Key Factors for The week Ahead highlights: Retail earnings, Home sales, and Jackson Hole Economic Symposium, Initial Jobless Claims etc.
Next week, Lowe’s, Macy’s, Kohl’s, Nordstrom, Dollar Tree, Dick’s Sporting Goods, Urban Outfitters, and BJ’s Wholesale Club will report earnings. Zoom Video Communications, Nvidia, and TD Bank will report second-quarter results. Central bankers, finance ministers, and economists from around the world will attend the Kansas City Fed’s annual Jackson Hole Economic Symposium starting Thursday. A timely consumer sentiment reading and July new and existing home sales will also be provided.
Key Takeaways
- Next week, Lowe’s, Macy’s, Kohl’s, Nordstrom, Dollar Tree, Dick’s Sporting Goods, Urban Outfitters, and BJ’s Wholesale Club will report earnings.
- Central bankers, finance ministers, and economists from around the world will attend the Kansas City Fed’s annual Jackson Hole Economic Symposium starting Thursday.
- A timely consumer sentiment reading, and July new and existing home sales will also be provided.
Next week’s key pionts on watch in wall street
US market
Wall Street benchmark indices ended down on Friday due to inflationary concerns and the longevity of the high interest rate regime. Dow 30 closed at 34,500.70, up 25.83 points 0.07%, S&P 500 at 4,369.71, down 0.65 points 0.01%, and Nasdaq Composite at 13,290.80, down 26.16 points 0.20%.
Indian markets will follow the Friday US market close on Monday. They will follow Dow and GIFT Nifty futures on Monday. The latter indicates Nifty50 and Monday action early.
Global Macros
US to release S&P Global Services, manufacturing, composite PMIs, and initial unemployment claims. UK PMI Manufacturing, S&P Global, and CIPS statistics will be released. The week will see Eurozone S&P Global Services and Manufacturing PMI and consumer confidence statistics.
China will set 1- and 5-year loan prime rates. The Street will also watch Federal Reserve Chair Jerome Powell’s Jackson Hole Economic Policy Symposium speech on Friday, August 25.
Retail Earnings Rise
Lowe’s, Macy’s, Kohl’s, Nordstrom, Dollar Tree, Dick’s Sporting Goods, Urban Outfitters, and BJ’s Wholesale Club will report earnings next week. TD Bank, Zoom Video Communications, and Nvidia will report second-quarter results. Refinitiv reports that 79% of large retailers have declared profit over analysts’ predictions and 64% have posted revenue above expectations.
Jackson Hole Economic Symposium
Beginning Thursday, Kansas City Fed policymakers will attend the three-day Jackson Hole Economic Symposium, held annually since 1981. It brings together central bankers, finance ministers, economists, and scholars from around the world to address the latest economic concerns. This year’s symposium, “Structural Shifts in the World Economy,” will likely discuss how central banks might prevent recessions after raising interest rates to their highest level in over two decades.
Home Sales Update
Current house sales are expected to drop to 4.15 million units from 4.16 million in June, according to the National Association of Realtors (NAR) on Tuesday. Mortgage rates hit a 21-year high this week, and a rise in property prices since February has reduced affordability, possibly affecting sales. Despite this, new house sales likely jumped to 701,000 this month from 697,000 in June.
Smart money
A flurry of 13F filings on Monday showed investors what hedge funds with at least $100M in assets under management bought and sold in Q2. Warren Buffett’s Berkshire Hathaway (BRK.B) increased its holdings in homebuilders like D.R. Horton (DHI), NVR (NVR), and Lennar (LEN) while selling stakes in Activision Blizzard (ATVI), Chevron (CVX), and McKesson. Investors also watched David Tepper’s Appaloosa and Elliott Management reports, while Michael Burry’s Scion Asset Management sold bank stocks and Alibaba (BABA). Long positions and call and put options are mentioned in filings, while shorts are not. (52 comments)
Barbie bonanza
Barbie surpassed Christopher Nolan’s The Dark Knight as Warner Bros. Discovery’s (WBD) highest-grossing domestic film this week with $537M. “After a tough stretch for movie theaters during the pandemic… foot traffic for theaters and music venues rose 29.5% last month,” said JLL President of Retail Advisory Services Naveen Jaggi. Barbie is also poised to be 2023’s highest-grossing film. SA analyst Andrew Dessy called Warner Bros.’ advertising prowess a “nice preview to the power of this recently combined media conglomerate.”
