Macroeconomics: The Day Ahead for 25 June

  • Modest run of data and events, digesting UK & German Consumer Confidence surveys, Tokyo CPI, awaiting US Personal Income / PCE and final Michigan Sentiment, some Fed speakers, as US infrastructure spending bill digested

  • US Personal Income/PCE: Personal Spending to confirm shift back to Services from Goods; PCE deflators seen mirroring CPI rise

  • US Infrastructure Spending proposal: hollowed out bill is put simply “not stimulus”; China and anti-trust bills of greater significance

  • In this Week’s Investing Channel video: reaction to Fed ‘shift’ was more knee-jerk, plenty of other factors at work. Watch here.

EVENTS PREVIEW

There is a relatively modest schedule of data and events to end the week, with Japan’s Tokyo CPI, UK and German GfK Consumer Confidence to digest ahead of Italy’s Confidence surveys, UK CBI Retailing survey, Brazil’s IPCA-15 inflation, while the US has Personal Income and pCE and final Michigan Confidence. Central bank speak comes via way of de Cos, Mester and Rosengren, who have all spoken in the past week. The other talking point will be the US infrastructure spending bill agreement (still to be debated in Congress in detail terms), which can only be described as a shadow of what was originally proposed at $1.21 Trln over eight years, above all as there is only $579 Bln of new spending, i.e. $72.375 Bln per annum, which in an economy that is estimated at $22.68 Trillion is less than a drop in the ocean – only the most disingenuous could describe this as stimulus. Some may argue that it will help to stimulate private sector lending, but again facts speak louder than words, all the monetary stimulus over the past 12 years has served to inflate asset prices, boost share buybacks and special dividends, and provided little in the way of lending to the real economy (admittedly it has at least stopped real economy funding being cut, but that is not stimulus either), and exacerbate already bad trends in terms of inequality. Per se the real focus should be on two other bills going through Congress that may have far more profound effects a) the anti-trust bill that threatens to break up tech behemoths, b) the ‘Eagle Act’ which promises sweeping legislation to boost economic competitiveness and push Beijing on human rights, as part of Congress’ ongoing efforts to pressure China.

 

 Next week brings month and quarter end, which will doubtless result in occasionally anomalous price action in markets, along with Eurozone and national CPI readings, Japan’s Q2 Tankan and its usual end of month run of activity and labour data, UK credit aggregates, Manufacturing PMIs from around the world, as well as the US labour report, Auto Sales, Construction Spending and Pending Home Sales, with plenty of central banks speakers, but no major policy meetings, while OPEC holds a potentially critical ministerial meeting to decide on a further easing of production cuts.  There are also a number of key USDA monthly and quarterly reports on the agricultural sector, even if these will likely remain subordinate to short-term weather prospects.

 

U.S.A. – May Personal Income / PCE

Markets will inevitably be transfixed by the deflators, though the Personal Spending data does require attention, in so far as an expected 0.4% m/m rise would contrast sharply with the headline 1.3% m/m fall in Retail Sales. Re-opening likely prompted a shift from goods consumption to Services, most notably items such as eating out, hotels, car rental and airfares, as can be seen on the attached chart, though the boost will not be as significant as in Q3 2020, above all given that Q1 lockdown measures had a far more modest impact than in Q2 2020. As for the deflators, these are seen rising 0.5% m/m headline and 0.6% m/m core, i.e. at roughly the same pace as CPI, but enough to boost y/y rates by 0.3 ppt to 3.9% y/y headline and 3.4% core, as compared with CPI readings of 5.0% and 3.8%.

To view the full report and to sign up for daily market commentary please email admisi@admisi.com

The information within this publication has been compiled for general purposes only. Although every attempt has been made to ensure the accuracy of the information, ADM Investor Services International Limited (ADMISI) assumes no responsibility for any errors or omissions and will not update it. The views in this publication reflect solely those of the authors and not necessarily those of ADMISI or its affiliated institutions. This publication and information herein should not be considered investment advice nor an offer to sell or an invitation to invest in any products mentioned by ADMISI.

Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.

ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.                  

A subsidiary of Archer Daniels Midland Company.

© 2021 ADM Investor Services International Limited.

Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.

ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.                  

A subsidiary of Archer Daniels Midland Company.

© 2021 ADM Investor Services International Limited.

Futures and options trading involve significant risk of loss and may not be suitable for everyone.  Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM.  The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.

Latest News & Market Commentary

Explore the latest edition of The Ghost in the Machine

Explore Now