Key Events This Holiday-Shortened Week: FOMC Minutes, Furable Goods And Fed Speakers

As DB’s Jim Reid (a fervent Liverpool supporter) writes in his weekly preview, the start of the World Cup coincides with the holiday-shortened Thanksgiving week so it will be the usual compressed few days of activity. The FOMC minutes (Wednesday) and the ECB’s account of their last meeting (Thursday) will be the key macro events. Focus will be on their thinking about the terminal rate (both) and QT plans (ECB), with both now more likely to hike 50bps than 75bps in December. We will also see global flash PMIs on Wednesday.

Other data will include an array of business activity indicators, including durable goods orders in the US. Indeed, Wednesday is a US data dump ahead of Thanksgiving and we will also see the final UoM consumer confidence data which includes the inflation expectations revision which is important. Claims also comes a day early.

 

The Fed speakers last week helped prompt a big flattening of the US curve as they generally hinted towards a terminal rate of above 5%. As such before we see the FOMC minutes, tomorrow sees three Fed speakers who might add to the debate. They are all hawks (Mester, George and Bullard) though and have all spoken since the FOMC so the market should know their biases. Over the weekend, the Atlanta Fed President Raphael Bostic (non-voter) opined that he believes that the Fed can slow the pace of rate hikes and feels that the Fed’s target policy rate need not rise more than 1 percentage point to tackle inflation and help ensure a soft landing. Boston Fed Collins also spoke but kept all options open.

Lastly, with only around 20 S&P 500 firms left to report earnings this season, this week’s results line-up will be tech-heavy and feature a number of large Chinese firms. These include Baidu (Tuesday), Xiaomi (Wednesday) and Meituan (Friday). In the US, we will hear from Zoom today and Analog Devices, Autodesk and HP tomorrow.

Courtesy of DB, here is a day by day summary of key events

Monday November 21

Data: US October Chicago Fed national activity index, Germany October PPI

Central banks: ECB’s Holzmann, Simkus, Nagel, Centeno and Vasle speak

Earnings: Zoom

Tuesday November 22

Data: US November Richmond Fed manufacturing index, UK October public finances, Italy September current account balance, ECB September current account, Eurozone November consumer confidence, Canada September retail sales

Central banks: Fed’s Mester, George and Bullard speak, ECB’s Holzmann and Rehn speak

Earnings: Baidu, Analog Devices, Autodesk, Dollar Tree, HP

Other: OECD’s Economic Outlook is released

Wednesday November 23

Data: US November PMIs, October durable and capital goods orders, new home sales, initial jobless claims, Germany, France, UK and Eurozone PMIs

Central banks: FOMC meeting minutes, ECB’s Guindos speaks

Earnings: Deere, Prosus, Xiaomi

Thursday November 24

Data: Japan November PMIs, Tokyo CPI, October nationwide and Tokyo department store sales, PPI services, Germany November Ifo survey, France November business and manufacturing confidence

Central banks: ECB’s account of October meeting, ECB’s Schnabel and Nagel speak

Other: US markets are closed

Friday November 25

Data: Germany December GfK consumer confidence, Q3 private consumption, government spending, capital investment, France November consumer confidence, Italy November consumer and manufacturing confidence, economic sentiment

Central banks: ECB’s Muller and Guindos speak

Earnings: Meituan

* * *

Finally, here is a focus on just the US, with Goldman noting that the key economic data release this week is the durable goods report on Wednesday. The minutes from the November FOMC meeting will be released on Wednesday and there are several speaking engagements from Fed officials, including presidents Daly, Mester, George, and Bullard.

Monday, November 21

01:00 PM San Francisco Fed President Daly (FOMC non-voter) speaks: San Francisco Fed President Mary Daly will speak at a livestreamed event hosted by the Orange County Business Council. Text and Q&A with audience and media are expected. On November 16, Daly said, “Somewhere between 4.75% and 5.25% [fed funds rate] seems a reasonable place to think about as we go into the next meeting. And so that does put it in the line of sight that we would get to a point where we would raise and hold…Pausing is off the table right now, it’s not even part of the discussion…Right now the discussion is, rightly, in slowing the pace.”

