The Fed signalled that not only is a rate hike this year on the cards but that potentially even the September FOMC meeting could be live.
That helped the Dow and S&P close the week lower and gave strength to the US dollar. Bonds sold off as a result as well.
So the week ahead with more Fed speeches and August non-farm payrolls, to be released Friday, looks like the one many traders have been anticipating to shock markets from their slumber.
Moves offshore have already found their mark in a lower Aussie dollar and likely stocks and bonds under pressure when markets open here in Australia for the week. That global markets will be a key driver again is likely as the ASX report season winds down and a relatively light week of data beckons.
Janet Yellen and Stanley Fischer nailed their rate rising colours to the mast at Jackson Hole. Yellen said that the case to raise rates had strengthened “in light of the continued solid performance of the labour market and our outlook for economic activity and inflation”.
Markets initially read Yellen as relatively dovish but a follow conversation between Fed vice-chair Stanley Fischer and CNBC changed all that. Reuters reported that “Fischer was asked on CNBC whether people should “be on the edge of our seat” for a rate hike in September, and for more than one policy tightening before year end. He answered: “I think what the Chair said today was consistent with answering yes to both of your questions, but these are not things we know until we see the data.”
Stocks finished down as a result and this week’s US non-farm payrolls, to be released Friday, is set to be a blockbuster.
For some thought-provoking listening to help you prepare for the week ahead, here’s our weekly podcast.
Australian Calendar – (courtesy NAB Economics, our emphasis)
The most market-sensitive releases this week are Q2 Capital Expenditure and Retail Sales, both out at 11.30am AEST Thursday. There is also plenty of second-tier data, including weekly Consumer Confidence, Building Approvals and NAB Online Retail Sales all Tuesday, and then RBA Credit Wednesday and the RBA’s Debelle speaks at an FX conference Thursday.
Retail Sales for July – just where is the Australian consumerAfter June’s disappointing retail sales if there is one intriguing question about the Australian economy at the moment it’s whether Australian consumers can continue to support the economic transition.
The NAB’s Economics team reports:
“Retail Sales for June were on the disappointing side, increasing a meagre 0.1% and pointing to some slowing in the rate of retail spending by consumers. High level indicators such as the NAB Business Survey for July suggests that there should be some resumption of growth in July and this likely underpins market expectations for a 0.3% m/m increase. However, industry reports, including those from the current reporting season have been mixed. One major market chain had a strike affecting distribution in Melbourne from mid-July, possibly hampering sales through its outlets. Still quite difficult trading conditions were also reported by department stores in July with David Jones having July as an additional clearance month. NAB therefore forecasts retail sales to be flat for the month, shy of the market consensus that looks for growth of 0.3%.”
International Calendar (also courtesy NAB Market Economics)
Global: The wash up from Jackson Hole will reverberate around markets this week as traders and markets evaluate the implications of the Fed’s signal that September is a live FOMC meeting.
US: Monday’s July personal spending/PCE deflators, S&P/CoreLogic house prices and Consumer Confidence on Tuesday, the Chicago PMI and Pending Sales Wednesday, all ahead of Thursday’s ISM Manufacturing and Non-farm payrolls Friday. There are Four Fed speeches scheduled.
China: The main focus shifts to Thursday’s official Manufacturing and Non-manufacturing PMIs followed 45 minutes later with the Caixin Manufacturing PMI. Consumer Sentiment is also due, out Monday.
Japan BOJ board member Funo speaks on Wednesday. Data-wise the most important releases scheduled are the monthly Jobless Rate, Household Spending, and Retail Trade on Tuesday, Industrial Production on Wednesday.
Euro: Business climate indicator on Tuesday, unemployment and CPI on Wednesday, and final August Manufacturing PMIs on Thursday. The ECB’s Villeroy speaks on Wednesday and Nowotny on Thursday.
UK: It’s a light week for key data, Thursday’s Manufacturing PMI the main interest
Canada: Wednesday’s GDP reports the main interest.
NZ: ANZ Business Survey on Wednesday, Overseas Trade Indexes out Thursday, and Building Work Put in Place, the third of the three of GDP partials for this week. Also for release are Building Consents on Tuesday and Credit Aggregates on Wednesday.
Here’s the NAB’s excellent calendar of all the key data and events for the week.