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 great to have you here with us again.
Thank you very much Matt. It's great to be here.
So we're back again, after a short summer break and looking into the week ahead, we've got, I think a few pieces of key data from across the regions. Looking at the three engines as we talk about the us, China and Europe. So perhaps you can talk through the elements that you're going to be keeping an eye on next.
Yeah, absolutely. Thanks, Matt. The complex macro backdrop continues for global financial markets as geopolitics energy supply and global inflation dynamics provide a difficult backdrop for businesses, for consumers and for policy makers alike. This week following on from the big focus of last week, the Jackson hole address from Fed chair Powell on the economic outlook, a topic that we will cover in more detail in a blog early next week. We get a raft of first tier data from the US.
Consumer sentiment on Tuesday, a key focus of policy makers globally in their assessment of financial conditions and consumer activity how much and how fast and how sensitive even the consumer is to monitory policy tightening.
Manufacturing ISM on Thursday key gauge of activity in the sector will the index maintain expansionary territory especially with their PMI equivalent dipping into contraction, doing so would be a positive surprise.
But the big focus will be on Friday and payrolls. The labor market is a key battleground for fed policy. The path to a soft landing, necessitates cooling labor market without significant job losses. And this has severe implications for domestic demand. And now after last month's positive beat, perhaps the fed may even be hoping for a more modest gain this time around essential viewing nonetheless, on payroll Friday.
Secondly next week we get the latest PMI data from China with the August readings and with one of the world's three major engines faltering at the current juncture or at the very least acutely vulnerable as Europe's energy crisis questions, the sustainability of their economic model and with a fed moving intentionally into restrictive territory to combat the threat of persistent inflation China's growth trajectory is a clearly of great importance for the global backdrop.
Recently publicized troubles, from state zero COVID policy to infrastructure and property market leverage issues. Not to mention recent energy issues driven in part by extreme weather. Have led to easier policy settings, a targeted rate cut in recent weeks and a 1 trillion Yuan targeted economic stability package from the State Council meeting earlier this week.
Going forward, therefore, it is likely that markets will place greater focus on the Chinese data evolution. This week's PMIs especially manufacturing where absolute level is likely to be very close to the 50 expansion contraction boundary will be a key barometer in this regard.
Finally Europe and its energy price problems will likely continue to be center stage for market focus next week, spot gas price levels, and one year ahead, power prices continue to make new highs this week, keeping economic pressure on the region at a maximum and likely made more acute by a further Nord stream One shutdown for three days at the end of this month.
Now the German CPI print for August on Tuesday is expected to rise further to 7.8% year on year. A number flattered even itself by a significant government energy price subsidies. However, is likely that the data release will be another reminder of the dire cost of living and huge fiscal cost, even of the current backdrop related to the current energy crisis. Headlines and further national or EU wide even measures will also be key market drivers.
Furthermore, Markets will watch not just the German CPI, but evaluate it in relation to the US CPI trajectory and relative policy pricing of the ECB and Fed activism going forward. Interesting times for foreign exchange and for relative bond and equity market pricing and another fascinating week for the global macro backdrop.
Thank you, Neil. Fascinating week ahead, indeed. As ever, it would seem during these times, in the meantime, in the United Kingdom, at least we have a long weekend, a bank holiday on Monday and if I'm not mistaken, we have a lot to be looking forward to from a sporting perspective. Perhaps you can outline what you're going to be keeping an eye on.
Absolutely. Yeah. Thanks Matt. It's a a massive long weekend for sport this weekend. There's a full premiership schedule Leicester against Chelsea and Villa against West Ham probably the pick of this week's action. West Ham will be hoping to carry their European form back into the premiership where it's been sadly lacking this season. We have the culmination of the second test England versus South Africa for Old Trafford, England needing a win to level the series there.
Formula One returns from the summer break with action from Belgium, it'd be interesting to see who has been to F1 summer school. And who's just been to the beach. We even get some Southern hemisphere rugby with Australia against South Africa and New Zealand against Argentina. But ultimately, it's likely the long bank holiday weekend brings us the start of the US open tennis championships which will be a big focus for many going forward.
And who knows maybe given it's a bank holiday weekend in August. It may be their last chance for a barbecue in 2022.
Fantastic. You never know, it might be a difficult decision as to to whether to venture outside for a barbecue or take your pick of a variety of sporting action.
Thank you once again for joining us and for outlining your thoughts on the week ahead. I look forward to catching up with you again next week.
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".
This communication is issued by Eurizon SLJ Capital Limited (“ESLJ”), a private limited company registered in England (company number: 09775525) having its registered office at 90 Queen Street, London EC4N 1SA, United Kingdom. ESLJ is authorised and regulated by the Financial Conduct Authority (FRN: 736926). This communication is treated as a marketing communication intended for professional investors only and is provided only for information purposes. It has not been prepared in accordance with legal and regulatory requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. It does not constitute research on investment matters and should not be construed as containing any recommendation, advice or suggestion, implicit or explicit, with respect to any investment strategy or financial instruments, or the issuers of any financial instruments, or a solicitation, offer or financial promotion relating to any securities or investments. ESLJ and its affiliates do not assume any liability whatsoever for the contents of this communication, save to the extent agreed in any written contract entered into between ESLJ and the recipient, and do not make any representation or warranty as to the accuracy or completeness of any information contained in this communication. Views are accurate as at the time of publication. Opinions expressed by individuals are their own and do not necessarily reflect those of ESLJ or any of its affiliates. The value of any investment may change and an investor may not get back the original amount invested. Past performance is not an indicator of future performance. This communication may not be reproduced, redistributed or copied in whole or in part for any purpose. It may not be distributed in any jurisdiction where its distribution may be restricted by law and persons into whose possession this communication comes should inform themselves about, and observe, any such restrictions.
Subscribe to our insights
If you are interested in our content, please sign up below and we will deliver Eurizon SLJ insights right to your inbox.
I consent to my data being collected and stored for the purposes of providing me information regarding my enquiry and related services. If you have any questions about your data please contact us at email@example.com
Our written research products aim to provide unique and orthogonal insights on key global economic and policy issues in a timely fashion.