Key Events This Week: Trade Talks And Central Banks
Following a turbulent week for markets where stocks first tumbled then soared amid further signs of deteriorating growth which boost Fed cut expectations that led to a v-shaped recovery in US equities, the focus this week turns to the scheduled trade talks between the US and China and even more central bank speak.
As DB’s Jim Reid writes, it’s not a big week for data with US CPI (Thursday), PPI (Tuesday) and UoM consumer confidence (Friday) the highlights even if they will be seen as backward looking and less relevant to the current Fed debate. Comments from Fed Chair Powell and numerous other Fed officials will also be in focus, along with the FOMC minutes (Wednesday). Finally Brexit talks reach a crucial juncture with time ticking down.
On trade, Chinese Vice Premier Liu He is due to visit Washington for talks with meetings expected to take place on Thursday and Friday with the mood music in recent days seemingly more positive. However as Deutsche Bank reminds us, Bloomberg published a story last night that suggested that the Chinese are “increasingly reluctant to agree to a broad trade deal” and that the “range of topics they’re willing to discuss has narrowed considerably”. The same report also added that Vice Premier Liu He is likely to bring an offer that won’t include commitments on reforming Chinese industrial policy or government subsidies that have been the target of longstanding US complaints. So if the article is true the stakes have been raised ahead of these talks.
Looking at the coming Fedspeak, most attention will be placed on Fed Chair Powell who speaks tomorrow at a NABE meeting in Denver and then on Wednesday at a Fed Listens Event in Kansas. Comments are also due from Kashkari today, Evans and Kashkari on Tuesday, Mester and Bostic on Thursday and Kashkari, Rosengren and Kaplan on Friday. Also of note from the Fed will be the FOMC minutes from the September meeting due on Wednesday. As a reminder, the dot plot projections revealed sharp divisions within the Committee however the signals from the meeting still indicated a continued dovish bias. That being said, data since has mostly deteriorated.
Brexit will continue to take center stage headlines wise but it’s still doubtful we’ll know much more about the end game by the end of the week. The EU need the U.K. to improve their proposals to intensify the talks but such improvements would likely lose Mr Johnson’s Parliamentary ability to get any deal passed. So stalemate is the most likely. The most intriguing question for the next 12 days is how Mr Johnson intends to try to bypass the extension letter he’ll be legally forced to write by October 19th if he fails to get a deal. Interestingly the one opinion poll released over the weekend gave Mr Johnson and the Tories 38% of the vote and a lead of 15%. So if this is to be believed the hard line stance is seemingly paying off electorally. However it’ll be interesting to see if he gets the blame if the U.K. doesn’t leave by October 31st and losses support or whether he can continue to win enough of the “Parliament vs the people” argument to sweep up the leave vote while the remain vote is split.
The key global events this week are summarized in the table below, via Goldman:
A day by day calendar of the week’s events, courtesy of Deustche:
- Data: Germany August factory orders; Euro-area Sentix investor confidence; US August consumer credit
- Central Banks: Fed’s Kashkari speaks; Israel rate decision
- Data: Japan August cash earnings, current account balance, trade balance; China September Caixin services and composite PMIs; Australia NAB business conditions, foreign reserves; UK Q2 unit labor costs; Germany August industrial production; France August trade balance, current account balance; US September PPI, NFIB small business optimism
- Central Banks: Remarks from Fed’s Powell, Evans, Kashkari, BoE’s Carney, Tenreyro, Haldane, ECB’s Lane, Constancio, Norges Bank’s Olsen. Uganda rate decision
- Politics: European Parliament holds confirmation hearings for its three incoming vice presidents
- Other: New IMF Director Kristalina Georgieva speaks
- Data: Japan preliminary September machine tool orders; France September industry sentiment; US MBA mortgage applications, August JOLTS, wholesale trade sales and inventories
- Central Banks: Fed’s Powell and George speak; September FOMC meeting minutes; BoE Financial Policy Committee quarterly statement
- Politics: The C40 climate summit starts in Copenhagen
- Other: IMF World Economic Outlook analytic chapters published
- Data: Japan September PPI and core machine orders; Germany August trade balance and current account balance; France August industrial and manufacturing production; UK September RICS house price balance, August monthly GDP, industrial and manufacturing production, construction output, trade balance; US September CPI, hourly earnings, initial and continuing claims
- Central Banks: Remarks from BoJ’s Amamiya, Fed’s Mester, Bostic; ECB Accounts of September Policy Meeting; Peru rate decision
- Politics: Chinese Vice Premier Liu He visits Washington for trade talks with his US counterparts; EU Economic and Financial Affairs Council hold meetings in Luxembourg
- Other: OPEC Oil Market Report released
- Earnings: Delta Airlines, Walgreens Boots Alliance
- Data: Germany September CPI; US preliminary October University of Michigan survey, September import and export price index
- Central Banks: Remark’s from Fed’s Kashkari, Rosengren and Kaplan
- Politics: Chinese President Xi Jinping and Indian Prime Minister Narendra Modi meet for their second unofficial summit
* * *
Looking just at the US, the key economic data release this week is the CPI report on Thursday. In addition, minutes from the September FOMC meeting will be released on Wednesday. There are several scheduled speaking engagements from Fed officials this week, including by Chair Powell on Tuesday and Wednesday.
