Among few important economic data the last week
was mostly about Deutsche bank, its ability to pay the US fine and the OPEC
meeting where members finally agreed on production cut. Next week we have PMIs (UK, US) and RBA rate
decision but the most watched data will be the US Employment report including Non-Farm
payrolls.
Previous week
European business sentiment seems to be improving as the German Ifo Business Confidence unexpectedly spiked 3.2 pts above forecasted 106.3 points on Monday. The economic activity in the Eurozone will likely expand at moderate pace in the coming months, however, there is a number of risk factors that can offset the medium term positive view.
The US consumer confidence showed a similar pattern when it jumped above the hundred points level where it was last time a year ago. The US final GDP grew a little faster (at 1.4% vs 1.1%) than initially expected, but still well below the last years growth. One component of the GDP, residential investments are slowing and the decline in housing activity is expected to continue in Q3. If you look at the housing data released in September (overview below), the picture is far from optimistic. On the other hand according to NAHB, the construction companies see an increased interest from prospective buyers supported by still low interest rates.
The last
topic from previous week is oil and the OPEC
meeting in Algeria. The members of the cartel managed to surprise the markets
by announcing an agreement to cut production, but… the planned cut 740,000 barrels/day is yet mainly the
only detail we have and Iran, Niger and Lybia’s will enjoy an exception. Their rising production can largely compensate the cut. Other challenges are the US shale production which
is getting more and more efficient and production recovery
after the fights eased in the African countries. The shares of each member
state on the production cut has to be still agreed on the November meeting and
it’s important that other large producers outside the cartel, like Russia will follow the decision to cut the output. Conclusion, modest positive outlook but nothing
decided yet so be cautious in bets until the November meeting.
Next week
Monday
We focus on
the UK manufacturing PMI which
surprisingly spiked last month which could be a result of the weak pound which
will help the country big time in the coming months if there is no significant
change. Later the day the US
manufacturing PMI can give us a little colour if the last surprise dip
below 50 pts was a one-time event or the US manufacturing sector still feel the
pain from the strong dollar and low commodity prices.
Tuesday
We start
the day with Australian Building
approvals but the main event is the RBA
rate decision (last rate cut was in august). The first monetary policy
meeting under Philip Lowe governance will most likely not result in a rate cut
as the recent comments from central bank officials had mainly neutral tone. Country’s
main problem is the sub 2% inflation and large Current account deficit but the
economy is rising and a solid 3.3% pace with unemployment at 5.6%. In the first
half of the European session the UK
Construction PMI is expected to hold close to the 49 pts level. Later the
day the GDT diary price index is
expected to be released from New Zealand which increased in the last 4 releases.
For CAD and NOK traders the API weekly
oil stocks are worth to watch. The Oil stocks keep declining which goes
against the seasonal expectations and a surprise increase may put some pressure
on the Crude and oil currencies as well.
Wednesday
In the
first half of Tokyo session we have the Aussie
retail sales and later on RBA Kent
is due to speak and maybe give some insights on the background of the rate
decision. The UK Services PMI In the
afternoon follow the ISM services PMI
from the US which declined last month but didn’t sink below the 50 pts level.
The EIA Crude inventories will be
also closely watched as they keep declining for the 4th week despite
the analysts expect seasonal rise each time...
Thursday
The Trade balance of Australia will be the first data of the day. As I mentioned
earlier the international trade is one of the main problems of the economy and
Australia needs weaker currency to boost exports. The last time the country had
positive trade balance was in May 2014 and a there is no surplus in sight
anytime soon if the AUD would strengthen. The Canadian building permits will be released with the US Initial jobless claims, the latter is close to historical
lows and is expected to stay close to recent levels as US economy is close to
maximum employment.
Friday
Since the
Brexit vote Manufacturing production
in UK is on decline and the question
is whether we can see in the next august figures the positive effect of the
weak pound. The data of the day will be however the US Employment situation report. No major changes are expected and
close to full employment economist don’t expect the Non-farm payrolls won’t be higher than 171-176 as well the Unemployment rate should hold at 4.9%.
The number worth to watch could be the Labour
force participation rate, which is still below long term average 63%
however a change in the declining trend seems to have started a year ago when
the participation rate bounced from 62.4 which was the lowest level since the
seventieth. Another interesting part of the data will be the change of the Average hourly earnings, which could be
a leading indicator of inflation. The more money in the pocket, the more could
be spent...
Remember to
watch your risk and be consistent
Mr. TechMan
DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading team’s view of the past and current economic and capital market environment. It is not an investment advice and should not be viewed that way at all, and the creators of this material cannot be held liable for any potential losses resulting from trading, where despite this disclaimer someone would consider this material as an investment advice. All rights reserved ©2016. Contact: landoftradingATgmailDOTcom
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