que señaló que una nueva ola de casos y confinamientos en el 2T inhibiría el crecimiento, pero se mostró seguro de que el crecimiento retornaría rápidamente a finales de año.

El banco central afirmó que, actualmente, el crecimiento previsto para la economía canadiense es del 6,0 % en 2021, una previsión menor que la de abril del 6,5 %. No obstante, revisó al alza su previsión de crecimiento para 2022 del 3,7 % al 4,6 %.

El crecimiento de la inflación sigue descontrolado: se espera que alcance o incluso supere el 3 % hasta 2022. La inflación no tiene freno y se sitúa en la parte alta del rango del BOC de entre un 1 % y un 3 %. No obstante, el banco considera que todo esto es transitorio, por lo que es probable que provoque un cambio de perspectiva en su política.

Principales datos económicos

Date  Time (GMT+1)  Asset  Event 
Tue 7-Sep  5.30am  AUD  RBA Rate Statement 
  5.30am  AUD  Cash Rate 
  10.00am  EUR  ZEW Economic Sentiment 
  10.00am  EUR  German ZEW Economic Sentiment 
       
Wed 8-Sep  3.00pm  CAD  BOC Rate Statement 
  3.00pm  CAD  Ivey PMI 
  3.00pm  CAD  Overnight Rate 
  Tentative  CAD  BOC Press Conference 
       
Thu 9-Sep  12.45pm  EUR  Monetary Policy Statement 
  12.45pm  EUR  Main Referencing Rate 
  1.30pm  EUR  ECB Press Conference 
  1.30pm  USD  Unemployment Claims 
  3.30pm  GAS  US Natural Gas Inventories 
  4.00pm  OIL  US Crude Oil Inventories 
       
Fri 10-Sep  1.30pm  CAD  Employment Change 
  1.30pm  CAD  Unemployment Rate 
  1.30pm  USD  PPI m/m 
  1.30pm  USD  Core PPI m/m 
  Tentative  GBP  Monetary Policy Hearings 

The All-New Symmetric ECB

This ECB meeting will be different. For a start, the opening statement is going to be shorter and more understandable. Lagarde told us this much when she launched the results of the ECB Strategy Review on 8th July. But is this just another cosmetic tweak or will there be substantial changes?

There certainly should be. The ECB has now changed their mandate for the first time in twenty-three years. Having failed abysmally to achieve their rather tortuous previous target of “close to, but below, 2%”, they’re now gunning for simple symmetry around 2%. As Lagarde explained at the Strategy Review, ‘Symmetry means that the Governing Council considers negative and positive deviations of inflation from the target to be equally undesirable’.

In practice, this unleashes the ECB doves. Previously they had to accept 2% as some kind of ceiling, which many of them feared was trapping the eurozone in a low growth, low inflation twilight zone. Since 2013, average annual inflation in the euro area has been just 0.9%. Now the doves can argue that expectations need to be reset in order to get inflation up to its target.

Why did the hawks agree to this?

They’ve certainly not been backward in coming forward over the years. But just as the Germanic fear of printing money was overcome by Mario Draghi, they have once again been forced to concede in this battle so that they don’t lose the war. There was a risk that the Strategy Review could have resulted in a Federal Reserve style “flexible average inflation targeting” regime, which would have tied the hands of the hawks by forcing them to push the stimulus pedal to the metal with average inflation so low for so long. Instead, they’ve managed to retain some power to interpret this new target in their preferred direction. Lagarde outright rejected the question of whether they were copying the Fed, replying ‘the answer is no, quite squarely’.

So now we have a target that seems to please both the doves and the hawks: the classic ECB fudge. Lagarde was at pains to point out that the new mandate was achieved with unanimous consent. Despite this bonhomie, Lagarde also warned that this week’s meeting would not «have unanimous consent».

The most prominent perma-hawk, Germany’s Jens Weidmann, is certainly gunning for the end of one of the ECB’s alphabet soup of quantitative easing programmes. The PEPP was launched in March last year in direct response to the pandemic. After all the “E” of its name refers to “emergency” – and Weidmann now thinks we are past that stage. As he noted on 27th June: ‘advances on the vaccination front mean that the economy in the euro area… is now probably making its way out of the crisis… The incidence of the disease declines only gradually… All the more reason, then, to talk about the conditions under which the emergency situation can be considered over from the perspective of monetary policy‘.

