Macroeconomics: The Day Ahead – 14 October 2020
Good Morning: The Long & the Short of it and The Bigger Picture
Written by Marc Ostwald, ADMISI’s Global Strategist & Chief Economist
- Digesting Singapore Q3 GDP, expected no change from BoK and MAS, awaiting US PPI, more US financials dominated earnings, deluge of central bank speakers; UK, Germany and Portugal to sell debt
- Tuesday price action underlines markets unrealistic Panglossian obsession with Covid-19 vaccine
- US PPI: modest monthly rise seen across all measures, Trade Services once again the ‘wild card’, ISM prices index hints at upside risks
The day’s statistical schedule is very light, with Singapore Q3 advance GDP (slightly stronger than forecast) to digest ahead of US PPI. By contrast there will be a deluge of Fed, ECB and BoE speakers, though most of have spoken recently, as the IMF/World Bank annual meetings continue with their respective press conferences, as the Bank of Korea and MAS kept policy settings unchanged. Financials again dominate the US earnings run, with Bank of America, Goldman Sachs and Wells Fargo headlining, with Alcoa also reporting; while govt bond issuance sees UK selling 9-yr, Germany 30 yr, Portugal 8 & 17-yr and Canada 4-yr. Yesterday’s trading action was instructive, in so far as the much better than expected US NFIB Small Business Optimism, ‘big beats’ in results from Citi and JPM (details were less encouraging) and as expected CPI prove to be roadkill in the face of the suspension of the J&J and later the Eli Lilly Covid-19 vaccine trials. It does suggest that political risk (with Brexit news above all in focus today ahead of the EU summit tomorrow), fiscal and monetary policy, let alone incoming economic data are all subordinated to the apparent holy grail of a vaccine. This is symptomatic of Panglossian thinking which ignores lengthy timelines for mass vaccination production and distribution, let alone the point that such suspensions were always very likely to occur as part of the trials process; for example, there is as yet no reliably effective vaccine for SARS. Hope is always good, but in times of adversity confronting and dealing with reality in a very pragmatic way is of greater importance. That said, it may simply be that the biggest hurdle is the fact that overall Q3 S&P500 earnings estimates have been revised steadily higher since the end of Q2, leaving less scope for a positive reaction, and perhaps more scope for ‘sell the fact’ trades.
U.S.A. – September PPI
Yesterday’s CPI was something of a non-event, even if the divergences in food and services prices highlight the impact of the pandemic, both via bottlenecks and on the other hand sharp drops in demand. Today’s PPI is also likely to be little more than a footnote for markets, above all if in line with an across the board consensus for a rise of 0.2% m/m, with the summer pressure on energy prices having flattened out, also true of food prices. That again leaves the very volatile Trade Services component as having most potential for an ‘outlier’, after two months of strong readings (1.2% and 0.8% m/m), with strength in ISM Manufacturing Input Prices sub-index (62.8) implying continued strength.
To view the full report and to sign up for daily market commentary please email firstname.lastname@example.org
The information within this publication has been compiled for general purposes only. Although every attempt has been made to ensure the accuracy of the information, ADM Investor Services International Limited (ADMISI) assumes no responsibility for any errors or omissions and will not update it. The views in this publication reflect solely those of the authors and not necessarily those of ADMISI or its affiliated institutions. This publication and information herein should not be considered investment advice nor an offer to sell or an invitation to invest in any products mentioned by ADMISI.
© 2020 ADM Investor Services International Limited.
Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
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.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.