Macroeconomics: The Day Ahead for 15 October

The day’s schedule is dominated by the US, with Retail Sales topping a busy run of data, more corporate earnings and a number of Fed speakers, elsewhere the schedule is very thin amounting to little more digesting EU Auto Sales and awaiting EU Trade and Brazil’s monthly GDP. The fickleness of market sentiment was more than amply demonstrated yesterday, as the FOMO and TINA reaction function conditioned by long-term central bank financial repression reasserted itself, on the back of a few better than expected earnings reports, weaker than expected US core PPI, falling jobless claims, the Fed minutes proposal of a relatively slow taper ($15 Bln/mth), and good demand at most of this week’s Treasury auctions and downward revisions to German GDP forecasts helping to break the seemingly relentless recent rise in yields. Be that as it may, the heightened level of volatility is likely to remain a feature, given that the overarching themes of China’s regulatory interventions, the widening property crisis and the power crises in China, India and Europe along with the array of supply chain disruptions remain very much ‘live’ considerations.

Next week’s schedule gets under way with China’s Q3 GDP and array of monthly activity indicators, the US has Industrial Production, a raft of housing data, Philly Fed Manufacturing and the Fed’s Beige Book, while the UK looks to CPI and PPI, PSNB and ONS House Prices, with G7 flash PMIs rounding off the week. The US Q3 corporate earnings season steps up a gear, while the EM space has rate decisions in Indonesia (unch), Russia (+25 bps) and Turkey, with the assumption on the latter being that Erdogan’s latest firings and appointments will induce a further rate cut.

** U.S.A. – Sep Retail Sales, Import Prices / Oct Michigan Sentiment  **  While a further sharp fall in Auto Sales predicates expectations of -0.2% m/m for headline Retail Sales, core ex-Autos and Gas is seen rising 0.5% m/m following the unexpectedly strong 2.0% m/m rebound in August, but US Retail Sales are value not a volume based measure, as such the inflation adjusted readings may in fact be flat or even negative across the board, implying a weak quarter for the Private Consumption component measure of GDP. Following on from the CPI and PPI reports, which remains overall very high, even if core PPI was considerably lower than expected, Import Prices round off this week’s run of inflation report, and are forecast to show a headline rise of 0.6% m/m to push the y/y rate up to 9.4%, but a more rise of 0.2% m/m ex-Petroleum. Last but least Michigan Sentiment is seen edging up to 73.1 from 72.8 and August’s cyclical low of 70.3, with the focus likely to be on the Inflation Expectations component, with 1-yr Expectations seen edging up to 4.7% from 4.6%, matching July’s cyclical and 13-yr high (see chart).