Weekly Market Outlook (11-15 September 2023)

Weekly Market Outlook (11-15 September 2023)

UPCOMING EVENTS:

  • Tuesday: UK Labour Market report, German ZEW, US NFIB Small Business Optimism Index.
  • Wednesday: Japan PPI, UK GDP, EZ Industrial Production, US CPI.
  • Thursday: Australia Labour Market report, Japan Industrial Production, Switzerland PPI, ECB Policy Decision, US Jobless Claims, US PPI, US Retail Sales.
  • Friday: NZ Manufacturing PMI, China Industrial Production and Retail Sales, Eurozone Wages data, US University of Michigan Consumer Sentiment.

Tuesday

The UK Unemployment Rate is anticipated to increase to 4.3% compared to the previous 4.2%. However, the market’s primary attention is likely to be on the wage-related data. It is expected that both Average Earnings excluding Bonuses, at 7.8%, and Average Earnings including Bonuses, at 8.2%, will match the previous figures. Given that the September interest rate hike is widely expected, this report is likely to have a notable impact on market pricing beyond September.

Wednesday

The anticipated year-on-year increase in the US Headline Consumer Price Index (CPI) is expected to reach 3.6%, up from the previous 3.2%, with the month-on-month reading projected at 0.6%, compared to the previous 0.2%. This rise in the Headline CPI is attributed to higher energy prices, which are likely to be temporary. The Federal Reserve primarily focuses on the Core measures, which exclude volatile food and energy prices. The year-on-year Core CPI is predicted to decline to 4.3% from the previous 4.7%, while the month-on-month figure is expected to remain at 0.2%, unchanged from the previous report. Unless this report shows uncomfortably high inflation across the board, it’s unlikely to alter the market’s expectations for the September meeting, where the Fed is expected to keep interest rates steady. The current debate is shifting towards the November decision and, more importantly, when the Fed will begin to lower interest rates.

Thursday

The European Central Bank (ECB) is expected to maintain the deposit rate at its current level of 3.75%. However, in reality, the likelihood of a rate hike is uncertain, with a probability of around 60%. Recent data has been unexpectedly weak, and the deterioration has occurred rapidly. Nevertheless, inflation and labor market indicators remain robust, and the central bank may be concerned that it could take an extended period to return to the 2% inflation target. In fact, the longer elevated inflation persists, the greater the risk that inflation expectations become unanchored, making it more challenging to bring inflation down later.

Regarding the US labor market, the weekly Jobless Claims figure continues to be a crucial indicator of its strength. Last week’s data significantly exceeded expectations. This week, consensus estimates project Initial Claims to be at 226K, up from the previous 216K, while Continuing Claims are expected to reach 1693K, compared to the previous 1679K.

Friday

Chinese Industrial Production Year-on-Year (Y/Y) is anticipated to reach 4.0%, up from the previous figure of 3.7%, while Retail Sales Y/Y are expected to be at 2.8%, compared to the prior 2.5%. This data will provide insights into the performance of the world’s second-largest economy following several significant disappointments in the past month.

The University of Michigan Consumer Sentiment is predicted to decline to 69.2 from the previous reading of 69.5. The previous final report was adjusted downward from the initial readings, aligning with the substantial miss observed in the Conference Board Consumer Confidence report. The University of Michigan survey places greater emphasis on consumers’ financial situations, while the Conference Board report focuses more on sentiment regarding the labor market. Consequently, given the elevated energy prices, it is likely that the forthcoming report will be lackluster and potentially contribute to higher inflation expectations.

Author: Jacky.T

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