In-depth Analysis

Weekly Outlook 05-09 September

Focus on RBA, BoC, and ECB monetary  policy meetings

  • On Monday 5th: Nyse and Nasdaq close for Labor Day. Japan, China, Spain, Italy, France, Germany, Eurozone, and the U.K publish Services PMIs. The U.K’s Composite PMI also comes out along with Australia’s and Europe’s Retail Sales.
  • On Tuesday 6th: The Australian monetary decisions are released, the U.K Construction PMI and other U.S PMIs become published.
  • On Wednesday 7th: Australian GDP figures released, Germany and the Eurozone publish GDP figures, Bank of Canada meets on monetary policy, the Canadian PMI figures are due, the U.S the Short-Term Energy Outlook is out, and hearings for the U.K Treasury Committee begin.
  • On Thursday 8th: Japan’s GDP data is published, and the ECB gathers for its September monetary policy meeting. The U.S reports on Oil Inventories and Jobless reports while FED Chair Powell is due to speak.
  • On Friday 9th: The Chinese release their CPI and PPI data, while Canada will reflect on its employment numbers.

Weekly outlook

A busy week of news to follow for investors this week. Particularly for those closely watching Australia, Canada, and the Eurozone, among other key economic reports and events, their central banks all meet to decide on monetary policy for September. Many economists predict that the major nations will continue to raise rates by considerable amounts this month.

Purchasing Managers Indexes (PMI) are being released by a number of leading economies this week, with many showing increases in spending and positive news for growth.

Monday 5th of September

Japan, China, Spain, Italy, France, Germany, the Eurozone, and the U.K all release their monthly Services PMI Indexes for August today for a look at the activity of purchasing managers for the service sector. A reading above 50 is positive for the economy and points to growth. Most countries are expected to hover at just under 50 this month, but China is looking to drop from 55.5 with its Caixin index to 54, Spain also drops to 52.9 from 53.8, and the UK is looking to remain unchanged at 52.5.

Australia will look into their recent consumer spending activity on Monday with the most recent Retail Sales report, expectations are for positive growth from the previous month’s 0.2% up to 1.3%. The monthly Retail Sales figures for August will also be published for Europe with an improvement, as the reading will go -1.2% to 0.4%.

The UK will also publish its Composite PMI which looks at the service sector and manufacturing purchasing. Forecasts are for no change at this stage from the 50.9 reported in July.

Tuesday 6th of September

Australia’s Reserve Bank will hold its monetary policy meeting to decide whether to continue on the same path in recent months of OCR increases. The current rate of 1.85% could increase again by 50 basis points to 2.35% according to analysts. Australia’s inflation numbers have been on the rise, ticking along with the rest of the major economies. Currently, it’s sitting at 6.1%, with forecasts of increases to 7.75% by the end of the year.

The U.K will release its Construction PMI for August, which observes the purchasing activity for the construction industry. A forecasted drop to 48.0 from the previous month’s 48.9 could indicate some contraction in the industry.

The U.S will also publish various monthly PMI reports today, most notably the ISM Non-Manufacturing PMI, for businesses aside from manufacturing, which is expected to soften to 55.5 in August from 56.7 in July.

Wednesday 7th September

Australian GDP numbers are available today. For the second quarter YoY GDP is expected by analysts to have increased to 3.8% from 3.3%, and in the previous quarter its forecast to have increased to 1.2% from 0.8%.

Germany and the Eurozone will both also publish their Q3 and Q2 GDP figures respectively. Germany is expected to see no change in its numbers 1.8% YoY and 0.1% QoQ, and the Eurozone is also forecasting no change from 3.9% last year and 0.6% in the previous quarter.

Canadians will hear whether interest rates will be increased again today as the Bank of Canada sits down for its September Monetary Policy meeting. Rates are currently sitting at 2.5%, and some analysts expect another hike as high as 75 basis points to 3.25%.

Also from Canada, the Ivey Purchasing Managers Index (PMI) will show key data relative to whether the manufacturing sector in the country is expanding (reading above 50) or contracting (reading below 50). The previous figures suggested a heavy contraction, with a drop from 62.2 down to 49.6 at the beginning of last month, and further falls to 48.3 are expected this month.

From the U.S the Short-Term Energy Outlook will provide an insight into the country’s energy markets and an analysis for crude oil.

Traders may also be interested to watch as Bank of England’s Governor Mervyn King and several members of the Monetary Policy Committee are expected to testify before the Parliament’s Treasury Committee. Volatility is expected to be high during the hearings.

Thursday 8th of September

Japan is set to publish its second quarter GDP data today, analysts are predicting positive numbers with an increase up to 0.7% from 0.5% last quarter, and 2.9% up from 2.2% YoY.

In the Eurozone, the ECB will gather for its monetary policy meeting. Calls from some policymakers are for a further hike of between 50 and 75 basis points this month to continue to curb rampant inflation, which is expected to top 10% in the wake of the growing cost of energy. The main refinancing rate is currently 0.5%, putting the ECB well behind many of the other central banks worldwide that have been frontloading rate hikes in recent months.

The U.S Initial Jobless claims for the week are expected to show an increase to 240K from 232K for people who have claimed insurance for unemployment for the first time. Also from the U.S, the Crude Oil Inventories will show the weekly change in the number of barrels held by the country and FED Chair Jerome Powell is due to make a public statement, which will draw the interest of traders.

Friday 9th of September

China will publish its CPI and PPI data today for the month of August for a look at how the costs of consumer items are rising or falling compared to previous reports. CPI from last month is expected to have dropped to 0.2%, and experts expect an increase to 2.8% from 2.7% last year. PPI, which affects the raw materials and potentially the cost of goods to consumers, is set to have dropped to 3.1% from 4.2% last year.

Canada will release its findings on the Employment Change report for August and the Unemployment Rate. Employment decreased by over 30,000 jobs in the previous month but forecasts indicate an increase of 15,000 in August, as calls from business groups mount for a solution to the growing labor shortage in the country.

 

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