Meanwhile the increasingly vocal dove Fabio Panetta of Italy (and old friend of Mario Draghi) has warned that tightening too soon would be disastrous: ‘If we are seen as determined to achieve 2% without undue delay and have a clear plan to do so by enabling monetary-fiscal interactions, rising inflation expectations will make our task easier. But if we are seen to be lacking determination, expectations will be less responsive and the “bang for our buck” will be considerably lower: we will end up spending more, not less, and we may not exit the liquidity trap.

How, then, can Lagarde hope to reconcile the two?

By ending the PEPP and resurrecting the old APP – that’s the original Asset Purchase Programme launched under Draghi in mid-2014 when he was in full Whatever It Takes flight. But the APP will have to change. The amount of purchases might have to drop (to please the hawks) but continue for a longer period of time (to please the doves) – and to be flexible enough to be increased/decreased at any time (to please everyone).

What does this mean in practice?

Forget interest rates. QE is now the only game in town. It’s not going anywhere. But it is going to be recalibrated. This week’s meeting gives Lagarde the chance to set up this new framework so that markets can get used to it. We are in a new normal now. As Panetta recently concluded ‘we should recognise that what was seen as unconventional in the past is now conventional‘. Step forward the APP.

Adelanto semanal: ¿Logrará el BCE sus objetivos de ajuste tras el cambio estratégico?

Esta semana, el BCE clarifica la posición de su política tras el cambio estratégico de junio. Los datos están dominados por las ventas al por menor mensuales en el Reino Unido tras un extraordinario segundo trimestre y una oleada de informes sobre el índice de gestores de compras (PMI). Entretanto, la temporada de ganancias del segundo trimestre se anima en Wall Street.

Comencemos con el anuncio más importante de la semana del banco central. Esta vez, es el turno del Banco Central Europeo. Los mercados permanecerán vigilantes en lo que respecta a los próximos movimientos del BCE, con un mayor escrutinio al haber asumido el compromiso de una revitalización estratégica a principios del mes pasado.

Recientemente, hemos observado un aumento de las tasas de inflación en el Reino Unido y en los EE. UU. Al tiempo que, hace dos semanas, la inflación en la eurozona se aleja del valor más alto en dos años, la inflación y sus efectos han pasado al primer plano en las consideraciones de los responsables de las políticas monetarias de la UE.

Tras una revisión estratégica de 18 meses, la UE ha fijado su objetivo de inflación en un 2 %. Según los observadores, esto le daría al bloque el espacio de maniobra suficiente para (a) aceptar tasas de inflación temporales superiores a la objetivo y (b) mantener los tipos de interés cerca de los mínimos históricos.

¿Podría esto propiciar un cambio en la política monetaria enmarcada en la pandemia? Es posible; no obstante, el hecho de que los responsables de las políticas del BCE cuenten con el espacio de maniobra para mantener bajas las tasas sugiere que no habrá mayores cambios en la trayectoria monetaria actual del bloque.

Con ocasión de la reunión de junio, el Banco Central Europeo reiteró su compromiso relativo a los 1,85 billones de euros en compras de activos en virtud de su mecanismo enmarcado en el Programa de Compras de Emergencia frente a la Pandemia (PEPP). Se dijo que esto se mantendría en vigor hasta marzo de 2022.

Volviendo a los datos, una de las publicaciones claves de la semana ha sido la relativa a las ventas al por menor en el Reino Unido correspondientes a junio y las comparaciones mes a mes.

Podemos evaluar las cifras de junio observando los datos de las ventas al por menor correspondientes al segundo trimestre de 2021 publicados recientemente e informados por la Asociación de Minoristas Británicos (BRC) en cooperación con la red global de firmas de servicios profesionales KPMG.

Según la Asociación de Minoristas Británicos, las ventas al por menor se dispararon en un 10,4 % entre abril y junio en comparación a las del mismo periodo en 2019. Se trata del más rápido crecimiento trimestral informado desde que se comenzaron los registros en 1995.

Además, el informe incluye una revisión inicial del estado del sector minorista británico, también correspondiente al mes de junio. La red de firmas KPMG ha informado que las ventas al por menor en junio se dispararon en un 13,1 % en comparación a los niveles de 2019.

