Highlights of last week:
- Nasdaq composite finished the week at record highs.
- President Trump initiated the process for 10% tariffs on another $200bn of Chinese imports.
- Crude oil collapsed post the US-China trade war escalation and return of oil from Libya which saw Crude oil futures losing $3.83/bbl on Wednesday.
- Brexit issues continued, with three cabinet members resigning, including Boris Johnson and David Davis who were two prominent pro Brexit figures.
- The Bank of Canada raised interest rates by 0.25% to 1.5% as expected, citing key inflation measures of running around 2%, consistent with the economy close to capacity
- Market has continued to build USD longs which rose another U.S. $2.6 billion to U.S $17.9 billion overall.
For the week ahead, the key events are as follows.
Australia: RBA Meeting Minutes for the July meeting (Tuesday), Employment Report (Thursday). The market is looking for employment growth of around 17K, which would keep the unemployment rate unchanged at 5.4%.
New Zealand: Q2 CPI (Tuesday). Expectations are for a 0.5% q/q which would see the annual rate lift from 1.1% to 1.7% yoy, still below the midpoint of the RBNZ target band. The inflation target is to keep inflation within a range of 1–3 percent on average over the medium term. The risks are for a weaker than expected outcome given inflation has remained lower even when growth was strong earlier in the year.
China: Q2 GDP (Monday) the markets is expecting +6.7% growth over the year to the June quarter, a small drop from Q1 of 6.8% although still a robust number. Industrial production and retail sales also out (Monday).
Japan: Q2 CPI (Friday). The inflation rate ex-food and energy for Jun is expected to by +0.4%. Inflation remains subdued in Japan however far from deflation.
U.S: Retail sales and the Empire State survey (Monday), industrial production (Tuesday) and the Philadelphia Fed manufacturing survey (Thursday). Retail sales have enjoyed a solid four-month run and are likely to remain so. Markets expectation are for headline retail sales to rise 0.5% while retail sales ex autos are expected to rise 0.4%. Risks are to the upside there.
US second quarter corporate earnings season is underway and consensus expectations are high.
Fed Speakers: Fed Chair Powell testifies to Senate panel on Tuesday.
Canada: CPI (June) and retail sales (Friday). Both data prints were weak last month however the Bank of Canada still chose to hike last week. The market is looking for inflation to rise 0.3% taking the annual rate to 2.3% yoy. Retail Sales are expected to print flat, after last month’s weather effected -1.2% decline.
In the Euro area: Inflation rate final for the Euro Area (Wednesday).
UK: Labour market report (Tuesday), CPI (Wednesday), and retail sales (Thursday).
After last week’s resignation of pro Brexit cabinet ministers David Davis and Boris Johnson. There is more chance that Theresa May could face a vote of confidence in her leadership of the Conservative party. Keep in mind that Parliament breaks for its summer recess on 24 July, hence the window is narrowing for Brexiteers to push for a no confidence vote in the near term.
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