Written Commentary
ADM Appoints Monish Patolawala as EVP and CFO
July 10, 2024
- Israel/Gaza conflict still front and centre, China property woes too; digesting partial UK labour report, Singapore Exports and NZ CPI; awaiting US Retail Sales, Industrial Production, NAHB Housing survey; barrage of Fed, ECB and BoE speakers; financials top US earnings; Eurozone bond supply, EU meetings
- U.K.: modest easing in still very high wage pressures, and slight fall in Payrolls offer some comfort to BoE, but underline high for longer
- US Retail Sales seen propped up by auto sales and gasoline prices, but core spending measures likely tepid, as momentum slows going into Q4
- US Industrial Production seen unchanged as utility output reverts to ‘normal’ seasonal pattern, offsetting modestly positive manufacturing surveys
- US NAHB Housing Index expected to ease slightly further after steep September setback
EVENTS PREVIEW
The conflict between Israel and Hamas will continue to cast a long shadow, with the focus on US diplomatic efforts to stop a further escalation via way of visits from Blinken today and Biden tomorrow in focus, but China’s’ property woes also remain in focus as Country Garden’s entire offshore debt will be deemed to be in default if today’s coupon payment is not made. Otherwise, there are the much better than expected Singapore trade and weaker than expected Japanese services output (Tertiary Industry Index) along with UK labour data to digest, while a barrage of key US activity data, Retail Sales, Industrial Production, NY Fed Services and NAHB Housing surveys will be the key statistical feature ahead. In event terms, there are numerous ECB, Fed and BoE speakers, while the US Q3 corporate earnings run continues to feature financials, with Goldman Sachs, Bank of America and BoNY Mellon among the headliners along with Johnson & Johnson and United Airlines. A busier day for Eurozone govt bond auctions has German 2-yr, Dutch 20-yr and Finnish 5 & 10-yr on the auction block.
** U.K. – Aug/Sep Labour Market reports **
The partial labour report, due to ONS decision to delay the publication of the Labour Force Survey, offered some further comfort for the BoE, with headline Average Weekly Earnings falling a little more than expected to 8.1% y/y from 8.5%, with the ex-Bonus measure only edging lower to 7.8% y/y from 7.9% underlines that wage pressures remain close to record highs, even if the increase looks to be past its peak. Implicitly a further 11K fall in HMRC Payrolls, following a downwardly revised -8K in August also points to less pressure going forward. But along with a likely very small slip in tomorrow’s CPI, the path back to the BoE’s 2.0% target is likely to be rather protracted, and thus likely to reinforce the high for longer narrative.
** U.S.A. – Retail Sales, Industrial Production & NAHB Housing Market Index **
The focus in terms of Retail Sales will be very much on the core measures, given that headline sales will see a boost from the solid 4.2% m/m rise in Auto Sales and a rise of just over 2.0% in gasoline prices, which the consensus expects to result in a 0.3% m/m rise, but core measures are expected to be tepid, with the Control Group measure forecast to rise just 0.1% m/m, echoing a similar gain in August. Much may depend on the extent of any boost from back-to-school and Labour Day holiday spending, which the fall in credit card spending and indeed the Michigan Sentiment survey suggests will be weak, and highlighting that momentum has slowed sharply at the end of Q3 going into Q4. Industrial Production and Manufacturing Output are forecast to be unchanged on the month, with a drop in utilities output as temperatures reverted to normal offsetting a modest boost to manufacturing output implied by the ISM and other surveys. After a sharp setback in September, the NAHB Housing Market Index is seen dipping slightly further to 44 from 45, as the new cyclical high in mortgage rates in the early part of the month continue to weigh on sales and indeed buyer traffic.
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