Yields rise
Bond rates rose across the board, extending a roughly three-month uptrend that began at the start of July. The benchmark 10-year Treasury (US10Y) yield finished at 4.25% on Wednesday, the highest since 2008. It followed the latest FOMC minutes, which suggested more interest rate hikes. Rising yields are still affecting stock prices, but the housing sector may feel the effects first. Latest developments showed 30-year fixed-rate mortgages at 7%, the highest level in over 20 years. 24 comments
PMI DATA
The Eurozone and UK will issue PMI data on Wednesday, which could reveal whether the European Central Bank will raise rates again in September and whether the Bank of England will raise rates significantly.
Eurozone and UK PMIs have fallen in recent months due to service sector stagnation and manufacturing decline.
ECB President Christine Lagarde will speak at Jackson Hole on Friday, with markets anticipating for September moves.
In July, Lagarde said the ECB would retain a “open mind” on rate decisions and was “moving to a stage where we are going to be data dependent”.
Weekly Global Market Outlook (21-25 August) / Day Wise
Tuesday, August 22
- Existing Home Sales (Jul)
- Richmond Fed Manufacturing Index (Aug)
Wednesday, August 23
- S&P Global Composite PMI – Flash Estimate (Aug)
- New Home Sales (Jul)
Thursday, August 24
- Durable Goods Orders (Jul)
- Chicago Fed National Activity Index (Jul)
- Kansas Fed Manufacturing Index (Aug)
- Day 1 of Jackson Hole Economic Policy Symposium 2023
Friday, August 25
- Michigan Consumer Sentiment Index – Final Reading (Aug)
- Day 2 of Jackson Hole Economic Policy Symposium 2023
Day-Wise Events in details
Monday 21 AUG
People Bank of China LPR
The PBoC is expected to lower its Loan Prime Rates next week, with the 1-Year LPR at 3.55% and the 5-Year LPR at 4.20%. This follows the PBoC’s surprise decision to lower the 1yr MLF rate by 15bps to 2.50%, which is a bellwether for the benchmark LPRs, and its unexpected 10bps cut to 1.80% on its 7-day Reverse Repo operations, which was the same magnitude as its Standing Lending Facility rate cut shortly after. The surprise easing by the PBoC follows numerous support pledges by Chinese authorities, including the central bank, and a streak of disappointing economic data releases from China, which recently slipped into deflation and showed a wider-than-expected contraction in exports and imports. The latest industrial production and retail sales figures also missed forecasts and prompted several commercial banks to downgrade their GDP growth forecasts for the year.
Tuesday 22 AUG
New Zealand Retail Sales
New Zealand Retail Sales (Tue): Westpac predicts a -0.1% QQ measure, following a -1.4% Q1 result. The bank expects nominal spending to rise 0.1% and goods sales to dip 0.1%. Excluding lumpy fuel and motor vehicles, we estimate that the volume of goods sold in ‘core’ retail categories fell by 1% over the June quarter. The desk suggests that high-interest rates and inflation have squeezed households’ purchasing power.
WEDNESDAY 23 AUG
EZ Flash PMI
Manufacturing PMI to drop to 42.4 from 42.7, services to drop to 50.4 from 50.9, resulting in a composite of 48.4 vs. 48.6. The composite fell to 48.6 from 49.9 in the previous edition as manufacturing fell to 42.7 from 43.4 and services fell to 50.9 from 52.0. The accompanying study stated that the Eurozone has had a poor second half of the year.Economic output decreased in July after stagnating the month before and growing steadily in the first five months. Manufacturing has slumped, but services activity growth has slowed too, reducing economic support. Investec analysts expect the July trends to continue into August because the “forward-looking elements of the July release failed to provide any hint of improvement, with new business in services contracting for the first time in seven months”. A weaker announcement may increase concerns about the Eurozone’s growth prospects and reduce betting on an ECB raise in September (63%). However, traders will likely wait for the August 31st publication of flash Eurozone CPI measures before making predictions for next month.
