Ostwald, Marc
08:16 (1 hour ago)
to Marc
- The usual meagre data fayre for the second working day of the month has
UK Construction PMI and Brazil Industrial Production; Powell heads busy
run of central bank speakers, but most not scheduled to talk on policy;
Austria 5 & 10-yr Sale; Pepsico results
- UK Construction PMI: seen stabilizing after choppy quarter
- NAFTA post mortem: name change probably most significant item, mostly
Emperor's New Clothes
..........................................................................
********************
** EVENTS PREVIEW **
********************
As is often the case on the second working day of the month, the data schedule is very modest, though the central bank schedule is plentiful via way of the RBA and CBSL rate decisions ahead of a deluge of ECB, BOE and Fed speakers, including the first of two outings this week for Powell. China, Hong Kong and India are all closed for holidays, while Austria sells EUR 1.1 Bln total of 5 & 10-yr, while Pepsico is headliner in corporate earnings terms. Statistically there are the overnight South Korea Industrial Production to digest ahead of Spanish Unemployment and the UK Construction PMI. For all that there are many central bank speakers today, it is debatable whether there will be much that offers fresh insights into monetary policy outlooks, just as it was far-fetched to expect anything new from the RBA at today's meeting other than no change in rates and a continued signal that rates will remain on hold for a further protracted period. For example, Mr Powell will hardly be saying anything different to the Fed press conference, while many of the other central bank speakers are talking on non-monetary policy issues, e.g. Quarles testimony is on financial sector supervision (as is ECB's Villeroy), Barkin speaks on Community banking, while BoE's Haldane is chairing a panel on 'Bringing Psychology and Social Sciences into Macroeconomics'. As such the ongoing UK Conservative Party conference and Italy budget related headlines (a cabinet meeting is scheduled for 6 pm local time to consider potential tweaks to the original proposal) may prove to be the main source of market moving headlines, notwithstanding the ephemera of random Trump outbursts, though one wonders if these might be a case of cheerleading as the mid-term elections approach, as per the "new" NAFTA jobs comments yesterday. A closer looks at the details of the latter suggests that the biggest changes are a) the new name USMCA, and b) the inclusion of the G20 agreement on not manipulating currencies (i.e. hardly revolutionary), and c) changes on US/Canadian bilateral dairy trade, which in truth were in the original TPP trade agreement which Trump walked away from. What there is not is any exemption for Canada and Mexico on steel and aluminium tariffs. As such Trump, Trudeau, Pena Nieto and Lopez Obrador are revealed as just another set of chest beating snake oil salesman peddling yet another version of the Emperor's New Clothes - perhaps we should not be even vaguely surprised, but that still needs to be borne in mind. The UK Construction PMI may thus be something of a sideshow, with the consensus looking for no change at 52.9, which is probably agnostic, after the volatility of the past three months (June 53.1, July 55.8, August 52.9), and out of kilter with sharp moves seen in the past two September. Some will doubtless hope that yesterday's better than expected Manufacturing PMI skews the risk to the upside, though the Construction PMI is historically much better correlated with the Services measure, and even that has become rather more random as a relationship over the past year.
from Marc Ostwald
