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, it's great to have you here with us again.

Neil Staines

Thank you very much Matt. It's great to be here.

Matt Jones

It's fair to say that we're recording this podcast a particularly difficult juncture for the United Kingdom. Perhaps you could share your thoughts with us.

Neil Staines

Absolutely. Yeah, thanks Matt. This week the UK will be front and center as the country and much of the Commonwealth goes into a period of mourning following the sad death of Elizabeth II, our Queen.

There is much to reflect upon following her Majesty's last act of public duty in asking Liz Truss to form a new government as prime minister within a swift announcement of a far reaching fiscal intervention to cap energy prices. Near current levels for the next two years potentially a massive fiscal injection, the new chancellor will set out the cost in a fiscal statement over coming weeks. The Prime Minister has also announced a review of energy regulations and net zero implementations alongside an energy supply task force, looking to reduce the cost of this historic intervention.

We also get a raft of UK data this week, GDP, employment and CPI. All critical elements for the monetary policy decision of the Bank of England on Thursday. The bank has a very difficult balance as the government's fiscal intervention could be seen as a significant boost or a life support for the consumer and for growth projections. But at the same time, will sharply reduce CPI progression. A complex demand and inflation adjustment for the bank of England and a difficult decision, therefore.

Markets are expecting 50 basis points, but we would argue uncertainty at next week's meeting is likely elevated, the thoughts and I interpretations of the bank of England in relation to the fiscal intervention will be very important. However, seeing is not a monetary policy report month commentary may not be communicated as fully as we might like.

Secondly as the Bank of England juggle with the demand and inflation trade off in the US, it's likely all about inflation. Next Tuesday, we get the US CPI print for August with analysts expecting a further drop to 8.1% year on year in August. That's down from 8.5% in July and the huge 9.1% in June. More broadly we are seeing anecdotal evidence of falling price pressures from global oil prices and indeed natural gas, from used cars to international freight shipping costs all prices heading in the right direction there. Now, while this week's commentary from power was entirely consistent with the Jackson Hole narrative, that the fed will act forthrightly on inflation. We will consult dictionary corner to determine whether forthrightly is a moderation or downgrade from expeditiously, although I suspect it is, and that history cautions against premature. Loosening of policy from restrictive territory. However other Fed speakers this week have highlighted rising risks and thus monetary policy considerations of both the lagged impact of previous monetary policy tightening and the implications of slowing global growth.

Overall, we see this as a less hawkish monetary backdrop than the market and sell-side analysts encourage at the current juncture.

And finally we get a global demand or global growth momentum focus from the German ZEW index for September. And for the data suite from China, for August industrial production, retail sales, investment, and unemployment data. What will be a key focus as markets try to gauge the extent of the demand, slow down and by extension the implications for demand led inflation and the global monetary policy momentum, all of this set against a somber reflection in the UK next week.

Matt Jones

Thank you, Neil. There's certainly plenty to focus and reflect upon in the week ahead. Thank you for joining us once again and outlining your thoughts. 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".

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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