1 / WITHOUT SURPRISES?
Is this year’s strong recovery in US growth losing momentum? A plethora of economic data pending in the world’s largest economy will provide clues.
The U.S. non-farm payrolls on Aug. 6 will provide a snapshot of July hiring. Economists polled by Reuters predict the economy created 926,000 jobs in July after surpassing 850,000 in June’s June forecast. The ISM Production Report and Purchasing Managers’ Index (PMI) surveys are published prior to payroll.
The strength of US economic data has, at least in part, fueled equity market gains. However, data that outperforms forecasts may become the exception rather than the rule.
Take a look at Citi’s US Economic Surprise Index, which measures how far the data is beating or falling short of economists’ projections. It stands at 3.2 – far from the record high of July 2020 of 271.
-WRAPUP 4 US economy returns to pre-pandemic levels; Labor market healing
Graphics: No surprise there: https://fingfx.thomsonreuters.com/gfx/mkt/gkvlgmblzpb/Pasted%20image%201627493171070.png
2 / CHINA CRACKDOWN
Regulatory raids have deterred investors from buying Chinese stocks. With the leash tightening for tech titans, the aggressive moves could well signal the end of the “barbaric growth” of internet companies.
Authorities have rushed to calm market nerves with reassuring editorials and promise to calm things down in the future. That is a floor under stocks and the yuan.
What investors want to see now is how serious the slowdown in Chinese economic growth really is. If PMI polls suggest that manufacturing growth is slowing and services are flattening in the coming week, this could be the next test for the markets.
-FACTBOX-From Education to Bitcoin, China’s regulatory crackdown season
Graphics: BATs vs. FAANGs: https://fingfx.thomsonreuters.com/gfx/mkt/egvbknonxpq/Pasted%20image%201627380472497.png
3 / STERLING GROWTH
The Bank of England will keep its stimulus programs in full swing at its Thursday meeting, despite some disagreement within its board of directors over the scope of its bond-buying program in the face of rising inflation and improving economic growth.
Thanks to a swift rollout of COVID-19 vaccination and an economy that adapts well to lockdown and reopening, the International Monetary Fund expects UK growth to hit a stellar 7% in 2021.
Things are rosier than a few months ago, and sterling has rallied as the UK reopening remains on track.
What should you watch out for at the BOE meeting? Your view on the economy, of course, but after two policymakers recently broke out of their ranks to propose an early end to their nearly £ 900 billion ($ 1.2 trillion) bond purchase program, it will be interesting to judge whether this view finds more support.
-BoE will maintain the stimulus at full speed despite the split over inflation risk
-IWF raises UK growth forecast for 2021, cautious about the longer term
Graphic: FX and vaccinations: https://fingfx.thomsonreuters.com/gfx/mkt/egvbknlnkpq/Pasted%20image%201627557471648.png
4 / EUROPE’S INFLATION FRONTLINE
Each reporting season has a unique flavor and, unlike the last few quarters, this one isn’t about lockdowns or tax cuts, but rather inflation and how companies deal with it.
Europe’s consumer goods sector is at the forefront of concerns about how raw material, shipping and labor costs could affect margins. Inflation mentions rose more than 400% yoy during Q2 earnings calls for STOXX 600 companies, according to analysts at BofA. Commodity, financial and consumer goods companies were the most prominent.
Many like Unilever, Reckitt or Nestle have complained about feeling the pinch. Other inflation-sensitive heavyweights could follow suit in the coming week, as reported by Nivea manufacturer Beiersdorf, fashion retailer Zalando and automotive supplier Continental.
A huge week for banks too, with HSBC, Societe Generale, Standard Chartered, Commerzbank, Intesa Sanpaolo and Credit Agricole, all of whom will report.
-UPDATE 4 Inflation worries overshadow Unilever’s strong first half and hit stocks hit
Graphic: Inflation when viewing profits: https://fingfx.thomsonreuters.com/gfx/mkt/zdpxoyqljvx/inflation%20and%20inflation.JPG
5 / ETHER WAKES UP After piggybacking on the booming Bitcoin, which hit a record of nearly $ 4,400 in May, the second largest cryptocurrency ether fell to the earth in one fell swoop, collapsing almost in half.
Now Ether faces a change in its underlying protocol, which may reduce its offering. The shift, known as EIP-1559 and due Thursday, aims to stabilize the fees paid by users of the Ethereum network. In the short term, this could support prices – and also use the token more easily in mainstream financing. But maybe the move was already priced in during the stellar rally of Ether earlier this year? Crypto fans might want to see this room.
-Other crypto outflows last week, third outflow in a row for Bitcoin -CoinShares
Graphic: Ethereum upgrade: https://fingfx.thomsonreuters.com/gfx/mkt/akpezgnalvr/Ethereum%20upgrade.PNG
(Reporting by Tom Westbrook in Singapore, Julien Ponthus, Tommy Wilkes and Tom Wilson in London, Ira Iosebashvili in New York; graphics by Gertrude Chavez and Saqib Ahmed, compiled by Karin Strohecker, editing by Catherine Evans)