of the week ahead

Transcript

Matt Jones

Welcome to "The Long & Short of the Week Ahead", a production of Eurizon SLJ Capital that takes a look at the macro-economic themes of the week ahead and has been recorded for professional investors.

My name is Matt Jones, Head of Distribution for Eurizon SLJ Capital, and I'm joined by Neil Staines, Senior Portfolio Manager.

Welcome back, Neil. Great to have you here with us again.

Neil Staines

Thank you very much. Lovely to be here, Matt.

Matt Jones

As we turn our thoughts to the week ahead, I think there's going to be a greater focus, perhaps in our session today when it comes to the U.K. But what else are you going to have your eye on as we look into the week ahead?

Neil Staines

Yeah, thanks, Matt. And, you know, attention really does turn back to the U.K. economy this week. After a tough week politically in the U.K., where an attempt to address the fiscal slippage of the Covid pandemic through a 1.25% Health and Social Care Levy gave few supporters on either side of the House or indeed the press. And it puts Labour ahead of Conservatives for the first time, according to one poll out this week. I think that's an interesting dynamic. Now, whether you think this is misguided, mistimed or misunderstood, the government will likely welcome a positive distraction from economic data this week.

On Tuesday, we've got the unemployment report for July that should see the unemployment rate dip a little further as the recovery or reopening continues. But we'll keep a close eye on on earnings data in that regard similar to the dynamic in the US.

On Wednesday, we get inflation for August. Now, amid a raft of global inflation data this week, we expect a significant jump in UK headline inflation to 2.9% in August. Now, the Bank of England Governor Bailey this week suggested that inflation is likely to be persistent, but numbers like these are certainly likely to keep the MPC on their toes for a little while longer.

On Friday, we get retail sales and we expect a bounce in August from a very disappointing July data. These are going to be closely watched, you know, to put that into context Bailey also suggested in the week that we see some flattening out of the recovery. Now, I think there's an interesting dynamic going on in here. Late this week, we saw July GDP data in the U.K. and this was certainly a little weaker than expected, but it showed a slowing momentum. But it's difficult really to kind of disentangle global supply issues with likely still rising demand in the U.K..

Secondly, I think, you know, the supply and demand imbalance is also going to be a big factor globally, you know, not just for inflation, but also for growth. Now, this week, we get the suite of data for August out of China and a lot of focus after a lot of focus on activity over recent weeks. This is going to be keenly watched. So we get retail sales, industrial production and investment data for the month of August. Now, further sequential moderation is likely, but with the total social financing this week suggesting a more positive progression, we may likely be coming towards an end of the moderation in growth in here. Unemployment also, which will be a key focus, but that remains relatively low and stable. Now, we've been highlighting the China growth moderation since February, and it's not clear that there is much further bottoming out in this. And we certainly see an encouraging signs from a monetary and fiscal standpoint. Nominal growth in China remains strong. We view the recent regulatory social engineering, targeted rebalancing and deleveraging as in line with the longer term structural targets of China. And they've proved a big positive for China over the past 30 years. We're not worried at this stage about China.

And lastly, on to politics, and obviously the UK was at the forefront of political questioning this week, but, you know, going forward, we expect the UK to add to a rising number of incumbents coming under pressure, whether it's Canada, Japan, Germany, France or even the US are all likely realizing that it's easy to spend lots of money in a global pandemic, but much more complicated when you have to ask people to pay it back. So I think in the US there's a continued focus also on the fiscal and monetary dynamics. Do we get Powell re-nomination? That I think, as we outlined last week, does have important connotations for the monetary dynamic. And we also have elections in Russia and in Germany over the coming weeks, as well as the Japanese leadership election that has important connotations from a fiscal stimulus perspective. So, you know, I think if we also switch to the EU stalling banking union talks and rising disparity of opinion on the monetary policy debate of the Eurozone Governing Council table, the ECB is also something that I think plays into the political dynamic much more complicated over the coming weeks and into Q4.

Matt Jones

Thank you, Neil. An interesting week ahead from a UK perspective in particular. Between now and then, however, we we have the weekend. As ever, we seem to be spoiled for choice when it comes to areas of focus. So what's caught your eye for the weekend?

Neil Staines

Absolutely. It's quite phenomenal, really. You know, this this weekend sees a return to Premier League football after the International World Cup qualifier break. And now with the potentially not very many further future opportunities for me to mention this with West Ham in the top four another important away game to Southampton and Arsenal versus Norwich as well with those at the bottom of the table would be quite important. And who could resist the return of Ronaldo to premiership action?

In Formula One, we move to Italy on the Grand Prix and some further fascinating battle likely I had there with the and now three points ahead in the driver's challenge. And I was about to mention the final test in the England India Test series. However, right at the last minute, it wasn't England saved by the Manchester rain, but saved by an India withdrawal due to fears of Covid.

However, despite that, you know, there is that one incredible story in sport this weekend, and that is Emma Raducanu at the final of the US Open at the Arthur Ashe Stadium in New York on Saturday. You know, ordinarily Leylah Fernandez at 19, making the final would be headline news, but trumped by the 18 year old qualifier. It really is a phenomenal story.

Matt Jones

Absolutely. Quite a phenomenal performance and a fairy tale in New York. Well, Neil, thank you once again for joining us. We look forward very much to catching up with you again next week.

Neil Staines

It was a pleasure. Likewise, thanks, Matt.

Matt Jones

Thank you for joining us for "The Long and Short of the Week Ahead". Further insights are available on our website eurizonsljcapital.com/insights. We look forward to you joining us again next week for more insights into macro-economic events and "The Long and Short of the Week Ahead".

Disclosure

None of the contents of this document should be understood as constituting research on investment matters, or as a recommendations, advice or suggestions, implicit or explicit, with respect to an investment strategy involving the financial instruments discussed, or the issuers of the financial instruments, nor as a solicitation or offer, nor as consulting on investment matters, of a legal, fiscal, or other nature. All the companies of the Intesa Sanpaolo Group, its administrators, representatives, or employees, decline any responsibility (fault-based or otherwise) deriving from indirect damages potentially caused by the use of this communication or its contents, or in any case deriving in relation to this document, nor may they be consequently held liable for any of the above. The information provided and the opinions contained in this document are based on sources considered reliable and in good faith. However no declaration or guarantee is offered by Eurizon SLJ Capital Limited, explicitly or implicitly, on the accuracy, exhaustiveness and correctness of the information, and there is no guarantee that results, or any other future events, will be compatible with the opinions, forecasts, or estimates contained herein.

Views accurate as at the time of publication. Opinions expressed by the authors are their own and do not necessarily reflect those of Eurizon SLJ Capital Limited, Eurizon Capital SGR or the Intesa Sanpaolo Group.
The value of investments will fluctuate, which will cause prices to fall as well as rise and you may not get back the original amount you invested. Past performance is not a guide to future performance.

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