Macroeconomics: The Day Ahead for 27 September

  • Much busier day for data, US headlines with Consumer Confidence, Durable Goods Orders House Prices, New Home Sales; Eurozone M3, Brazil IPCA-15 inflation; further raft of central bank speakers, rate hikes in Hungary & Nigeria; UK 11-yr I-L, German & US 5-yr
  • UK: BoE and Treasury statements may only be temporary reprieve, with long wait for detailed Mini-Budget impact assessment; fat risk premium may be more of a help for GBP and UK assets
  • US Durable Goods Orders: aircraft to weigh modestly on headline, core measures to eke out small gain, CapEx intentions survey hint at downside risks
  • US Consumer Confidence: more modest further rebound seen on gasoline prices, strong labour markets; jump in mortgage rates may offset
  • US House Prices seen stalling, New Home Sales expected to fall for 7th month in 8

EVENTS PREVIEW

The day’s schedule of data and events is again busy, but markets are very much self-absorbed in their own price dynamics after the turmoil over the past week, perhaps all the more so with quarter end in view. Statistically there are China’s Industrial Profits and Japan’s Services PPI to digest ahead of Eurozone M3 and Private Sector Credit, Brazil IPCA-15 Inflation, but it will be run of US data that grabs most attention, with Durable Goods Orders, both House Price measures, New Home Sales and perhaps above all Consumer Confidence. There is another deluge of central bank speakers, with rate hikes expected in Nigeria (50 bps) and Hungary (100 bps), and with the world potentially facing a serious food supply problem in 2023, the G20 Agricultural Ministers meeting requires plenty of attention.

** U.K. – Treasury & BoE statements **

As we noted yesterday, market speculation about an emergency rate hike was rife, though it would have been unwise for the BoE to get into a spiral of bear baiting with markets. But with yields sky rocketing again, after Kwarteng made the rather amateurish error of talking about further tax cuts on Sunday, something needed to be said by the Treasury & BoE, and it would have been a much stronger message had it been a joint one, than two separate statements. While it may in the very short-term serve to stop some of the ‘rot’, the fact that the BoE will not offer its assessment until the November MPC meeting, and the OBR assessment will not be available until the official budget on November 23 does beg the question of how long nay ‘market ceasefire’ will hold. As can be seen in the attached charts of the UK 5, 10 & 30-yr spreads vs. US  Treasuries, something in the region of 65-85 bps risk premium has been added to the UK Gilt curve as a result of the “mini-budget”, which bodes very poorly for UK public sector financing costs. In addition the spike higher in 5-yr Gilt yields leaves banks having to re-price the whole gamut of their mortgage products, and per se is likely to more than offset any benefits from the stamp duty cut.

** U.S.A. – Consumer Confidence, Durable Goods Orders, House Prices & New Home Sales **

Mirroring the still much more depressed Michigan Sentiment, Consumer Confidence is expected to pick up further to 104.5 from August’s sharp rebound to 103.2 from July’s low of 95.3, with falling gasoline prices continuing to provide a boost, along with a tight labour market. However rising mortgage and loan rates and a weak housing market may provide some offset, especially with inflation continuing to be sticky. Ahead of that, a drop in aircraft orders is expected to see headline Durable Goods Orders post another very small -0.2% drop, but core measures are seen edging up fractionally, though the weakness of CapEx intentions in regional Fed manufacturing surveys imparts some downside risks. July FHFA House Prices are seen unchanged m/m, confirming the stall signalled by the June reading of 0.1% m/m that brought an end to a run of increases of 1.0% m/m plus every month over 24 months. Affordability is clearly starting to weigh very heavily, and this is also expected to weigh on New Home Sales that are seen down 2.2% m/m after falling 12.6% and 7.1% m/m in the prior 2 months, and only having posted one m/m increase this year.

To view the full report and to sign up for daily market commentary please email admisi@admisi.com

The information within this publication has been compiled for general purposes only. Although every attempt has been made to ensure the accuracy of the information, ADM Investor Services International Limited (ADMISI) assumes no responsibility for any errors or omissions and will not update it. The views in this publication reflect solely those of the authors and not necessarily those of ADMISI or its affiliated institutions. This publication and information herein should not be considered investment advice nor an offer to sell or an invitation to invest in any products mentioned by ADMISI.

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.

© 2022 ADM Investor Services International Limited.

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.

Futures and options trading involve significant risk of loss and may not be suitable for everyone.  Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM.  The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.

Latest News & Market Commentary

Explore the latest edition of The Ghost in the Machine

Explore Now