Con miras a proporcionar un contexto, la Asociación de Minoristas Británicos y la red de firmas KPMG están comparando las ventas al por menor contra las cifras del año 2019, ya que los datos correspondientes al 2020 se han visto distorsionados por la pandemia de la COVID-19.

La combinación de la atenuación de los confinamientos, las cálidas temperaturas veraniegas y la Eurocopa 2020 contribuyó al aumento del gasto minorista. Además, muchos veraneantes del Reino Unido no han tenido otra opción que quedarse en casa, por lo que el dinero que hubieran gastado en el exterior ha permanecido en la economía local.

Todo debido a una demanda contenida que se desata a medida que se levantan las restricciones en materia de confinamiento. A partir del lunes, se eliminará la mayoría de las restricciones que afectan la cotidianidad de los británicos, por lo que ya ha estallado la batalla para hacerse con el dinero de los consumidores.

Será muy interesante observar si ocurren cambios en los hábitos, desde lo que respecta al gasto minorista hasta las experiencias relacionadas. Esta ha sido la tendencia en los EE. UU. durante los últimos dos meses, por lo que los consumidores del Reino Unido también podrían decantarse por hacer cosas en lugar de comprarlas.

El viernes, también contaremos con una plétora de informes sobre el índice de gestores de compras (PMI) procedentes de los EE. UU., el Reino Unido y la UE.

En cuanto al Reino Unido, los índices de gestores de compras de Markit IHS correspondientes tanto a servicios como manufactura demuestran que el Reino Unido sigue, en gran medida, sobre una base de crecimiento.

Comenzando con la fabricación, la lectura de junio fue de 63,9 —un poco más baja que el mayor valor histórico de 65.6—, pero aún una de las tasas más altas en el historial de 30 años del sondeo. Sin embargo, las personas con información de primera mano del sector advirtieron que los atolladeros en la cadena de suministros y los elevados costes de los insumos que satisfacen la creciente demanda podrían desacelerar la producción industrial en lo sucesivo.

La lectura del índice de gestores de compra (PMI) en materia de servicios correspondiente a junio concordó con la fabricación en el Reino Unido: un ligero distanciamiento con respecto al máximo de mayo, pero todavía evidenciando un fuerte crecimiento. En la actualidad, la lectura se ubica en 62,4. Sin embargo, los gastos operativos en aumento y la falta de personal podrían afectar el crecimiento a corto plazo, al igual que podría hacerlo la creciente inflación. La lectura de julio nos brindará una imagen más nítida.

Además, mantener el impulso (y que se prolongue hasta julio) es el deseo de la UE. Las lecturas de junio fueron algunas de las más positivas en años. El flash del índice compuesto se situó en 59,2, lo que supone un aumento con respecto al registrado en mayo y situado en 57,1. En materia de servicios, se verificó un aumento desde 55,2 hasta 58,0, lo que sugiere que la demanda contenida está impulsando los sectores hotelero y de servicios.

Aunque pujante, los EE. UU. podrían haber alcanzado su punto máximo según los índices de gestores de compras (PMI) publicados. Su puntuación compuesta para junio se situó en 63,7, la segunda tasa de expansión más rápida registrada.

Chris Williamson, economista de empresa jefe en IHS Markit, manifestó: «Junio ha sido otro mes caracterizado por un impresionante crecimiento de la producción en los sectores de fabricación y servicios de la economía estadounidense, finalizando con la expansión trimestral más acentuada desde 2009, año en el que se dispuso de datos por primera vez».

«La tasa de crecimiento se lentificó en comparación con el máximo registrado en mayo; no obstante, se trata de una señal más de que el vigor en la recuperación de la economía alcanzó su punto máximo en el segundo trimestre».

Sin duda, la inflación influirá enormemente en el cálculo del índice de gestores de compras de julio. Los precios básicos y no básicos aumentan en las economías antes mencionadas; no obstante, la publicación del viernes nos permitirá comprender mejor sus efectos en la actividad económica de los EE. UU.

También nos adentramos en la segunda semana del periodo de ganancias del segundo trimestre en los EE. UU. Esta semana, diversas empresas tecnológicas y de bienes de consumo de rápido movimiento (FMCG) —entre ellas, Netflix, Twitter, Intel, Johnson & Johnson y Coca-Cola— publicarán sus resultados.

