Key Factors:- Next week’s events include U.S. And Eurozone Inflation, Fed Speak, Bank Of Japan Minutes.

The latest updates on home prices in the U.S. will come out next week, along with new and pending home sales for August. Federal Reserve Chair Jerome Powell will hold a town hall-style event with educators on Thursday, and on Friday, we’ll get the Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation gauge. Costco, Micron Technology, Accenture, Nike, CarMax, and Carnival Cruise Line will be among the companies reporting earnings next week.

 

Key Takeaways

• The most recent national home price data will be released next week, along with new and pending home sales for August.
• On Thursday, Fed Chair Jerome Powell will hold a town hall-style meeting with educators.
• The PCE Price Index, the Fed’s favored inflation gauge, will be released for August on Friday.
• Among the firms reporting earnings will be Costco, Micron Technology, Accenture, Nike, CarMax, and Carnival Cruise Line.

Weekly Economic calendar USA

Monday 

• Chicago Fed National Activity Index (Aug)
• Dallas Fed Manufacturing Index (Sep)

Tuesday 

• S&P Case-Shiller National Home Price Index (Jul)
• FHFA House Price Index (Jul)
• New Home Sales (Aug)
• CB Consumer Confidence Index (Sep)
• Richmond Fed Manufacturing Index (Sep)
• Dallas Fed Services Index (Sep)

Wednesday 

• Durable Goods Orders (Aug)
• EIA Crude Oil Inventories
• MBA Mortgage Applications Index

Thursday 

• U.S. Gross Domestic Product – Final Reading (Q2 2023)
• Real Consumer Spending – Final Reading (Q2 2023)
• Corporate Profits (Q2 2023)
• Pending Home Sales (Aug)
• Kansas City Fed Composite Index (Sep)
• Fed Chair Jerome Powell’s Town Hall Speech
• Continuing Claims
• EIA Natural Gas Inventories
• Initial Jobless Claims

Friday 

• Personal Income and Spending (Aug)
• Advanced International Goods
• Advanced Retail Inventories
• Advanced Wholesale Inventories
• Chicago PMI, PCE Prices
• PCE Prices – Core
• Personal Income
• Personal Spending
• University of Michigan Consumer Sentiment – Final

TOP FACTORS IN WALL STREET

U.S.

The major U.S. equity indices fell for the week as investors reacted to hawkish Federal Reserve predictions and increasing Treasury yields. On Thursday, the S&P 500 Index suffered its biggest one-day loss in six months and a third straight losing week.
T. Rowe Price traders remarked that the United Auto Workers’ strike and the possibility of a U.S. government shutdown may have weighed on markets in addition to increased interest rates. Tax-loss harvesting may have intensified selling as fiscal year-end approached for some investors.
There will be many economic data this week, with the spotlight on the consumer and the Fed’s favored inflation gauge. Due to the solid labor market, August personal income should climb while expenditure cooled after summer holidays.
The bond market will closely monitor the upcoming inflation report. Headline PCE may rise due to rising energy prices, but core PCE should stay at 0.2%.
Wall Street will watch the UAW strike and government shutdown odds. This week will be full of central bank talk. Federal Reserve Governor Kashkari speaks at Wharton on Monday.
Bowman welcomed FedCommunities’ rental housing affordability event on Tuesday. On Thursday, Chair Powell hosts a town hall with educators and Goolsbee, Cook, and Barkin speak. Williams discusses monetary policy Friday.

Eurozone

Unless data surprises arise, the ECB hinted following its September meeting that its tightening cycle may be over. Next Friday’s flash HICP inflation statistics may be the first test.
Policymakers are worried about a weakening economy and recession, although significant progress has been accomplished and more is predicted this year.
As always, several nations will reveal their inflation data in the days preceding up to the eurozone release, so we can get a good estimate by Friday.
Besides that, the week saw surveys and other tier two and three data. Central bank talk, especially President Christine Lagarde’s comments on the inflation report day, will be monitored.

UK

The Bank of England stunned investors this week by holding the Bank Rate at 5.25, with those in favor voting 5-4. That may conclude the tightening cycle if data improves as the MPC expects.
However, poor data between now and the early November meeting could swing the balance. Not that there’s anything happening next week, but data will be under more strain. Only the second-quarter GDP final number stands out.

Higher-for-longer Fed forecast surprises

The Fed held its short-term lending guideline at 5.25% to 5.50%, unchanged from July, and its revised Summary of Economic Predictions predicted one more rate hike in 2023. Despite market expectations, authorities raised their 2024 and 2025 rate forecasts. The economy has been more resilient than projected, therefore the central bank upped its growth estimate.

