ON DECK FOR MONDAY, AUGUST 29
KEY POINTS:
- Markets extend Friday’s ECB and Fed drivers with a risk-off tone
- London shut for a bank holiday. Take late August trading with a grain of salt.
- A$ shakes off stronger retail sales
- ECB’s Lane to speak on inflation panel
- Fed’s Brainard unlikely to impact markets
- Global Week Ahead
As a reminder, please see the Global Week Ahead—Marching Forward, Looking Backward here and the accompanying slide deck for clients is here.
Key topics:
- No central banks!
- US nonfarm & wages to inform the Fed’s next move
- Eurozone CPI could reinforce recent ECB hawkishness
- Canada’s growth is softening
- PMIs: US, China
- Other global macro
Monday is bringing with it an extension of Friday’s market activity that was driven by Powell’s speech and ECB comments and rumours including contemplated of a 75bps hike at the September 8th ECB meeting. London is shut for a bank holiday and being late August take all market action with a bit of a grain of salt. Overnight calendars were very light and the same will hold true into the N.A. session.
EGB yields are mostly 11–14bps higher in 2s with 10s up by a little less and hence curves are flattening somewhat. US Treasury yields are up 4–8bps in 2s through 10s. Fed funds futures are pricing a rate peak of 3.75–4% until late next year when a 25bps cut is priced and OIS is pricing ~225bps of ECB hikes by next summer. The USD is broadly stronger but the euro is holding its own and backed by shifting ECB-speak. The yen continues to tumble from about 136.5 before Friday’s events and at 138.5 now. Stocks are broadly lower with S&P futures down by ~1%, TSX futures down by a little less and European cash markets off by around 1½% on average and with London shut.
Australian retail sales surprised higher but had at best a fleeting effect on the A$ and curve independent of broader forces. The value of sales increased by 1.3% m/m in July which was the largest gain since March. Some of that was no doubt due to higher prices which is reason to partly fade the estimates, but Australia only updates CPI quarterly.
ECB Chief Economist Lane speaks on a panel titled “high inflation and other challenges for monetary policy” along with two others at a Central Bank Research Association event in Barcelona (9amET).
Fed Vice Chair Brainard delivers pre-recorded remarks at a FedNow Service event and hence is likely to focus upon payments system issues (2:15pmET). US data only includes the Dallas Fed’s manufacturing activity report for August (10:30amET).
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