A moderately quiet week ahead for the global markets as far as economic events are concerned. The emphasis for the undoubtedly remain focused upon the timeline for Fed tapering, a resurgent eurozone, the Chinese slowdown and indecision as to the validity of BoE forward guidance.
In the UK, much of the focus will be upon the second GDP estimate for Q2 which has the potential to shock markets should we see a chance from the preliminary 0.6% figure. The US plays host to the Jackson Hole Symposium towards the end of the week, which provides the stage for potential Fed governors to stake their claim in the absence of many key central bankers. Meanwhile, in the eurozone, the release of prominent PMI figures for the French, German and eurozone economies. Markets will be watching closely to see if the recent positive sentiment brought about by recent GDP figures feeds through to another positive week for the eurozone.
In Asia, the Chinese HSBC flash manufacturing PMI figure is seeking to reverse some of the losses seen over the past three releases. Meanwhile, the Japanese markets will be geared solely towards the trade balance figure on Monday. Finally, the Australian focus will be on Tuesday, with the release of minutes from the monetary policy meeting back on 6 August.
[B]UK[/B]
A very quiet week in terms of economic releases in the UK, where the only release of note comes in the form of the second estimate GDP release on Friday. The preliminary figure is typically the most volatile GDP release, and thus there is lessened expectations for this week. That being said, the NIESR Q2 GDP figure pointed to a potential 0.7% rise, which is above the 0.6% preliminary number provided in early August. Subsequently, with markets expecting no change, an adjustment would likely catch people by surprise and spark volatility.
[B]US[/B]
A somewhat busier week for the US, with the major event coming in the form of the Jackson Hole symposium, FOMC minutes and home sales figures. The week begins in earnest on Wednesday, with the existing home sales figure, which is expected to show further improvements for the crucial housing sector. Market expectation is for a rise from 5.08 million to 5.15 million, which would represent a reversal after a reduction last time around. The importance of the existing figure is that this represents the majority of the total home sales data and thus is the leading indicator of housing market strength. On the whole, this release has tended to disappoint with four out of the last five figures coming in below estimates and thus the bias continues to be downward.
Also on Wednesday, the minutes from the last FOMC meeting are released. The talk of tapering within the markets have reached a crescendo over recent weeks, with speculation pointing to a potential reduction in the rate of asset purchases occurring in September. This is by no way guaranteed and thus these minutes are likely to be poured over for any indication of a timescale. Other points to look out for are hints as to the amount and type of purchases which are going to be affected.
Such tapering is expected to be largely effected by the ongoing employment data out of the US. However, given the lack of remaining rate and non-farm payroll figures until the September decision, the weekly unemployment claims figure will play a more prominent role. This week we are expecting a marginal rise from 320k to 322k, which would likely bring little in terms of response. However, be aware than any large movement away from this estimate could bring market volatility.
Finally, the week is rounded off by the annual Jackson Hole symposium, due to be held on Thursday and Friday. This is a meeting where central bankers, finance ministers, academics and alike can hold discussions away from the press. Given the 2010 speech from Ben Bernanke provided strong hints to QE2, markets will be paying close attention to any announcements this year. That being said, the notable lack of high caliber central bankers (no Mario Draghi nor Mark Carney) brings about a more domestic feel. Thus many will be looking out for speeches from the likes of Janet Yellen, whose bid to become Fed chair has been the centre of debate over the recent months.
[B]Eurozone[/B]
A particularly strong period for the eurozone recently comes back into question this week, with the release of crucial PMI figures for France and Germany, along with the region as a whole. Of those, it is the German manufacturing PMI reading which hold the most importance given the size of German industrial exports and the value that adds to the eurozone as a whole. This figure is expected to push further into expansion, from 50.7 to 51.1. Meanwhile, the other notable single release is the French manufacturing PMI, which is predicted to move out of contraction and into expansion, with a shift from 49.7 to 50.4. Overall, it is worth noting both releases in particular, but it is the overall movement of the full six figures which are likely to move the wider market. An out-performance across the majority of surveys will bring a notably positive tone for the prospects of the region and that is what I expect to occur given recent strength within the single currency.
[B]Asia & Oceania[/B]
The major event of the week from a Asian perspective comes in the form of the Chinese HSBC flash manufacturing PMI figure for August. The importance of this figure is derived from the clear unreliability of Chinese data, with manipulation seemingly rife and difficult to quantify. Subsequently, the HSBC figures have tended to provide a more objective reading into the strength of the economy and in particular the key manufacturing sector. It is worth noting that the sizable spread between the HSBC and official manufacturing PMI readings are partly associated with the larger weighting given to small or medium sized firms in the HSBC measure. Nevertheless, this release is highly significant and the ability to reverse the recent decline would be an important step in convincing the world that the recent slowdown is coming to an end. Market expectation is for a rise from 47.7. to 48.3, which if attained would be notable. Overall the markets will be looking to at least see this figure moving in the right direction after a disappointing last month.
The Japanese week is likely to be fairly quiet, with the trade balance representing the only notable release. The importance of this figure will be whether the exports show significant strength given the relative weakness of the yen in 2013. The imposition of a sales tax has been hotly discussed over recent months and thus increased signs of international competitiveness would provide extra leeway for such a tax. It is also worth noting that Bank of Japan governor Haruhiko Kuroda will be speaking at the Jackson Hole summit later in the week where analysts will be looking out for any potential change in direction in policy.
Finally, the Australian markets will be looking towards the release of crucial RBA monetary policy minutes on Tuesday. This comes off the back of a reduction in the headline interest rate from 2.75% to 2.5% at the 6 August meeting. Overall, the discussions of a 50 basis point cut will be what people are keeping an eye out for. The reduction of the Australian dollar is key for the RBA and given the muted effect within the fx markets from this recent decision, people are looking ahead to see if another reduction could be discussed for future meetings.
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