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

So looking into the week ahead, geopolitics and and a busy week for central bank land. What in particular are you going to be focusing on?

Neil Staines

Yeah, absolutely. Last week we highlighted politics and geopolitics as a factor to watch. And I think it's an increasingly important piece of the macro puzzle. This week's European Army announcements and the US, Australia, UK Indo-Pacific Security Partnership, were a case in point on that front. And geopolitics retain a focal. Whether it's militarily strategic or trade, tensions clearly still remain. On top of that, we've also got Russian elections coming up. This weekend we have the Japanese leadership elections reaching full steam, four candidates there. And the German general elections are going to have big connotations for the European project. There's some signs at the last minute that the CDU/CSU coalition are coming back into contention, but potentially big implications there for fiscal transfers and possibly even the revisions to the Stability and Growth Pact, which we expect over the coming months.

Yeah, absolutely. Last week we highlighted politics and geopolitics as a factor to watch. And I think it's an increasingly important piece of the macro puzzle. This week's European Army announcements and the US, Australia, UK Indo-Pacific Security Partnership, were a case in point on that front. And geopolitics retain a focal. Whether it's militarily strategic or trade, tensions clearly still remain. On top of that, we've also got Russian elections coming up. This weekend we have the Japanese leadership elections reaching full steam, four candidates there. And the German general elections are going to have big connotations for the European project. There's some signs at the last minute that the CDU/CSU coalition are coming back into contention, but potentially big implications there for fiscal transfers and possibly even the revisions to the Stability and Growth Pact, which we expect over the coming months.

Then in the US and at the FOMC will be very keenly watched. And there are two real separate dynamics going on here. Firstly, the revisions to the summary of economic projections. You know, on balance, we expect growth and perhaps even inflation forecasts to edge higher, even if there is a Delta induced compositional change to the expectations. And this likely leads to a further nearing in our expectation of the of the rate hike forecasts of the participants or the dots. And that likely puts more dots in 2022. That has significant connotations. The second dynamic is the commentary on the framing from Powell, if you like. We continue to expect Powell to err on the dovish side until he's confirmed as Fed chair for a second term. Until then, it likely pays him not to diverge too much from the position of his main work. There's also some minutes from the RBA, and this may be interesting from a broader perspective, just to see how central banks are interacting with the Delta variant slow down, much more exacerbated in Australia due to the idiosyncratic ways in which they've dealt with their covid strategies, but certainly a focus for markets nonetheless.

And then lastly, on to growth. Growth continues to be the main driver of focus of the markets at the moment. Now we get the OECD interim outlook. Now that may provide a backdrop for the debate. We'll get flash PMIs later on in the week for September and German IFO for September also and these are also likely to be barometers of the relative trajectories, as well as a broader sentiment towards a global growth backdrop. Recent Delta induced slowdowns have shown some signs of bottoming out, at least in the US and China, just as Europe comes off the boil. So differentiation continues to be a big focus. And whether the focus might move away from the transitory or temporary factors due to covid and Delta and move towards equilibrium and we think that growth rates are likely to remain key.

Plenty to focus on from a rates, equity, commodity and FX markets perspective at the moment.

Matt Jones

Thank you, Neil. Plenty to be looking forward to in the week ahead. In the meantime, perhaps comparatively a quieter weekend ahead. There's always something to keep an eye on though. So what are you watching for over the weekend?

Neil Staines

Absolutely. Thanks very much, Matt. You know, I think by recent standards, somewhat something of a barren week for sports in some respects. We are back to the regular season games in the premiership after a European group stage games in a week where West Ham registered their first win in Europe since 1999. However, at home to Manchester United and Renaldo, this weekend may prevent fans from partying as such. On Saturday morning, we get Australia versus South Africa in the rugby. That may be well worth forfeiting a lay in for, but ultimately for me, I expect to take this opportunity to venture outside as much as possible ahead of next weekend's Ryder Cup, where I doubt I'll be able to.

Matt Jones

Sounds like very sensible planning. Well, thank you once again for joining us, and I look forward 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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