Macroeconomics: The Day Ahead – 16 October 2020
Good Morning: The Long & the Short of it and The Bigger Picture
Written by Marc Ostwald, ADMISI’s Global Strategist & Chief Economist
- Busy day for US data – Retail Sales, Production & Michigan, as Singapore Exports and Korea Unemployment digested; EU Summit, UK Brexit negotiations decisions and gaggle of central bank speakers; pandemic related news still front and centre; monthly equity options expiry
- US Retail Sales: autos to boost headline, seasonal adjustment for unwind of Aug ‘back to school’ could boost core measures
- US Industrial Production: further solid auto led gain expected, utilities to drag’ mining, extraction likely to boost
- US Michigan Sentiment: expected to hold 6-mth high; lack of fiscal stimulus package, rise in infection rate, scrappy Presidential debate may weigh
There is a busy run of statistics to end the week, above all from the US with Retail Sales, Industrial Production and preliminary Michigan Sentiment, while elsewhere there are Singapore’s Exports (much weaker than forecast), South Korean Unemployment (rising even more sharply than forecast) and EU27 Auto Sales to digest. Central bank speakers (Fed, BoJ, BOE & ECB) are again plentiful, but it will be the EU Summit which attracts most attention, both in terms of co-ordinated measures to stem the second wave of Covid-19 infections, implementing the recovery fund, dealing with tensions in the Mediterranean and flash points in Eastern Europe and the Caucasus, and if there is anything more than the commitment to carry on negotiating with the UK for a further 2 weeks on a trade and security deal, with UK PM Johnson also set to decide on whether to keep negotiating, or according to UK media reports deliver a ‘no-deal ultimatum’. The US corporate earnings again features financials (Ally Financial, BoNY Mellon, State Street) and also has results from Kansas City Southern and Schlumberger. Eminently all of this will continue to be subordinated to any pandemic developments (infection rates, lockdown measures, vaccines/treatments, fiscal stimulus), as has been evident for some time. It is also monthly equity options expiry, generally far less significant than the quarterly event, but the recent volatility jump and the currently very high ratio of options/cash trading volumes may prompt some erratic trade as a consequence. In passing, it is well worth noting that the Fed’s most dovish member Kashkari yesterday emphasized that more fiscal stimulus is needed, and more significantly does not view additional Fed QE as offering any help given current economic needs.
Next week’s schedule sees a mixed bag of data in significance terms, with China’s Q3 GDP and run of monthly activity indicators topping the bill, the US has the Fed’s Beige Book and various housing indicators, the UK looks to inflation and budget data, Japan has Trade, the Eurozone has surveys, while Canada awaits CPI and Retail Sales. The final US presidential TV debate is accompanied by numerous central bank speakers, while the US Q3 earnings season cranks into full gear.
U.S.A. – Sep Retail Sales / Industrial Production
– Auto Sales are again likely to lead an expected 0.8% m/m headline rise in US Retail Sales, though ex-Autos measures seen at a more subdued 0.4% m/m pace, with the absence of a new fiscal aid package continuing to restrain spending, though favourable seasonal adjustment could help to flatter the outturn (unadjusted sales tend to fall sharply in September after the August ‘back to school’ boost, which was very muted this year). Industrial Production and Manufacturing Output are both seen up 0.6% m/m, (prior 0.4% & 1.0%) and continue to see a patchy picture, with continued strength seen in Autos, while catch up due to previous storm disruptions set to give mining output a boost, and refining likely to be robust if yesterday’s very strong Philly Fed survey is anything to go by, but utilities output set to drop as temperatures reverted to typical seasonal levels, though the strength. As for preliminary Michigan Sentiment, this is expected to be little changed at 80.5, thus sustaining September’s 6-mth high of 80.4, but a distance from March’s 89.1; the risks look to be to the downside: lack of a fiscal package to support jobs/pay, the shambolic presidential debate and a renewed rise in infection rates.
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