Monday, October 7
- 10:20 AM Minneapolis Fed President Kashkari (FOMC non-voter) speaks: Minneapolis Fed President Neel Kashkari will take part in a discussion about the Fed’s work on Native American reservations.
Tuesday, October 8
- 06:00 AM NFIB small business optimism, September (consensus 102.5, last 103.1)
- 08:30 AM PPI final demand, September (GS +0.1, consensus +0.1, last +0.1%); PPI ex-food and energy, September (GS +0.1%, consensus +0.2%, last +0.3%); PPI ex-food, energy, and trade, September (GS +0.1%, consensus +0.2%, last +0.4%): We estimate headline PPI rose 0.1% in September, reflecting fairly soft core prices and weaker energy prices. We expect a 0.1% increase in the core measure excluding food and energy, and also a 0.1% increase in the core measure excluding food, energy, and trade.
- 1:35 PM Chicago Fed President Evans (FOMC voter) speaks: Chicago Fed President Charles Evans will speak in a moderated Q&A at the Chicago Rotary Club. Audience and media Q&A are expected.
- 1:50 PM Fed Chair Powell (FOMC voter) speaks: Fed Chair Jerome Powell will speak at the annual meeting of the National Association for Business Economics in Denver.
- 5:00 PM Minneapolis Fed President Kashkari (FOMC non-voter) speaks: Minneapolis Fed President Neel Kashkari will take part in a townhall discussion at St. Cloud State University. Audience Q&A is expected.
Wednesday, October 9
- 10:00 AM JOLTS Job Openings, August (consensus 7,265k, last 7,217k)
- 10:00 AM Wholesale inventories, August final (consensus +0.4%, last +0.4%)
- 10:30 AM Fed Chair Powell (FOMC voter) and Kansas City Fed President George (FOMC voter) speak: Fed Chair Jerome Powell and Kansas City Fed President Esther George will participate in a Fed Listens event at the Kansas City Fed.
- 2:00 PM Minutes from the September 17-18 FOMC meeting: At its September meeting, the FOMC lowered the funds rate target to 1.75-2%, as widely expected. The statement was mostly unchanged and kept the “will act as appropriate” policy guidance, but the Summary of Economic Projections showed rising division among the Committee on the appropriate policy path. In the minutes, we will look for further discussion of the path of the policy rate and the growth and inflation outlook.
Thursday, October 10
- 08:30 AM CPI (mom), September (GS +0.02%, consensus +0.1%, last +0.1%); Core CPI (mom), September (GS +0.14%, consensus +0.2%, last +0.3%); CPI (yoy), September (GS +1.72%, consensus +1.8%, last +1.7%); Core CPI (yoy), September (GS +2.37%, consensus +2.4%, last +2.4%): We estimate a 0.14% increase in September core CPI (mom sa), which would leave the year-on-year rate unchanged at 2.4% on a rounded basis. Our monthly core inflation forecast reflects a 2-3bp boost from tariffs in the apparel and footwear, household furnishings, auto parts, and personal care categories. However, we nonetheless estimate a flat apparel reading due to offsetting downside from residual seasonality. We expect a decline in used car prices following brisk increases in the summer months, and we also note scope for a pause in medical services inflation following the three-year-high August increase (mom sa). On the positive side, we expect a rebound in education prices as higher campus labor costs flow through to tuitions. We estimate a 0.02% increase in headline CPI (mom sa), reflecting lower gasoline prices.
- 08:30 AM Initial jobless claims, week ended October 5 (GS 220k, consensus 218k, last 219k); Continuing jobless claims, week ended September 28 (consensus 1,651k, last 1,651k): We estimate jobless claims increased by 1k to 220k in the week ended October 5, following a 4k increase in the prior week.
- 5:30 PM Cleveland Fed President Mester (FOMC non-voter) speaks: Cleveland Fed President Loretta Mester will speak at the Edward J. and Louise E. Mellen Executive Speaker Series at University Heights, Ohio. Prepared text and audience and media Q&A are expected.
- 6:30 PM Atlanta Fed President Bostic (FOMC non-voter) speaks: Atlanta Fed President Raphael Bostic will participate in a conversation with Rev. Jesse Jackson, Sr. at a conference in Atlanta.
Friday, October 11
- 08:00 AM Minneapolis Fed President Kashkari (FOMC non-voter) speaks: Minneapolis Fed President Neel Kashkari will take part in a moderated Q&A on the US economy in New York. Audience Q&A is expected.
- 08:30 AM Import price index, September (consensus -0.1%, last -0.5%)
- 10:00 AM University of Michigan consumer sentiment, October preliminary (GS 93.7, consensus 92.0, last 93.2): We expect the University of Michigan consumer sentiment index rose by 0.5pt to 93.7 in the preliminary October reading, as the level appears low relative to other surveys and an improvement in the September UMich final print suggest upward momentum for sentiment at the end of the month.
- 1:15 PM Boston Fed President Eric Rosengren (FOMC voter) speaks: Boston Fed President Eric Rosengren will speak at a symposium at the University of Wisconsin Madison. Prepared text is expected.
- 3:00 PM Dallas Fed President Kaplan (FOMC non-voter) speaks: Dallas Fed President Robert Kaplan will speak to the Commonwealth Club of California in San Francisco. Audience and media Q&A are expected.
Source: Deutsche Bank, Goldman, BofA
Mon, 10/07/2019 – 09:22