La empresa de ingeniería y de servicios a yacimientos petrolíferos Schlumberger bien puede ser una de las empresas que no haya que perder de vista. Los precios del petróleo comenzaron a aumentar a finales del año pasado. ¿Ha supuesto esto una mayor actividad para las multinacionales como Schlumberger y, en consecuencia, una mejora en sus resultados financieros?

A continuación, tiene a su disposición un resumen de los informes de elevada capitalización en Wall Street esta semana; no obstante, también puede acceder a nuestro calendario completo de ganancias correspondiente a EE. UU. aquí.

Principales datos económicos

Date Time (GMT+1) Asset Event
Tue 20-Jul 2.30am AUD Monetary Policy Meeting Minutes
 
Wed 21-Jul 2.30am AUD Retail Sales m/m
  3.30pm OIL US Crude Oil Inventories
 
Thu 22-Jul 12.45pm EUR Monetary Policy Statement
  12.45pm EUR Main Refinancing Rate
  1.30pm EUR ECB Press Conference
  3.30pm GAS US Natural Gas Inventories
 
Fri 23-Jul 7.00am GBP Retail Sales m/m
  8.15am EUR French Flash Manufacturing PMI
  8.15am EUR French Flash Services PMI
  8.30am EUR German Flash Manufacturing PMI
  8.30am EUR German Flash Services PMI
  9.00am EUR Flash Manufacturing PMI
  9.00am EUR Flash Services PMI
  9.30am GBP Flash Manufacturing PMI
  9.30am GBP Flash Services PMI
  1.30pm CAD Core Retail Sales m/m
  1.30pm CAD Retail Sales m/m
  2.45pm USD Flash Manufacturing PMI
  2.45pm USD Flash Services PMI

 

Principales informes de resultados

Mon 19-Jul Tue 20-Jul Wed 21-Jul Thu 22-Jul Fri 23-Jul
Philip Morris International Coca-Cola AT&T American Express
IBM
Netflix Johnson & Johnson Newmont Goldcorp Schlumberger
Verizon Communications Intel Corp
Snap Inc
Twitter Inc

Stocks shrug off higher inflation, gold up as yields are pinned

A mildly positive start to the Friday session for European markets after Wall Street set fresh records, with the S&P 500 jumping to a new all-time high even as data showed US inflation surged in May. US CPI rose to 5% last month, whilst the core reading rose to +3.8%, the highest in 30 years. Core month-on-month declined from 0.9% in April to 0.7% in May but still remains extremely high. Rates actually fell with the 10yr Treasury under 1.44%, sending the dollar to under 90 and gold firmer. 

 

Hot inflation readings right now are pretty much fully priced and understood, as is the reaction function of central banks: they see it as transitory, nothing to worry about. This was evinced by the European Central Bank yesterday, which stuck to the inflation-is-temporary script. It raised expectations for growth and inflation this year but sees inflation at just 1.4% in 2023. The message from the ECB was that things are much better, but we are not about to ease off. 

 

The ECB said it sees risks to the growth outlook as «broadly balanced», for the first time since December 2018. And the statement was quite dovish given upgrades, with the bank saying that “the Governing Council expects net purchases under the PEPP over the coming quarter to continue to be conducted at a significantly higher pace than during the first months of the year”. We might have expected them to drop the word significantly at this meeting. It’s all set up nicely for a battle over the summer between the hawks and doves – if the data continues its current trajectory, we should anticipate a September taper announcement. 

 

Bank of America’s closely-followed Flow Show shows strong flows to bonds, with $12.5bn inflows vs $1.5bn to equities in the last week. The paper notes dryly that “nobody knows how to trade inflation, everybody knows how to trade ‘don’t fight the Fed’.” This is an apt way of describing the fact that just about no one around today really understands either a strong and sustained period of inflation, nor a proper bear market. Just because you’ve not had to deal with it before doesn’t mean it can’t happen.  

 

Yields falling on a hot inflation print seems counter-intuitive. But while inflation is surging, inflation expectations are not shooting higher. As such, at its meeting next week, the Fed can still argue that the inflation we are seeing is a factor of base effects and short-term supply problems. The question remains: at what point does the stream of higher inflation readings become more than just transitory?

