The final week of the month can sometimes have a feel of tying up loose ends, however, there is still a busy week on the economic calendar. Furthermore, there are some crucial inflation releases for the US and Eurozone for traders to keep an eye on. Elsewhere PMIs will also be a driver of sentiment.
- US – Durable Goods, Consumer Confidence, Pending Home Sales, final GDP, ISM Manufacturing and Core PCE,
- Europe & Asia – China official PMIs, UK final GDP, Japan’s Tankan survey, and final Manufacturing PMIs
- LatAm – Unemployment for Chile, Brazil and Colombia, and Colombian interest rates
- US Durable Goods Orders (Monday 27th September 1230GMT) +0.6% exp.
- US Consumer Confidence (Tuesday 28th September 1400GMT) improving to 114.5 (from 113.8 in August)
- US Pending Home Sales (Wednesday 29th September 1400GMT)
- US GDP – Q2 Final (Thursday 30th September 1230GMT) unrevised +6.6% (from +6.6% Q2 Prelim, Q1 was +6.3%)
- US Core PCE inflation (Friday 1st October 1230GMT)
- US ISM Manufacturing (Friday 1st October 1400GMT) unchanged at 59.9 expected
- Michigan Sentiment - revised (Friday 1st October 1400GMT) unrevised from the 71.0 prelim (70.3 final August)
Both US confidence indicators are released this week and are expected to reflect a mild improvement in August. The Conference Board’s Consumer Confidence is expected to pick up to 114.5, whilst the final reading of Michigan Sentiment is expected to be unrevised at its preliminary mild improvement of 71.0.
The third and final reading of Q2 GDP growth is expected to be unrevised at +6.6% so is unlikely to make much of an impact. Subsequently, any surprise, either way, would be worth watching. The Fed’s preferred inflation gauge, the Core Personal Consumption Expenditure will take interest though. Inflation has shown signs of peaking in recent months (core CPI has fallen for two months in a row now) and if confirmed with a similar move on the Core PCE this could weigh USD lower.
- USD will be reactive to any surprises in final GDP.
- Core PCE will be watched too for confirmation of inflation rolling over. This would weigh down bond yields and USD. It would also be positive for equities.
- USD will also move on ISM Manufacturing, with any positive surprise (USD positive) or negative surprise (USD negative).
Europe & Asia:
- China PMIs – official (Thursday 30th September 0100GMT)
- UK GDP – final (Thursday 30th September 0700GMT) unchanged at +4.8%
- Japan Tankan survey (Thursday 30th September 2350GMT)
- Eurozone final Manufacturing PMI (Friday 1st October 0800GMT)
- UK final Manufacturing PMI (Friday 1st October 0830GMT)
- Eurozone flash HICP inflation (Friday 1st October 0900GMT) increases to +3.3% headline expected and +1.8% core.
Traders will spend the first part of the week working out the implications of the results in the German Federal election. The formation of a new coalition government will be tricky and markets may not be sure how to react. Subsequently, there could be some choppy moves as a result next week. The transition from the uber stability of Chancellor Merkel to a new government could take time.
In Asia, China’s official PMI data could mould sentiment on Wednesday, where PMIs are threatening to go into contraction territory as COVID remains an issue. Japan’s Tankan survey for Q3 is taken as a key lead indicator and is expected to show mild improvement for both manufacturing and non-manufacturing.
German inflation (often be seen as an indicator for Eurozone inflation) is expected to increase to 4.1% (from 3.9%). Higher inflation is also expected for flash Eurozone HICP inflation to continue to increase to 3.3% (from 3.0%) and Core HICP to 1.8% (from 1.6%). Inflation has been accelerating higher recently and has come in at or above forecast for the past five months. Although the ECB insists inflation is transitory, this continued increase adds weight to any hawks arguing for further reduction in the monthly PEPP purchases.
- EUR may react to newsflow surrounding the formation of the new German Government.
- Broad sentiment to be impacted by Chinese PMIs. If both move below 50 this would be negative for higher risk assets (AUD and NZD in forex)
- Focus back on EUR with the flash inflation numbers. Higher than forecast would support EUR.
- Chile unemployment (Thursday 30th September 1000GMT)
- Brazil unemployment (Thursday 30th September 1100GMT)
- Colombia unemployment (Thursday 30th September 1500GMT)
- Colombia interest rates (Thursday 30th September 1900GMT)
- Brazil Manufacturing PMI (Friday 1st October 1700GMT)
Unemployment is a major theme in LatAm markets this week, with data for Chile, Brazil and Colombia. Falling trends have formed for Chile and Brazil in recent months and any deviation from this will be disappointing. Colombia has just started to show signs of improvement but unemployment remains worryingly high over 14%, so this needs to show signs of reasonable improvement lower.
Colombian interest rates will also be in focus after the Central Bank (BanRep) held rates at 1.75% last month. However, in July’s meeting, there were two dissenting voters (out of seven board members) citing concerns over rising inflation. As inflation continues to accelerate higher, this opens the door for more dissenters to join the clamour for higher rates.
- CLP and BRL to move on unemployment data, but markets should only react with increased volatility on any upside surprises.
- COP may be choppy on unemployment data but also increased volatility around the central bank decision which could go either way.