UK Flash PMI
Services to drop to 50.7 from 51.5, manufacturing to drop to 45.0 from 45.3, resulting in a composite of 50.3 vs. 50.8. The composite dropped to 50.8 from 52.8 in the previous report as services fell to 51.5 from 53.7 and manufacturing fell to 45.3 from 46.5. A minor upturn in service sector activity contrasted with another manufacturing production decline, according to the study. The latest factory production drop was the fastest since January. Oxford Economics predicts “are likely to signal further weakness in private sector activity growth” for the release. Last month, manufacturers reported faster output and new order contractions. This means August activity will be low. Policy-wise, last week’s strong wages data and sticky core inflation indicate a 25bps BoE raise for September, therefore the announcement is unlikely to affect pricing for the meeting. However, a weaker outturn could lower market expectations of tightening beyond next month.
THURSDAY AUG 24
Jackson Hole Symposium
The schedule will be released on the symposium’s eve, although Fed Chair Powell will speak on Friday. Symposium title: “Structural Shifts in the Global Economy”. Investec analysts say “we are not convinced that Fed members will add that much to the current monetary policy conjuncture, given a fair amount of policy related comments recently, including those in the July meeting minutes,” but the event should help markets understand how central bankers worldwide view medium-term economic issues. The Fed can raise rates again if needed and bases its policy reaction on incoming data. The latest FOMC meeting minutes indicated that inflation is “unacceptably high” and that officials perceive significant upside risks to inflation, maintaining a hawkish policy stance. Some warned that the Committee could tighten too much, and others saw economic dangers balancing. Despite the modest downturn in economic activity, most officials believe below-trend growth and a weaker labor market are necessary to restore economic equilibrium. Fed policymakers no longer expect a modest recession this year, demonstrating the economy’s resiliency despite strong monetary tightening. Tim Duy, SGH Macro’s Fedwatcher, said Jackson Hole presents a clear messaging difficulty for the Fed. Powell can follow the messaging of recent weeks, including the minutes and June SEP, which has been consistent with market pricing of roughly 10bps more rate hikes before the Fed cuts rates 100bp in 2024, but that messaging relies on a forecast that is clearly not working, and a data-dependent Fed would respond accordingly.” SGH argues the Fed would highlight growth is substantially over trend and brace us up for another rate hike at the October or November policy meeting if he followed the data.If he was bold, he would say that a growth rate like that anticipated by the Atlanta Fed should trigger a rate raise in September, but it feels like too much of a move when the Fed consensus wants to end the rate hike cycle.” The data-dependent strategy resulted in too-low pricing for October and November meetings, according to SGH. However, SGH suggests the Fed chair use recent rhetoric “this path fights the growth numbers and emphasises the expected impacts of policy lags,” it says. Powell might also cite recent decreases in near-term inflation expectations to tighten policy in real terms even if the Fed maintains rates unchanged.” That method would suggest SGH is pricing inflation forecasts too low. Powell is likely to emphasize growth, but this raises the chance of recession.
CBRT announcement
In the CBRT announcement on Thursday, there are no estimates for the next step after the 250bps boost in July, which fell short of the market’s median expectation of a 500bps hike. However, economists forecast a CBRT raise in August, though the quantity is unknown. A policy U-turn at the last two sessions (after Erkan became Governor in early June) resulted in rate rises below investor forecasts. After years of Turkish President Erdogan’s fight against high rates, Erkan promised “gradual and steady rate hikes” in July. In the current monthly CRBT poll, Turkish End-2023 CPI is expected at 59.46% (prev. 43.82%), 12-Month CPI at 42.01% (prev. 33.21%), End-2023 USD/TRY at 29.8220 (prev. 28.4560), and 12-Month Repo rate 23.25%. However, some desks warn that a substantial boost may not affect the Turkish currency, citing the Russian Rouble and Argentinian Peso reactions to their central banks’ rate hikes.
