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. It's good to have you here for what is the start of the Season 2.
Thank you very much. Lovely to be here, Matt.
As we look into the week ahead, I think we're going to be starting the season with a truly global look at data and also perhaps covering topics of growth, policies and risk within markets. So looking to the week, can you outline your thoughts as to what you're going to be looking at in particular?
Yes, absolutely. Thanks very much, Matt.
As you say, I think, you know, there are some specific, important focuses on growth and how that interacts with the Delta variant upswing across the globe; policy from a fiscal and monetary stance; and also how the impact of risk plays as we get past the end of the summer.
So, next week's data focus kicks off with China and the August PMI data. Now, there's been much focus of late on the sequential growth moderation in China and indeed the regulatory pivot and its impact on targeted equity segments. Our view is that this is a core function of China's socialist ideology and more akin to the ESG pivot of Europe and the West rather than something more sinister. And furthermore, a recent announcement from the PBoC [People's Bank of China] suggested that it will boost credit support for the real economy and that likely helped sentiment much more; certainly seems as if we're going from more pessimism to optimism. The PMI data will be closely watched in relation to the near-term global growth outlook. Certainly there are some signs that Germany, and Europe, are following China's moderation, as we have often suggested. But overall, we continue to see growth and yields moderating in China, but worth noting that we still see high absolute levels of both and we remain positive on China.
Secondly, switching to the US, we get manufacturing and services ISM data for August on Wednesday, and then on Friday. PMI remains deep in expansionary territory, especially in manufacturing. But there will clearly be some inference on the US growth momentum drawn from the ISM data. However, next week also brings the August employment report, where its clearest inference is not directly for growth, but likely for policy sentiments. So a number of Fed speakers have stated that a couple more months of near a million job gains is likely consistent with the attainment of the magical 'substantial further progress'. And so after 938,000 in June and 943,000, that's thousand, job gains its an important number in that regard. It's also likely significant, has significant connotations, for confidence and the new dot plot projections and ultimately the policy guidance and the September FOMC.
And then lastly, on risk, the following Monday, the 6th of September, is the US Labour Day holiday. Its importantly seen as a benchmark for the return of markets from the summer holidays. Now, the market proverb 'sell in May, go away' was originally addended with '...and come back on St Ledger's Day', the mid-September thoroughbred horse race that attracted aristocrats, merchants and bankers back to the city from their country estates, but more recently has been addended with '...come back after Labor Day'. Now, at the end of May, the S&P was around 4,200, almost 7% below the current levels. And it'll be interesting to watch the reaction function of markets over the coming weeks and the attitude to risk likely given the Fed's improved confidence. We continue to see a supportive macro backdrop for equities, particularly in the US - potentially bad news for those who have sold in May.
Thank you, Neil. As ever, a lot to be looking at in the week ahead. In the meantime, though, we have the final Bank Holiday of the British Summer. So I think aside from the obligatory barbecue - weather permitting, usual caveat in England - what else have you got your eye on?
Yes, absolutely, I shall certainly be having a good look out for any available barbecues. But beyond that, there's plenty of sport to keep us occupied. It's the culmination of the second test between England and India, at Headingley, after a blistering start from Jimmy Anderson, I think it's likely to level the series for England, fingers crossed. The Paralympics carries on with the culmination of the track cycling, medals up for grabs in athletics, archery, equestrian, swimming, triathlon and wheelchair rugby. It sounds like some wonderful action there. And the Formula One is back after a long break - cancelled Japan Grand Prix - we move to Belgium and the next phase of the head to head Hamilton vs Verstappen. Fascinating stuff there, too. Then it would be, finally, it would be remiss of me not to mention Premiership football with West Ham seeing if they can retain the top spot. Half an eye also on the close of the transfer window, potentially some last minute surprises.
Thank you, Neil. Lots to be looking at over the weekend from a sporting perspective and with regards to the Paralympics, do keep a lookout over the next week, we have country profiles on the Dominican Republic, Costa Rica and Indonesia, courtesy of Alan Wilson, Portfolio Manager on our Emerging Markets desk. Those will be released onto our website over the course of the next week.
Thank you once again, Neil, for joining us and outlining your thoughts on the week ahead. I look forward to catching up with you next week.
It was a pleasure. Likewise, thanks, Matt.
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".
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