After eight weeks of consistent low-volatility trade where US stocks stayed inside a 1% range, everything might suddenly have changed.
The S&P 500 was down 2.5%, bonds rates rose, and the US dollar found further support.
Of course one day’s fall might just be that.
But with the SPI futures indicating a 79 point fall on the open, the Aussie dollar under pressure, and a big week of data and events here in Australia and across the globe, markets will be on edge.
With less than two weeks before the FOMC meeting, the air of tension in markets has risen, with the CBOE Volatility Index at its highest levels since the immediate aftermath of the Brexit vote.
The terminal phases of quantitative easing?
Matt Felsman from APP Securities wonders if the selling in bonds and stocks that occurred after the ECB meeting Thursday and accelerated Friday on further comments from Fed officials suggesting this month’s meeting might be live, if markets are not “concluding that we are heading towards the terminal phases of quantitative easing globally”.
It’s an interesting notion and that one concurs with the growing calls from central bankers themselves that monetary policy can not achieve a sustainable lift in global growth on its own. That’s changed market thinking.
Bond rates are rising across the globe. Japanese 10 year rates are back in positive territory for the first time in 6 months. Things are changing in global markets.
Australian Calendar – (courtesy NAB Economics, our emphasis)
RBA assistant governor Chris Kent speaks Tuesday morning, NAB Business Conditions are also out Tuesday, and a relatively robust Employment/Unemployment report expected Thursday are the key events.
Also on offer are Monthly Consumer Confidence and REIA Rental/Vacancies report both Wednesday and Consumer Inflationary Expectations Thursday.
Australian Labour Force – August
While the NAB’s business survey, released Tuesday, is for me the most important data release for the week in Australia – because it will give us a strong lead on the current state of the economy – it’s Thursday’s labour force data for August which the NAB says “is the most market sensitive release”.
The NAB is looking for 22,000 new jobs to have been created during August. That’s above the current market consensus of a rise of 15,000 which the NAB says is the “breakeven employment level” of 15,000 a month. That rate of jobs growth is “needed in order to keep the unemployment rate steady”.
Of particular note will be the split once again between full-time and part-time jobs created.
International Calendar (also courtesy NAB Market Economics)
Global Risk events: Fed Governor Brainard’s speech Monday is anticipated as having the potential to influence Fed market pricing with the FOMC meeting the following week. The Bank of England (and Swiss National Bank) meet with no change expected. EU leaders meet Friday (without UK) to discuss Brexit.
US: Retail Sales Thursday and CPI Friday the key data releases. Other data this week include NFIB Tuesday, Current Account Balance Thursday and Industrial Production also Thursday. Fed speakers will be important for US rate hike expectations with Governor Brainard speaking Monday the one to watch; thereafter lockdown begins.
China: An important week for China with key monthly activity partials (Industrial Production, Retail Sales and Fixed Asset Investment) on Tuesday. Given the pick-up in imports this data should meet or even exceed expectations. Money Supply and lending/financing growth due sometime next week.
Japan: A quiet week, with Machine Orders on Monday and final July Industrial production on Wednesday.
UK: A big week for the UK with the BoE meeting Thursday (no change expected), and key data including CPI Tuesday, Unemployment Wednesday and Retail Sales Thursday. Finally the UK Secretary responsible for Brexit David Davis speaks to the House on Tuesday.
Canada: A quiet week with Bank of Canada’s Wilkins giving a lecture in the UK Wednesday.
NZ: GDP Thursday the highlight (expect a bumper result of 1.2% q/q well above RBNZ expectations of 0.8% q/q). Other data out are Food Prices Tuesday, Current Account Wednesday, PMI Thursday and Consumer Confidence Friday.
Here’s the NAB’s excellent calendar of all the key events and data for the week ahead.
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