Macroeconomics: The Day Ahead for 24 August

  • Ukraine Independence Day, US Durable Goods Orders and Pending Home Sales accompany inflation data from Brazil, Mexico and South Africa, digesting Fed’s Kashkari, awaiting Riksbank’s Floden, US & German 5-yr; EIA Oil inventories
  • US Durable Goods: defence likely to boost headline again; core measures set to echo slowing surveys order indices
  • US Pending Home Sales – further sharp fall expected: New Home Sales collapse and persistent fall in MBA Mortgage Applications skew risks to downside

EVENTS PREVIEW

Today marks the 6 month anniversary of Russia’s invasion of Ukraine, as well as being Ukraine’s Independence Day, which will see no celebrations, above all out of an all too palpable and understandable fear of Russian attacks and atrocities. While there are is a goodly volume of economic data – US Durable Goods Orders and Pending Home Sales, along with South African, Mexican and Brazilian inflation data – this may struggle to impinge much on markets focussed on Europe and China’s power and drought crises, and awaiting Powell’s Jackson Hole Symposium speech. On the central bank front, Kashkari’s comments overnight echoed prior comments, and a hawkish tilt from Riksbank’s Floden seems inevitable, while Iceland’s Seldabanki may well hike rates a further 100 bps (to 5.75%). Ping An Insurance, Nvidia, Salesforce.com and Royal Bank of Canada look to be the standouts in terms of the corporate earnings schedule, while Germany and the US sell 5-yr, and the US also offers 2-yr FRN. The energy crises in Europe and China will also continue to be a key overarching theme, with yesterday’s spike in TTF Gas and Base Powerload prices driven by last year’s “favourite”, low wind power, to add insult to the injury of droughts and scarce Russian gas supplies.

** U.S.A. – July Durable Goods, Pending Home Sales **

Durable Goods Orders are expected to post a solid headline gain of 0.8% m/m, on defence related demand, but core measures are at best expected to eke out small gains (Ex-Transport 0.2%, Non-defence Capital Goods 0.3%), echoing the downturn in manufacturing surveys’ orders metrics. Going forward there should be some additional support for machinery given the pressure to automate and digitalize due to labour skills shortages. Pending Home Sales are seen falling again (-2.5% m/m vs. June’s precipitous -8.6%, echoing the persistent downtrend in MBA Mortgage Applications and yesterday’s extended plunge in New Home Sales, as well as the general housing sector headwinds due to affordability, and higher mortgage rates – see also chart of New Home inventories. While US PMIs are seen as the poor uncle in economic signal terms relative to the ISM surveys, it has to be observed that yesterday’s US composite PMI was weaker than UK, Eurozone, French and German ones (none of which were vaguely good) – see chart. As previously noted the skew in market expectations for Powell’s speech to be hawkish now looks to be a setup for a sharp reversal, above all in STIRs futures, which as the attached June 2023 Euro$ futures chart highlight is doing a very good impression of Lizzie Borden’s axe.

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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.

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