Macroeconomics: The Day Ahead – 26 August 2020

Good Morning: The Long & the Short of it and The Bigger Picture

Written by Marc Ostwald, ADMISI’s Global Strategist & Chief Economist

• Busier day for data and events, but US Durables the only like market mover; digesting Australia Construction Output, Singapore & Thai Production, France Consumer Confidence; also awaiting South Africa CPI & Hong Kong Trade;  Schnabel, Wilkins and Haldane to speak; UK, Germany & US to sell debt
• US Durables: surveys and weekly hours point to further auto led recovery, overall picture very uneven across sectors; CapEx proxy seen almost back at pre-pandemic levels

EVENTS PREVIEW

Today’s schedule is busy both in terms of data, events and debt auctions, and yet it is probably only US Durable Goods Orders that will have anything but a passing impact, and obviously follows yesterday’s unexpected 6-yr low in Consumer Confidence, which temporarily unseated a rather spurious whoop for joy about the ‘news’ that US and China have not abandoned the ‘phase one’ trade deal, and ongoing vaccine hopes. Todays data run also has Australia’s Q2 Construction Output (much better than forecast), Singapore Industrial Production & French Consumer Confidence to digest ahead of South African CPI, Hong Kong Trade & Mexico’s June & revised Q2 GDP. ECB’s Schnabel and BoC’s Wilkins are among the most thoughtful of G7 central bankers, and their speeches potentially market moving, while BoE’s Haldane may not touch much on monetary policy given that he is speaking at an Edinburgh Festival events. Aside from a deluge of Chinese municipal bond issuance, Italy will sell 2-yr Zeros, the UK 10-yr, and the US offers $50 Bln of 5-yr and 21 Bln of 2-yr FRN.

** U.S.A. – July Durable Goods Orders **

– Manufacturing surveys suggest a continued rebound in orders, with the auto sector still leading the way, and offsetting continued non-defence aircraft weakness, though the latter will likely be more than ironed out by a very favourable seasonal adjustment, with a 4.5% m/m gain seen in headline. Orders ex-transport are seen slowing to 1.9% m/m after bouncing 3.3% and 3.6% m/m in prior months, though the risks would appear to be to the upside of the consensus, above all given the solid rise in manufacturing hours, even if the picture across sectors is very uneven. Non-defence Cap Goods ex-Aircraft, the so-called CapEx proxy are forecast to post a further 1.8% m/m after a rise of 3.3% in June, which would bring them very close to pre-pandemic levels.

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