Lately, it’s been slow in markets. These are the dog days of summer, after all.
Perhaps the best visual representation of the slowdown in activity is trading volume in the Treasury market, shown in the chart at right.
Treasuries took centre stage in May and June when a big sell-off there roiled markets around the world, and trading volume rose to an all-time high.
This week, trading volume is plumbing lows not seen since Christmas break.
Next week, though, is bound to shake things up.
“Risk events are set to pick up dramatically, threatening the summer lull,” says Société Générale head of rates and forex strategy Vincent Chaigneau. “Risk conditions are sanguine, but exposed to renewed pressure on Treasuries.”
Major events include the Federal Reserve’s July FOMC meeting, which concludes Wednesday; European Central Bank and Bank of England policy meetings, which conclude on Thursday; and a host of key economic data releases in the United States, including the first reading of second-quarter GDP and ADP’s monthly private payroll report on Wednesday, two key reports on manufacturing from ISM and Markit and monthly vehicle sales figures on Thursday, and the headliner: the jobs report on Friday.
Sprinkled in the mix are factory orders, consumer spending and personal income, initial jobless claims, regional manufacturing reports out of the Federal Reserve banks in Dallas and Chicago, Case-Shiller home prices, and pending home sales.
And we haven’t even mentioned global PMI day, when we get updates on the state of manufacturing in major economies all around the world.
Needless to say, there will be a lot for financial markets to digest.
“Our economists had long predicted weakness over Q2, and expect data to strengthen this summer,” says Chaigneau. “That should start as early as this week, with the manufacturing PMI seen in the 53 region (a level not seen over the past four months) and [nonfarm payrolls] at 200,000.”
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