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
Bitcoin ⬇ 2.65% 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 Sunrun, FirstSolar, Ballard Power Systems, Plug 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 & Company, Foot Locker Inc., Buckle Inc., Madison Square Garden Entertainment Corporation
Monday: Afya Ltd., Palo Alto Networks, Flexsteel Industries Inc., Nordson Corp.
Tuesday: Medtronic Plc., Intuit Inc., Macy's Inc., Dick's Sporting Goods, Bank of Nova Scotia, J.M. Smucker Corp., Dole Plc, Nordstrom, Scansource Inc., Absolute Software, Electromed Inc., Urban Outfitters
Wednesday: Nvidia Corp., Salesforce, Royal Bank of Canada, PetroChina Co., Autodesk Inc., Snowflake Inc., iMedia Brands Inc.
Thursday: Toronto-Dominion Bank, AIA Group, Dollar General Corporation, Titan Machinery Inc., VMWare Inc., Peloton Interactive Inc., Abercrombie & Fitch, Hibbett Inc.
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