Tuesday, November 22

10:00 AM Richmond Fed manufacturing index, November (consensus -8, last -10)

11:00 AM Cleveland Fed President Mester (FOMC voter) speaks: Cleveland Fed President Loretta Mester will deliver opening remarks at a discussion on wages and inflation at an event hosted by the Cleveland Fed. Q&A is not expected. On November 10, Mester said, “I currently view the larger risks as coming from tightening too little…This morning’s October CPI report also suggests some easing in overall and core inflation…Monetary policy will need to become more restrictive and remain restrictive for a while in order to put inflation on a sustainable downward path to 2%…It is likely that there will continue to be higher-than-normal levels of financial-market volatility, which can be difficult to navigate. With growth likely to be well below trend, it could easily turn negative for a time.”

02:15 PM Kansas City Fed President George (FOMC voter) speaks: Kansas City Fed President Esther George will participate in a virtual policy panel hosted by the Central Bank of Chile. On November 16, George said, “I’m looking at a labor market that is so tight, I don’t know how you continue to bring this level of inflation down without having some real slowing, and maybe we even have contraction in the economy to get there…Seeing that we’re not going to get help in the supply side, we have a lot of work to do…When I think about inflation today, we’ve kind of turned the tide of supply-chain, production-side shortages. Now, we’re really looking at labor as the driver here…For me, the more important question for this committee, looking out over next year, is being careful not to stop too soon. This was the lesson of the 1970s and ’80s, is thinking, ‘Oh, we’ve got it now, we can stop,’ and then you find that inflation really reemerges in some way.”

02:45 PM St. Louis Fed President Bullard (FOMC voter) speaks: St. Louis Fed President James Bullard will discuss the implications of heterogeneity in macroeconomics for monetary policy at an event hosted by the Central Bank of Chile. Media Q&A is not expected. Bullard’s presentation on November 17 said, “Even under these generous assumptions, the policy rate is not yet in a zone that may be considered sufficiently restrictive. To attain a sufficiently restrictive level, the policy rate will need to be increased further…Caution is warranted…as both markets and the FOMC’s SEP forecasts have been predicting declining inflation just around the corner for the past 18 months.”

Wednesday, November 23

08:30 AM Durable goods orders, October preliminary (GS +1.5%, consensus +0.4%, last +0.4%); Durable goods orders ex-transportation, October preliminary (GS flat, consensus flat, last -0.5%); Core capital goods orders, October preliminary (GS flat, consensus +0.1%, last -0.4%); Core capital goods shipments, October preliminary (GS +0.4%, consensus +0.2%, last -0.5%): We estimate that durable goods orders rose 1.5% in the preliminary October report, reflecting strength in commercial aircraft orders. We forecast moderate growth in shipments of core capital goods (+0.4%) but unchanged core capital goods orders, reflecting weaker foreign demand and some softening in domestic industrial data.

08:30 AM Initial jobless claims, week ended November 19 (GS 215k, consensus 225k, last 222k); Continuing jobless claims, week ended November 12 (consensus 1,520k, last 1,507k): We estimate initial jobless claims decreased to 215k in the week ended November 19.

09:45 AM S&P Global US manufacturing PMI, November preliminary (consensus 50.0, last 50.4): S&P Global US services PMI, November preliminary (consensus 48.0, last 47.8)

10:00 AM University of Michigan consumer sentiment, November final (GS 55.5, consensus 55.0, last 54.7); University of Michigan 5–10-year inflation expectations, November final (GS 3.0%, consensus 3.0%, last 3.0%): We expect the University of Michigan consumer sentiment index increased by 0.8pt to 55.5 in the final November reading.

10:00 AM New home sales, October (GS -7.0%, consensus -5.5%, last -10.9%); We estimate that new home sales declined 7.0% in October, following a 10.9% decrease in September.

02:00 PM FOMC meeting minutes, November 1-2 meeting: The FOMC increased the federal funds rate target range by 75bp to 3.75%-4.0% at its November meeting. Chair Powell hinted that the FOMC will likely raise the funds rate to a higher peak than it previously projected and said that slowing the pace is not contingent on seeing softer inflation data, but rather is likely to be appropriate because the level of the funds rate is now much higher, the cumulative tightening to date is substantial, and the magnitude and timing of its impact on the economy are uncertain. Our baseline forecast calls for the Fed to deliver a 50bp rate hike in December, and a 25bp hike in February, March, and May for a peak rate of 5-5.25%.

Thursday, November 24

No major data releases scheduled.

Friday, November 25

No major data releases scheduled.

Source: DB, Goldman

Mon, 11/21/2022 – 09:40

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