Traders’ Diary: Everything you need to get ready for the week ahead

Jerome Powell’s speech dominated last week’s headline
European Central Bank (ECB) will make its rates decision this week
‘Economic reporting season’ has begun

Last week’s economic headline was dominated US Fed’s Jerome Powell speech at the Kansas City’s annual gathering of US Fed bankers in Jackson Hole.

The Fed Reserve Chair pledged to resolutely fight inflation, saying the Fed must continue to raise interest rates to stop inflation from becoming a permanent aspect of the US economy.

“We must keep at it until the job is done,” Powell said, twice, in his unusually short eight-minute speech.

“These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain,” he added.

Powell’s hawkish words sent Wall Street into a tailspin on Friday, with all three major US benchmark indexes falling by more than 3% each.

His speech also caused interest rate futures traders to beef up their bets on a third straight 75bp rate hike at the next Fed’s meeting on September 20th.

Referring to the fall in US inflation from 9.1% to 8.5% in July, Powell said: “A single month’s improvement falls far short of what the committee will need to see before we are confident that inflation is moving down.”

The surge in inflation is indeed becoming a global phenomenon.

In the UK, Citi Bank economists have forecast that UK inflation will hit 18% in early 2023 (from the current 10%), topping the Bank of England’s prediction of 13%.

The last time UK’s inflation is at 18% was in 1976 when the oil supply shock left the country seeking a bailout from the IMF.

UK consumer confidence has now hit the lowest level since records began in 1974, falling to -44 in August.

In the Eurozone area, inflation is at 8.9%, a 25-year high.

This Thursday, the European Central Bank (ECB) will make its interest rates decision. The Bank hiked its rates by 50 basis points last month.

In China meanwhile, inflation is at a two-year high of 2.7%.

On Monday last week, the Chinese central bank cut its 1 year loan prime rate to 3.65% from 3.70%.

It’s an encouraging development, but experts say that a more positive step would be for China to open up its economy quickly by changing its Covid policies.

Zhang Zhiwei, chief economist at Pinpoint Asset Management, told Bloomberg the recent policy “are clearly more aggressive than before.”

“Authorities (in China) are aware the stress build-up [in the property sector] imposes quite high macro risk, so they need to take action quickly and aggressively to address those problems.”

The Economic Calendar for this week

Source: Commsec and Investing.com

The focus will now shift from the corporate ‘profit reporting season’ to the ‘economic reporting season’.

Australia and New Zealand

MONDAY
Retail trade for July

TUESDAY
Building approvals for July

WEDNESDAY
Private sector credit for July
Construction work done for the June quarter

THURSDAY
CoreLogic Home Value index for August
Business investment for the June quarter
Housing, personal, lease & business loans indicators for July
Purchasing managers’ index for August

Global

TUESDAY
US home prices for June
US JOLTs job vacancies for July
US consumer confidence for August
Euro S&P Global Composite PMI for August
Euro retail sales for July

WEDNESDAY
China Purchasing managers’ indexes for August
US ADP employment change for August
Euro inflation for August
Euro GDP for Q2

THURSDAY
China Purchasing managers’ index for August
US Purchasing managers’ index for August
US construction spending in July
US Challenger job cuts in August
US Unit labour costs for the June quarter

FRIDAY
US non-farm payrolls for August
US factory orders for July