 

With yields sinking to fresh 3-month lows, real rates (TIPS) shot lower too, giving a helping hand to gold. The set up for gold looks promising – rising inflation + a Fed willing to keep its thumb on yields, producing even-more negative real rates. Prices have clawed back the $1,900 level and could be heading for the $1,960 region if the recent peak at $1,196 can be cleared. Failure to retain the $1,900 could see the 50% retracement at $1,877 again.

The FTSE 100 is testing the near-term highs around 7120 in early trade – a break could call for test of the post-pandemic peak at 7,164 at the top of the ascending triangle. Continued MACD divergence is a headwind.

Markets look for direction from ECB, US CPI inflation

European stock markets were again lacking direction ahead of today’s closely awaited ECB meeting and a hotly anticipated inflation reading from the US. The FTSE 100 trades a little higher, the DAX a little lower. Wall Street closed lower with the major indices holding to well-worn ranges. The S&P 500 down 0.4% to 4,219.55 but remains just a few points below its all-time high of 4,238.04 set on May 7th.  

Meme stocks attracted the most interest as Clean Energy Fuels – the fourth most talked about stock on the /Wallstreetbets thread yesterday – rallied 31%. AMC fell 10% and Clover Health dropped 23% after a monster rally in the previous session. Today’s most-discussed stocks include WISH, CLF, WKHS, AMC and TLRY. 

 US inflation reading key risk event

If there is a worry about inflation – today’s US CPI print will tell us a lot – then the bond market is not showing it. US 10yr yields fell under 1.49% to the lowest level in 3 months. This is not just a Fed thing – the yield on longer dated paper such as the 30yr is also well off its 2021 highs. Today’s inflation reading still poses a risk to the market. The annual rate is forecast to climb to 4.7% in May, from 4.2% in April, whilst the core reading is seen at 3.4%, with the month-on-month at +0.4%. With the Federal Reserve anchoring its policy goals to employment, another hot reading won’t be too much to worry about. Nevertheless, the print will still lead to some volatility at 13:30 (BST) in index futures, numerous FX crosses and gold. An above forecast inflation reading would reignite market taper fears, albeit this is likely to be short-lived and one to fade as the Fed still has control of this, at least to the extent that the market believes it does.

ECB set to hold steady for now

The European Central Bank (ECB) convenes today amid a much rosier economic outlook than at the start of the year. But with the central bank having communicated its plans to front-load asset purchases, there is not expected to be any material change in policy or communication. It will be hard to avoid taper talk so how the ECB responds to questions around tapering will be of central importance to the market’s expectations and the euro. At the March meeting the ECB said it would pick up the pace of asset purchases, front-loading the PEPP scheme, but that it could still use less than the full envelope of €1.85tn if favourable financial conditions can be maintained without spending it all. The outcome of the March meeting was very much that the PEPP programme is more likely to end by March 2022 than be extended, albeit policy will remain very accommodative well beyond that point. Today it’s likely the ECB will support continuing running PEPP at around €80bn a month before starting to taper in September. 

Yields have been pressing higher but have retreated from the May peaks. The increased pace of asset purchases that was agreed in March came as a response to rising yields at the time. But the economic outlook – chiefly driven by a strong vaccine rollout that was slow to start but is now firing on all cylinders – has improved greatly since then. The ECB has been taking the line that inflation is temporary and rising bond yields reflect better fundamentals, so I don’t think it will be unduly concerned by a higher rate environment now due to the better economic picture. This will make talk of a taper very difficult to ignore. The language around the speed of asset purchases may change somewhat, and this could drive EZ yields + EUR higher. It will be very interesting to see what the ECB says about the state of financing conditions, and it is sure to continue to tie PEPP purchases to maintaining these as ‘favourable’.  

The big risk for EUR crosses around this meeting is: does the ECB silence taper talk with enough vigour to keep yields in check, or does it allow the market to think the more hawkish voices are winning the argument about when the central bank eventually exits emergency mode? With the ECB seen in a holding pattern, there is quite a low bar for a hawkish surprise.

Inflation has picked up since the last meeting, which could see the forecast for 2021 and 2022 revised upwards from the March level. EZ inflation rose to 2% in May from 1.6% in April, the first time it’s been on target in over two years. With growth in Q1 a little light, the rebound in the summer should mean GDP projections remain broadly unchanged. 

