After an event-filled week which covered the gamut from political news, earnings and Fed speak, the economic calendar eases off modestly with the Q2 GDP print – which according to Barclays will print at 5.0% but Morgan Stanley warns it’s all downhill from there – the main highlight this week in the US and the ECB in Europe, with no major political events planned (although keep an eye on Trump’s twitter feed), offset however by the peak of earnings season with 175 S&P 500 companies slated to release their latest quarterly reports, including more of the tech heavyweights.
A snapshot calendar of key US events is below:
The highlights include Alphabet on Monday, Verizon, AT&T and Harley Davidson on Tuesday, Coca-Cola, General Motors, Facebook and Boeing on Wednesday, Intel and Amazon on Thursday, and Exxon Mobil and Chevron on Friday. In Europe UBS reports on Tuesday and Royal Dutch Shell on Thursday. It’s still relatively early stages so far with just 86 S&P 500 companies having reported but an impressive 81 of those companies – or 94% – have beat earnings expectations, while a still solid 65 have beaten revenue expectations.
Other events this for markets his week with the global PMIs due out on Tuesday, the ECB meeting on Thursday and corporate earnings releases really starting to ramp up in the US. It’s difficult to envisage the ECB being a particularly exciting meeting however with the autopilot mode now somewhat on for the rest of the year following the last policy meeting decision. Deutsche Bank economists expect Mario Draghi to aim for a “Goldilocks” tone during his conference – that is neither sound too hawkish nor too dovish. The team believes that the impression from recent press stories is that the ECB thinks the market has priced its new policy stance too dovishly. Indeed using their modified Taylor Rule, the team shows that the market is fully pricing an escalation of a trade war – a markedly worse economic scenario than the ECB’s baseline or the consensus. Without a clear materialization of the risk scenarios, the team believe the market should price a first hike by end 2019 with a reasonable probability. DB’s baseline call is a 20bp deposit rate hike in September 2019 (25bp refi. hike).
The release of the flash July PMIs across the globe will also be closely watched for any potential inflection points in manufacturing sentiment as a result of the growing trade war. We’ll get the manufacturing print for Japan early in the morning followed then by the manufacturing, services and composite readings for Germany, France and the Eurozone, and then the same for the US in the afternoon. In terms of what to expect, the current market consensus is for slight deterioration in Europe. The Eurozone manufacturing reading is expected to nudge down 0.2pts to 54.7 which would be the lowest since November 2016 and also mark seven consecutive monthly declines. The services print is expected to also fall 0.1pts to 55.1 and the composite decline 0.1pts to 54.8. Expect the market to be focused on some of the prices components of the data, as well as more-trade sensitive components like new orders. In the US the manufacturing PMI is expected to also fall a modest 0.3pts to 55.1.
This week will also be a decent test for the Treasury market with about $119bn due to be auctioned. That’ll all be in maturities up to 7 years so should put the spotlight back on the yield curve, especially given that last week was the first week in six that the 2s10s curve actually steepened, albeit with most of that coming on Friday.
A breakdown of key events by day, courtesy of Deutsche Bank
- Monday: In Europe the only data scheduled today is the advance July consumer confidence reading for the Eurozone. In the US we’ll get the June Chicago Fed National activity index print followed by June existing home sales data. Away from that, the BoE’s Broadbent will speak to the Society of Professional Economists in London in the evening. Meanwhile, Alphabet will releasing earnings.
- Tuesday: The big data focus on Tuesday will be the release of the flash July PMIs across the globe. Overnight we’ll get the manufacturing PMI for Japan followed by the manufacturing, services and composite PMIs for France, Germany and the Eurozone. The US PMIs will then be out in the afternoon. Away from that data, we’ll also get July business and manufacturing confidence prints for France, CBI selling prices data for the UK for July, and the July Richmond Fed manufacturing index in the US. Earnings wise, Verizon, AT&T and Harley Davidson are due to report.
- Wednesday: There is no data of note in Asia on Wednesday. However in Europe we’ll get June PPI for France along with the July IFO survey for Germany, July CBI retailing reported sales in the UK and M3 money supply data for the Euro area for June. In the US, June new home sales is the only data due out. Away from the data, European Commission President Jean-Claude Juncker and the EU trade chief Cecilia Malmstrom will meet with US President Donald Trump to discuss averting a new round of U.S. tariffs on European car imports. Key earnings releases for the day include Coca-Cola, General Motors, Facebook and Boeing.
- Thursday: All eyes on Thursday will be on the ECB monetary policy meeting which beings at 12.45pm BST. Data-wise, overnight we will get June services PPI for Japan. After that we’ll get the August consumer confidence print for Germany and July consumer confidence data for France. In the US, the June advance goods trade balance, preliminary June wholesale inventories, June retail inventories, preliminary June durable goods and capital goods orders and the July Kansas City Fed manufacturing activity reading are all slated for release. Away from the data, the WTO will hold a General Council meeting to cover issues related to the US-China trade conflict, while notable earnings releases for the day include Intel and Amazon.
- Friday: Much of the focus on Friday will be on the advance Q2 GDP reading for the US in the afternoon. Prior to that, we’ll get June industrial profits data for China followed by the release of June consumer spending data and the advance Q2 GDP reading for France. In the US, we will also get the final July University of Michigan survey data. Finally, Exxon Mobil and Chevron will report earnings.
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