Except for the Fed meeting, economic news was quiet this week. Weekly initial jobless claims fell below expectations to their lowest level since January, bolstering labor market optimism.

U.S. Treasury yields peak for years

A 16-year high in the benchmark 10-year U.S. Treasury yield was driven by the Fed’s likelihood of keeping short-term rates higher and strong economic growth. Bond prices and yields move oppositely. AAA municipal bond yields rose considerably as investors priced in a higher rate regime and Treasury market weakness.

Despite equities market risk-offness, investment-grade corporate bond yield premiums to Treasuries remained constant. T. Rowe Price traders said the primary market for high yield bonds was busy and expected additional deals due to strong demand for new issuance.

US Economy

Globally, investors will watch the second-quarter economic growth statistics on September 28 and Fed Chair Jerome Powell’s address on September 29.
The second estimates for Q2CY23 showed 2.1 percent annual growth for the US economy, compared to 2.4 percent for advance estimates and 2 percent for the first quarter. Thus, whether the economy maintains its annualized 2% growth rate will be crucial.
Participants will also closely listen to the Fed chair’s speech for a strong signal about the interest rate hiking cycle’s peak. Last week, Powell predicted increasing interest rates through 2024.

Housing Market Updates

On Tuesday, we’ll get the Case-Shiller National Home Price Index and the FHFA’s House Price Index for July. Prices, as measured by the Case-Shiller Index, are expected to rise 0.7% in July, marking the sixth consecutive month of recovery following severe losses in the second half of 2022. They are expected to have decreased 1% year on year, marking the sixth month in a row of year-over-year reductions.
Mortgage rates have reached their highest level in over two decades as a result of the Fed’s rate hikes, pricing many purchasers out of the market. This, along with a lack of inventory, has resulted in the most unaffordable market in nearly 40 years, with about 80% of Americans believing that now is not a good time to buy a home.

The Fed’s Preference Inflation Index

The Bureau of Economic Analysis (BEA) will release the August Personal Consumption Expenditures Price Index—the Fed’s favored inflation gauge—on Friday.
Prices are expected to have risen 0.5% last month, up from 0.2% in July. They are estimated to have risen 3.5% year on year, up from 3.2% in July. Core prices, which exclude volatile food and energy expenses, are expected to rise 0.2% month on month and 3.9% year on year.
The PCE Price Index is the Fed’s preferred inflation indicator since it more closely matches real spending decisions by consumers than the Consumer Price Index (CPI). As part of its dual mandate of price stability and full employment, the Fed targets a 2% annual rate of PCE inflation.

Weekly Global Market Calendar (18 Sep-22 Sep)

Monday September 25

• German Ifo (Sep)
• US National Activity Index (Aug)
• German State CPIs (Sep)

Tuesday, September 26

• Swedish PPI (Aug)
• US Consumer Confidence (Sep)
• New Home Sales (Aug)
• Richmond Fed (Sep)

Wednesday, September 27

• Spanish Parliament PM Vote re. Feijoo (TBC)
• CNB Policy Announcement
• BoJ Minutes (Jul)
• German GfK (Oct)
• Swedish Consumer Confidence (Sep)
• EZ M3 (Aug)
• US Durable Goods (Aug)

Thursday, September 28

• Banxico Policy Announcement
• CBRT Minutes (Sep)
• EZ Consumer Confidence Final (Sep)
• German HICP Prelim. (Sep)
• US PCE Prices Final (Q2)
• IJC (w/e 18th Sep)

Friday, September 29

• Chinese Caixin PMIs (Sep)
• UK GDP (Q2)
• German Import Prices & Retail Sales (Aug)
• Swiss KOF (Sep)
• German Unemployment (Sep)
• Norwegian Unemployment (Sep)
• EZ Flash HICP (Sep)
• US PCE Price Index (Aug)

Day-Wise Events in details

Tuesday WEDNESDAY 26-27 Sep 

Spanish Parliamentary Vote

People’s Party leader Feijoo was given the first mandate by the King to form a government after the July election, when neither he nor incumbent PM Sanchez could reach a majority. Feijoo is unlikely to win 176 seats in Congress, therefore his chance is slim. If he fails, incumbent Sanchez will have an opportunity to build a government in October/November, although the PSOE leader is unlikely to win a majority. In case both challengers fail, the King may offer others a mandate to form a government or let them try again. If a second effort is made, the threshold drops to a simple majority, but Politico believes Feijoo will need 172 votes to defeat the opposition’s 170 and convince Junts separatists to abstain. Another general election in the first few months of 2024 is likely due to the uncertainty of how many seats each camp will win and whether separatist groups will join or abstain.