BoK Announcement
The Bank of Korea is anticipated to keep its 7-Day Repo Rate at 3.50% for the 5th straight meeting next week as inflation softens and the central bank has less incentive to hike. At the last meeting in July, the BoK unanimously decided to keep rates unchanged, but six of the seven Board members wanted to keep the door open for one more rate hike. The BoK stated that domestic economic growth is expected to recover gradually with GDP and consumer price inflation this year expected to be consistent with forecasts. The BoK also acknowledged that risks to some non-bank financial sectors have increased and will retain a restrictive policy stance for a long time and monitor financial stability issues. Additionally, BoK Governor Rhee said several Board members expressed concern about the rise in household debt and noted that no Board member had discussed a rate cut so far, but the central bank clarified shortly after that Governor Rhee did not say there will be no rate cut until year-end, which suggests the central bank doesn’t want to rule out any options despite the unlikely likelihood.
FRIDAY 25 AUG
Japan Tokyo CPI
Markets anticipate a slight decrease in August CPI to 2.9% (prev. 3.0%), while Core metric is expected to remain at 3.0% (prev. 3.2%). Desks expect the BoJ to consider a slight policy shift due to 3% inflation and Q2 GDP surprises. The Tokyo release precedes the nationwide CPI report two weeks later. ING analysts believe BoJ Governor Kazuo Ueda will approach the FX market differently than the last governor. The yield gap, which ignores the recent good recovery and relatively significant inflation, explains JPY weakness. High cost-push inflation may hamper household consumption and investment recovery. The present JPY move does not support the BoJ’s assertion that FX reflects economic fundamentals.
US Economic calendar for week
Tuesday August 22
Existing Home Sales (July
Wednesday August 23
API & EIA Crude Oil Stock Change
MBA Mortgage Applications (For week ended Aug18)
S&P Global Manufacturing Services
Composite PMI Flash (Aug)
New Home Sales (July)
Thursday August 24
Jack Hole Symposium
Initial Jobless Claims (For week ended Aug19)
Durable Goods Orders (July)
Friday August 25
Jack Hole Symposium
Fed Chair Powell speech
Global Economic calendar for week
Monday, August 21
- PBoC LPR
- German PPI (Jul)
Tuesday, August 22
- US Richmond Fed Index (Aug)
- New Zealand Retail Sales (Q2)
Wednesday, August 23
- EZ/UK/US Flash PMIs (Aug)
- Canadian Retail Sales (Jun)
- US New Home Sales (Jul)
Thursday, August 24
- Fed’s Jackson Hole Symposium (24-26th Aug)
- CBRT Announcement
- BoI Announcement
- BoK Announcement
- US Durable Goods (Jul)
Friday August 25
Fed’s Jackson Hole Symposium (24-26th Aug)
Japan’s Tokyo CPI (Aug)
German Ifo Survey (Aug)
German GDP Detailed (Q2)
Uni of Michigan Final (Aug)
EARNINGS CALENDAR
Monday, August 21
Tuesday, August 22
- Lowe’s Companies (LOW)
- Medtronic (MDT)
- Baidu (BIDU)
- KE Holdings (BEKE)
- Dick’s Sporting Goods (DKS)
- Coty Inc. (COTY)
- BJ’s Wholesale Club (BJ)
- Toll Brothers (TOL)
- Macy’s (M)
- Urban Outfitters (URBN)
- La-Z-Boy Inc. (LZB)
Wednesday, August 23
- Nvidia (NVDA)
- Analog Devices Inc. (ADI)
- Snowflake Inc. (SNOW)
- Autodesk Inc. (ADSK)
- NetApp Inc. (NTAP)
- Bath & Body Works (BBWI)
- Williams-Sonoma (WSM)
- Advance Auto Parts (AAP)
- Kohl’s Corp. (KSS)
- Peloton Interactive (PTON)
- Foot Locker Inc. (FL)
- Abercrombie & Fitch (ANF)
Thursday, August 24
- Intuit Inc. (INTU)
- Royal Bank of Canada (RY)
- Toronto Dominion Bank (TD)
- Vmware Inc. (VMW)
- NetEase Inc. (NTES)
- Workday Inc. (WDAY)
- Marvell Technology (MRVL)
- Dollar Tree (DLTR)
- Ulta Beauty (ULTA)
- Burlington Stores (BURL)
- The Gap (GPS)
- Nordstrom (JWN)
- For details
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