EXANTE Macro Insights

EXANTE Macro Insights

Markets remain worried about the pace of Fed rate rises as inflation hits record peaks in Europe.

  • The Fed’s future watch
  • Inflation causing anarchy in the UK? 
  • Energy and inflation crisis in Europe?
  • Crypto mining under pressure
  • Key data for the coming week
  • Upcoming Corporate earnings

US: 
S&P 500   12.91 % QTD and  12.33% YTD
Nasdaq 100  17.08 % QTD and  17.47% YTD
Dow Jones Industrial Average  10.97% QTD and  6.02% YTD
NYSE   8.60% QTD and  8.33% YTD 

Europe:

Stoxx 600   7.82% QTD and  10.0% YTD
DAX   6.59% QTD and  14.22%YTD
CAC 40   10.22% QTD and  8.73 % YTD 
IBEX35   4.15% QTD  3.20% YTD 
FTSE MIB   6.88% QTD and  16.78% YTD
FTSE 100   4.83% QTD and  1.78% YTD

Global:

MSCI World Index  10.50% QTD and  12.64% YTD
Bitcoin2.65% MTD and  49.6% YTD

Note: As of 5:30 pm EST 17 August 2022

The Fed’s waiting on inflation signals. Market hopes were briefly raised on Wednesday following the release of July’s FOMC minutes, which showed that the Fed was committed to raising rates as high as necessary to tame inflation, but also thinking ahead about just when they will seek to slow rate rises. The USD has been flat this week against the EUR, but up against the GBP and the YEN. Fed officials may provide an update to their views on the outlook during the yearly Jackson Hole Economic Symposium, scheduled for next week, 25-27 August. Renewable producers like SunrunFirstSolarBallard Power SystemsPlug Power and TPI Composites Inc. received a boost this week with the signing into law of the $430 billion Inflation Reduction Act which promises a decade of federal subsidies via long-term tax credits for solar panel makers, fuel cell manufacturers and energy storage companies, biogas and hydrogen producers. 

Autumn anarchy in the UK? The UK has the highest level of inflation in the G7. July headline inflation was above expectations at 10.1% y/oy/, up from 9.4% in June. Core inflation was also above expectations at 6.2% y/o/y. Households are becoming increasingly stressed as inflation adjusted real wages fell 3% in the three months through June and job vacancies fell for the first time since August 2020.The Bank of England (BoE) has forecast inflation at over 13% in October due to rising food, energy and secondary inflation effects and recession by Q4 2022. In addition, political uncertainty remains as the Conservative Party leadership race for a new Prime Minister is ongoing and transportation strikes and amid rising wage demands risks further damage to the economy. Markets are now pricing in a 50 bps rate rise at the September meeting despite signs that the economy is slowing and, according to Bloomberg, investors now expect the BoE to intensify the tightening cycle, with its key rate peaking at around 3.75%. 

A worrying winter ahead for Europe. Inflation in the Eurozone reached a record high of 8.9% y/o/y in July. Core inflation, the number watched most closely by the ECB was at 5.1%. Gas prices are also up again as Germany struggles to meet government mandated gas storage levels for November. Rising gas prices have forced the German government to announce a temporary cut, set to begin in October, on VAT on natural gas to 7% from 19% in an attempt to ease the burden on households and companies as a new levy set to help utilities cover the cost of replacing Russian energy supplies, takes effect. 

Mining losses. Crypto miners have experienced a growth in net losses over Q2 due to the drop in Bitcoin. According to their latest corporate earning reports, Core Scientific Inc.Marathon Digital Holdings Inc., and Riot Blockchain all posted net losses in Q2 of  $862 million, $192 million and $366 million respectively.

Key data to look out for this coming week 

In Europe: On Friday look out for PPI data from Germany, the Eurozone’s largest economy. On Tuesday there is Eurozone S&P Global Composite PMI, Manufacturing PMI and Services PMI data, German S&P Global/BME Composite, Manufacturing and Services PMIs and French S&P Global Composite, Manufacturing and Services PMIs. On Tuesday there is also Eurozone Consumer Confidence data. On Thursday look out for German GDP and German Ifo Business Climate, Current Situation and Expectations survey data. There is also the ECB Monetary Policy Meeting Accounts. 

In the UK: 
On Friday there is retail sales data. On Tuesday there’s S&P Global/CIPS Composite, Services and Manufacturing PMIs. 

In the US: 
On Monday there’s the Chicago Fed National Activity Index. On Tuesday there’s S&P Global Composite, Manufacturing and Services PMIs as well as New Home Sales. On Wednesday there is Durable Goods orders data and Non-defence capital goods orders, and pending home sales data. On Thursday look out for GDP data, continuing and initial jobless claims, Core Personal Consumption Expenditures, Personal Consumption Expenditures Prices, and news from Fed policymakers and others during the Jackson Hole Economic Symposium taking place Thursday-Saturday, 25-27 August. 

On Monday also look for the People’s Bank of China (PBOC) interest rate decision. 

Upcoming Corporate Earning Reports:

Friday: Bilibili Inc.Deere & CompanyFoot Locker Inc.Buckle Inc.Madison Square Garden Entertainment Corporation 
Monday: Afya Ltd.Palo Alto NetworksFlexsteel Industries Inc.Nordson Corp.
Tuesday: Medtronic Plc.Intuit Inc.Macy's Inc.Dick's Sporting GoodsBank of Nova ScotiaJ.M. Smucker Corp.Dole PlcNordstromScansource Inc.Absolute SoftwareElectromed Inc.Urban Outfitters 
Wednesday: Nvidia Corp.SalesforceRoyal Bank of CanadaPetroChina Co.Autodesk Inc.Snowflake Inc.iMedia Brands Inc.
Thursday: Toronto-Dominion BankAIA GroupDollar General CorporationTitan Machinery Inc.VMWare Inc.Peloton Interactive Inc.Abercrombie & FitchHibbett Inc.

 

DISCLAIMER: While every effort has been made to verify the accuracy of this information, EXT Ltd. (hereafter known as “EXANTE”) cannot accept any responsibility or liability for reliance by any person on this publication or any of the information, opinions, or conclusions contained in this publication. The findings and views expressed in this publication do not necessarily reflect the views of EXANTE. Any action taken upon the information contained in this publication is strictly at your own risk. EXANTE will not be liable for any loss or damage in connection with this publication.

This article is provided to you for informational purposes only and should not be regarded as an offer or solicitation of an offer to buy or sell any investments or related services that may be referenced here.

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