THURSDAY SEP 28

Banxico

As expected, the central bank left rates unchanged at the preceding Banxico meeting and restated its guidance that the reference rate will need to be maintained at its current level for a long time. Thus, Banxico may maintain rates at 11.25% on Thursday. At this meeting, guidance will be prioritized. As expected, August inflation statistics showed a drop in 12-month headline and core measurements. September half-month statistics showed headline M/M and Y/Y cooling slightly. M/M core accelerated somewhat but was in line with forecasts, while Y/Y core softened from the first half of August. Meanwhile, July economic activity stagnated and disappointed analysts. Pantheon Macroeconomics analysts expect Banxico guidance to change after the data, seeing the September meeting as a prime opportunity. Pantheon also expects the Banxico to gradually lower rates in late Q4.

CBRT Minutes

The CBRT raised rates 500bps to 30% to reflect market forecasts. The Bank said it will tighten until inflation improves significantly and gradually strengthen as needed. Further simplifying and improving the micro and macroprudential framework, the CBRT noted. July and August inflation was beyond projections, the release said. CapEco analysts say the central bank is “now doing what many investors had hoped they would by raising interest rates sharply and taking a more serious stance against inflation,” keeping investor optimism in the policy shift and Turkey’s sovereign dollar bond spreads near multi-year lows. The CapEco department expects rates to increase to at least 35% by year-end, requiring more tightening.

Friday SEP 29

China Caixin PMI (Fri)

Chinese markets will be on holiday from September 29th to October 6th for the Mid-Autumn Festival, when the PMIs will be issued. Chinese assets will not react to the data, but the surveys may have a macro influence as another economic indicator. Manufacturing was 51.0, Services 51.8, and Composite 51.7 in August PMIs. After a wave of stimulus to boost the economy, the release arrives. In recent commentary, the NBS stated that the economy saw accelerated demand, but domestic demand remains insufficient and the foundation of economic recovery needs to be consolidated, and that the domestic economy is recovering but still faces difficulties and China should focus on expanding domestic demand.

Friday’s EZ Flash CPI

September Y/Y HICP is expected to dip to 4.6% from 5.2%, with the super-core metric falling to 4.9% from 5.3%. As energy costs prevented a larger reduction, headline Y/Y HICP fell to 5.2% from 5.3%, while super-core fell to 5.3% from 5.5%. Moody’s anticipates energy costs to be the “main downward pull on the headline rate” this time, while the core should also fall due to transport services base effects unwinding. Policy-wise, the publication is unlikely to affect pricing for the October meeting, which has a 90% chance of keeping the deposit rate at 4.0%. However, if the publication is below forecasts and September PMI indicators are sluggish, markets may begin to bring forward ECB rate cuts, with the first 25bps reduction priced in for July next year.

US PCE (Fri)

Analysts predict August core PCE prices to grow 0.2% M/M, matching July’s rate. To predict whether the Fed will raise rates again this year, traders will frame the data in the perspective of Fed policy. While the Fed held steady on policy during its September meeting, it could raise rates further. The central bank upped its PCE prediction for this year from 3.2% Y/Y to 3.3%, but cut its core PCE outlook to 3.7%. Not until 2026 does the central bank forecast headline and core inflation at 2.0%. Chair Powell said that while inflation has moderated and expectations remain well anchored, the central bank will keep rates in restrictive territory until it is confident that inflation is returning to target. The central bank governor also warned that below-trend growth and weaker labor markets may be needed to lower inflation. Powell said the last three inflation numbers were encouraging, but he wants more.

EARNINGS CALENDAR

Monday, September 25

• Thor Industries Inc. (THO)

Tuesday, September 26

Costco Wholesale Corp. (COST)

Cintas Corp. (CTAS)

Ferguson PLC (FERG)

Neogen Corp. (NEOG)

Wednesday, September 27 

Micron Technology Inc. (MU)

Paychex Inc. (PAYX)

Jefferies Financial Group (JEF)

Concentrix Corp. (CNXC)

H.B. Fuller Company (FUL)

Thursday, September 28  

Accenture PLC (ACN)

Nike (NKE)

Jabil Inc. (JBL)

CarMax Inc. (KMX)

Vail Resorts Inc. (MTN)

BlackBerry Ltd. (BB)

Friday, September 29

Carnival Corporation (CCL)

For details

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