Experience the Decision Economics Difference for yourself.
The Global Markets Weekly – 10/19/18
U.S. GDP, ECB, Italy
It’s a busy upcoming week. In the U.S., activity data include the advance estimate of Q3 GDP, where analysts will look beneath the headline given what are likely to be large swings in inventories (+) and net exports (-). DE expects final sales growth in the vicinity of 3% annualized to be a good read on underlying activity, and we expect a solid pattern of above-consensus growth to continue into 2019. It is also a peak weak for the Q3 corporate reporting season.
In Europe, the EU has until Monday to say whether the Italian budget submitted October 15 violates guardrails for the structural budget deficit. The EU can ask for a revised budget as late as the Oct.29. If so, Rome has three weeks (Nov 19) to come up with one. Still, we doubt that penalties will ultimately be imposed even if the budget is still found excessive. Fines have never been imposed since the rules were set up in 1989, last threatened on Portugal and Spain in 2016. A downgrade by Moody’s came Friday, little surprise given budget changes, reflecting the market’s prior reassessment.
Economic data in the region will include the high-impact PMIs, where both the manufacturing and services PMIs are looking more sluggish in 2018. Decelerating GDP growth and still mild core inflation will keep the ECB and Draghi sticking to the status quo. As asset purchases conclude this year, there are still a number of hurdles including Brexit, trade conflicts, and the Italian situation to leave markets reasonably assuming any outright adjustment to interest rates is unlikely until the second half of 2019.
Coming after the new forecasting round at the last meeting, the main focus will be Draghi’s tone regarding underlying economic conditions, and Italy. On the latter, Draghi may stick to generalities after his comments to EU officials made waves last week. He and the EU will need to balance a fine line. “Whatever it takes” worked during the sovereign debt crisis, but there isn’t a similar phrase that will get a country to agree to budget rules, at least not without stiffening nationalist opposition ahead of key EU elections next spring.
Coming Week’s Key Indicators and Events
| Release | DE / Consensus | Comment | |
| U.S. | Q3 GDP (Fr) | 3.5% / 3.3% SAAR
|
Mixed underlying moves, underlying final sales near 3% annualized. Sturdy Q3 consumer despite quarter-end weather impacts, solid business investment. |
| Euro | ECB (Th) | Hold / Hold | Italy in focus, Draghi warning on fiscal outlook and rules may embolden Italian government to hold firm on loosening restraint. Inflation subdued, activity broadly on track, rate hike still a way off. |
| U.K. | Carney Speech (Tu) | Grinding toward a Brexit agreement as Irish border question may be dropped. | |
| Japan | Manuf PMI (We) | Following pattern of diminishing momentum elsewhere, but still growth. | |
| Canada | Rate Decision (We) | +25 bps / +25 bps | Steady growth, inflation around target. |
| Turkey | Rate Decision (Th) | Hold / Hold | Currency in better shape over the last month, no need for hike at the moment. |
[private]gmw_1019[/private]
Research Studies
DE | Sinai Economic and Market Perspectives | Seeds of A Sovereign Debt Crisis Planted – 02/03/21
[private] [/private] Seeds of A Sovereign Debt Crisis Planted Allen Sinai* The U.S. and Global economies have undergone a fiscal/debt revolution of huge import from which there will be no turning away! The main catalysts read more
A TAILORED APPROACH
We know investment professionals have specific needs, in terms of type and method of information support.
meet
allen sinai
& the team
