Weekly market preview from Alpari UK – 23 June 2014
A busy week ahead for the markets, where a range of notable releases make up for the somewhat lack of any single guaranteed market mover. In the US, the main event of note comes in the form of the final GDP figure for Q1. Whereas in the UK a somewhat quiet week sees a focus upon the BoE financial stability report on Thursday. On the other hand, a busy week in the eurozone sees the release of various PMI figures on Monday morning.
In Asia, the main event of the week comes on Monday when the Chinese HSBC manufacturing PMI figure is expected to shine a light on the tentative recovery we have seen in recent months. In Japan the retail sales figure on Friday will be absolutely key to determining how the sales tax hike is affecting consumption going forward.
The ongoing conflict within Iraq is also a major theme going forward, where any military involvement from the US is likely to lead to a flight to safety in the form of risk off sentiment.
US
A somewhat mixed week ahead, where the release of consumer confidence and GDP figures form the mainstay of the week which is also accentuated by the release of housing data and unemployment claims. The main event of the week is likely to be Wednesday’s final GDP release for Q1. This is the third release of the GDP figure for the somewhat turbulent first quarter of the year, which saw substantial weaknesses owing to the existence of adverse weather conditions. The effect upon the economy from housing to jobs was stark and this has been reflected within the growth figure. However, with each revision to the GDP number it seems that the impact of that weather is ever more reflected. In line with this, the initial advance figure of 0.1% was lowered to -0.6% for last month’s preliminary figure and finally we are expecting to see a figure closer to -1.7% on Wednesday. The impact within the markets remains to be seen even if we do see anything like -1.7% given that markets are now largely focusing on more recent indicators. However, any further deterioration in output to such a degree should always be seen as important.
On Tuesday, the release of the latest
consumer confidence survey is set to shed light on the health of the retail sector. This acts almost as the qualitative release whereas the retail sales figure measures the quantitative impact. Earlier this month we saw the May retail sales post a moderate rate of growth at 0.3% which followed a marginal rise in the consumer confidence from 82.3 to 83.0. On this occasion, we are expecting yet another small rise to 83.4, which could spell out a similar rate of growth in retail sales when they’re released next month. Be mindful of the importance of consumer power within the US, where personal consumption makes up around 70% of GDP. For this reason, I believe Tuesday’s figure could be a hugely valuable and under-appreciated indicator of future economic growth announcements.
UK
A very quiet week in the UK, where the main event of note is going to be Thursday’s
financial stability report accompanied by a speech by BoE governor Mark Carney. Released twice a year, this report focuses largely upon the financial system and specifically how to promote stability going forward. One element that could come into this is the particularly hot topic of the housing market, which is driven in part by the potential over-extension of the banks in loan to value ratios. However, the existence of low rates, coupled with the existence of ‘help to buy’ means that there is a commonly held view that the market is somewhat ‘frothy’ to put it kindly. Apart from the housing market, I am sure the event will throw up some a question or two relating to when Carney sees interest rates rising. His previous comments have led us to believe that we could see a move sooner than expected and thus the markets will be willing to react should expectations change accordingly.
Eurozone
A busy week ahead for the eurozone, where the early part is dominated by the release of PMI surveys for both the manufacturing and services sectors. This is followed by the release of the German Ifo business climate survey on Tuesday. However, it is the PMI releases on Monday which are of most interest, with France, Germany and the eurozone economies coming under scrutiny. Within those three, we can gauge a comprehensive overview of the strength or weaknesses in the manufacturing and services of the most important regions. For this reason these figures will provide clues as to how the area will grow going forward. In particular keep an eye out for the
French manufacturing PMI, which is beginning to move back towards the 50 mark which denotes a sector in expansion. Despite this, forecasts point towards a possible stagnation around the 49.6 mark.
On the other hand, the
German manufacturing sector is the most dominant driver of growth from any one sector in the eurozone. Thus any strong growth is likely to be greeted positively in the markets. Finally, it will of course be crucial to follow the
eurozone surveys for a comprehensive view of how the manufacturing and services sectors are growing. Be aware that for us to see any significant moves in the markets, we would either need to see a substantial shift away from expectations in one of the key surveys or else a shift in a single direction across the majority of the measures.
On Tuesday, the
German Ifo business climate survey is released, with the typical associations between German economic strength and the eurozone growth likely to come back to the fore. This figure is the type of release which typically requires a strong move away from expectations to grab the market’s attention and on this occasion there is very little chance expected. Thus the stage is set for a potential surprise should the figure move comprehensively away from the 110.4 level seen last month.
Asia & Oceania
An interesting week ahead in the Asian region, where the week begins strongly with the release of the
HSBC manufacturing PMI figure due very early on Monday. This figure has been at the forefront of the slowdown in China over recent months given its focus upon the smaller and thus weaker firms. However, recently we have seen an uptick in the measure towards the all important 50 mark. This has preceded growth in the headline manufacturing PMI and subsequently eased worries of a more protracted slowdown. The one thing the markets will be looking for is a possible move back above 50, which would be the ultimate sign that the worst is over. However, forecasts point towards this potentially being a little too far on this occasion with expectations of a move from 49.4 to 49.7.
In Japan, the focus will be upon the release of the consumer data on Friday with the BoJ likely to be watching out for any signs that the sales tax hike has led to a downturn in consumption since it’s inception in April. The
retail sales figure will be key to this message, where market forecasters are expecting to see a somewhat positive move towards -1.9% from last months -4.3% figure. This is going to be a key indicator in determining whether the BoJ will push for any further asset purchases in the future. Subsequently those trading the yen will be watching this release very closely.
Read the full report at Alpari News Room