ECB speakers have been offering a few titbits since the last meeting. Of particular importance to the speed at which the ECB will exit emergency mode, Christine Lagarde stressed that inflationary pressures will be temporary – sticking to the global central banker script. At the April meeting she said tapering talk was premature. But she remains caught between the hawks and doves. Kazaks and Lane made it clear policymakers will look at the asset purchase programme again in June, which could involve scaling back the programme if the economic situation is better.  There were dovish comments from Panetta in late May, noting that it was too early to taper bond purchases. Banque de France Governor, Villeroy de Galhau, stressed that the ECB is going to be at least as slow to tighten as the Federal Reserve. 

Finally, London’s IPO market is showing signs of fatigue. Broker Marex has pulled its planned listing, while fuel cell company Elcogen and miner Tungsten have both delayed planned floats. Whilst there may be more to the Marex decision than simply ‘challenging IPO market conditions’, it does rather seem there is some amount of investor fatigue after a deluge of new issuance in the first quarter. Wise to pause. In the case of Marex, it may be wise to steer clear. 

ECB preview: no big changes ahead of Jun 10th meeting

  • No material changes expected 
  • More hawkish (EUR positive) more likely than more dovish 
  • Brighter economic outlook since March 

The European Central Bank (ECB) convenes on Thursday (Jun 10th) amid a much rosier economic outlook than at the start of the year. But with the central bank having communicated its plans to front-load asset purchases, there is not expected to be any material change in policy or communication. It will be hard to avoid taper talk so how the ECB responds to questions around tapering will be of central importance to the market’s expectations and the euro. 

At the March meeting the ECB said it would pick up the pace of asset purchases, front-loading the PEPP scheme, but that it could still use less than the full envelope of €1.85tn if favourable financial conditions can be maintained without spending it all. The outcome of the March meeting was very much that the PEPP programme is more likely to end by March 2022 than be extended, albeit policy will remain very accommodative well beyond that point.  

To taper? 

Yields have been pressing higher but have retreated from the May peaks. The increased pace of asset purchases that was agreed in March came as a response to rising yields at the time. But the economic outlook – chiefly driven by a strong vaccine rollout that was slow to start but is now firing on all cylinders – has improved greatly since then. The ECB has been taking the line that inflation is temporary and rising bond yields reflect better fundamentals, so I don’t think it will be unduly concerned by a higher rate environment now due to the better economic picture. This will make talk of a taper very difficult to ignore. The language around the speed of asset purchases may change somewhat, and this could drive EZ yields + EUR higher. It will be very interesting to see what the ECB says about the state of financing conditions and it is sure to continue to tie PEPP purchases to maintaining these as ‘favourable’.  

The big risk for EUR crosses around this meeting is: does the ECB silence taper talk with enough vigour to keep yields in check, or does it allow the market to think the more hawkish voices are winning the argument about when the central bank eventually exits emergency mode. 

New projections 

Inflation has picked up since the last meeting, which could see the forecast for 2021 and 2022 revised upwards from the March level. EZ inflation rose to 2% in May from 1.6% in April, the first time it’s been on target in over two years. With growth in Q1 a little light, the rebound in the summer should mean GDP projections remain broadly unchanged. 

What has the ECB been saying lately? 

ECB speakers have been offering a few titbits since the last meeting. Of particular importance to the speed at which the ECB will exit emergency mode, Christine Lagarde stressed that inflationary pressures will be temporary – sticking to the global central banker script. At the April meeting she said tapering talk was premature. 

Kazaks and Lane made it clear policymakers will look at the asset purchase programme again in June, which could involve scaling back the programme if the economic situation is better.  There were dovish comments from the Panetta in late May, noting that it was too early to taper bond purchases. Banque de France Governor, Villeroy de Galhau, stressed that the ECB is going to be at least as slow to tighten as the Federal Reserve. 

But we’ve also had warnings about financial stability risks stemming from rising levels of sovereign debt. Vice president de Guindos warned of a “legacy of higher debt and weaker balance sheets which … could prompt sharp market corrections and financial stress”. 

Technical outlook 

Right now, the price action has flipped above the 5-day moving average (RHS), so we look for a confirmation of this move (close above today and a green candle again tomorrow) for a bullish signal. On the LHS, the longer-term view of the daily MACD divergence is raising a warning flag. 

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