It’s been a relatively quiet start to the week for Asian financial markets with little in the way of domestic economic news to shift the tone. After the S&P500 closed down just 0.1% on Friday, the main Asian equity indices have also seen limited moves. For example, having closed on Friday down less than 0.1% on the week, the Topix closed up just 0.1% as the yen eased back slightly to 107.4/$ having on Friday touched its strongest level in fourteen months close to 107.0. And China’s CSI300 and the Hang Seng are both currently up a similar amount with CNY little changed too.
In the bond market, JGBs were slightly weaker ahead of a 20Y auction tomorrow. But yields on USTs have eased back (e.g. 10Y yields are down a couple of bps to 2.04%, having late on Friday risen to their highest levels since the FOMC announcements). And so far this morning, yields on euro area govvies have done likewise (10Y Bund yields down 2bps to -0.305%).
Looking ahead, after last week’s strong signals of likely near-term easing from the Fed and ECB, attention shifts away from monetary policy, with the main event to be the Trump-XI bilateral penciled-in for the margins of the Osaka G20 summit at the back end of the week. Much of the week’s top-tier economic data come from mid-week on, including US May trade and durable goods (Wednesday) and personal spending and PCE deflator reports (Friday); the usual month-end deluge of Japanese figures (Friday); and the June flash estimate of inflation in the euro area (also Friday). A relatively quiet start to the week kicks off today with the German Ifo business survey for June and a couple of regional Fed activity surveys.
It was an uneventful start to the week for economic data from Japan with no notable new releases. And it will remain relatively over the next couple of days, with tomorrow’s release of the minutes from the April monetary policy meeting – when the key elements of the monetary policy framework were predictably left unchanged but made a few technical tweaks to enhance the sustainability of the current monetary policy stance – most notable.
Looking further ahead, on Thursday retail sales data for May are expected to show a rise on the month following weakness at the start of the quarter. And Friday brings the usual slew of month-end economic reports. IP is expected to have gone into retreat last month not least as production was impacted by the extended Golden Week holiday. The May labour market figures are expected to show the unemployment rate unchanged at 2.4% and the job-to-applicant ratio unchanged too and consistent with continued significant tightness. In addition, May housing start and construction orders, Tokyo CPI numbers for June, and the BoJ’s summary of opinions from last week’s Policy Board meeting are also due on Friday. In the JGB market, a 20Y auction will be held by the MoF tomorrow while a 2Y auction will be held on Thursday.
After last week’s further signalling from Mario Draghi that the ECB is readying itself to ease policy in the autumn, the coming week will focus on data, with several further top-tier economic survey results for June due as well as flash inflation data for the current month. In terms of surveys, the German Ifo and French INSEE business conditions surveys come this morning and tomorrow respectively, with national consumer confidence indices from those two countries coming on Wednesday. The following day will bring the Commission’s full business and consumer survey results. While the flash PMIs released on Friday hinted at improvement in June, the positives were centred principally in France, with the German indices little changed and the message from the remainder of the euro area one of deterioration. Therefore, the Commission’s headline euro area Economic Sentiment Indicator is expected to fall back somewhat after rising for the first time in eleven months in May.
The inflation figures will come in the second half of the week, with the German and Spanish numbers on Thursday and the French, Italian and euro area data on Friday. Most notably, we currently expect the euro area release to show that headline inflation remained unchanged at 1.2%Y/Y but that the core inflation rate ticked up to 1.0%Y/Y. In the bond markets, Germany will sell 2Y Schatz on Tuesday. Italy will sell inflation-linked bonds on the following day and 5Y and 10Y BTPs on Thursday.
The coming week should be relatively low-key for UK economic news with no show-stopping releases due, sadly allowing the national embarrassment of the Conservative leadership election to continue to dominate attention. After a quiet start to the week, tomorrow will bring the CBI’s Distributive Trades Survey, which seems highly likely to suggest that retail sales remained subdued in June after declining in April and May. The following day brings UK Finance loan data for May. And after a quiet Thursday, the end of the week will bring the June GfK consumer confidence and Lloyds business barometer surveys and final Q1 GDP data (which seems bound to confirm the current estimate of growth of 0.5%Q/Q boosted by Brexit-related inventory accumulation) including a first estimate of the current account deficit. Meanwhile, on Wednesday BoE Governor Carney and certain other MPC colleagues will testify to the House of Commons Treasury Committee on the May Inflation Report. In the bond market, the DMO will sell 30Y Gilts on Tuesday.
In the US, the coming week brings several top-tier releases. A quiet start today brings just the latest Chicago and Dallas Fed activity surveys. Tuesday brings several housing market reports and the June Conference Board consumer confidence survey. The following day brings the advance goods trade and inventories figures for May, as well as durable goods orders data for the same month. Thursday will see the final release of Q1 GDP data, while the monthly personal income and consumption figures for May – including the closely watched deflators – will follow on Friday. In the bond market, the Treasury will sell 3Y notes on Tuesday, 10Y notes on Wednesday and 30Y bonds on Thursday.
Ahead of next week’s RBA policy meeting, for which there is increasing speculation of a further cut in the cash rate to 1.0%, top-tier economic data will be few and far between, with the most notable release coming on Friday in the shape of May’s private sector credit numbers.