In Global Week Ahead, the world’s major central banks, really all of them, take center stage.
From the USA, the latest economic projections from the Fed; President Powell’s bailiff; and, of course, all the specific details of the FOMC’s largest voting contingent on an explicit reduction schedule; these Wednesday actions and data will keep traders focused everywhere.
Added to this are the PBoC in China, the BoJ in Japan, the BoE in the United Kingdom and a few smaller monetary policy players; these actors will be added significantly to this main global collective event.
During each trading day for the past 18 months, what keeps the benchmark stock indexes of advanced countries high are the regular and continuous impulses of liquidity from the G10 central banks.
Not the fundamentals.
Next are Reuters’ five global market themes, reorganized for equity traders.
(1) The Fed meeting ends on Wednesday
Several big names in the central bank will meet in the coming days, with the US Federal Reserve meeting on September 21 and 22 at the top of the must-see list.
The timing of the Fed’s US phase-down plans remains the key question, and recent data suggests caution is in order: the US economy created the fewest jobs in seven months in August and prices consumption increased at their slowest rate in six months.
Several officials say the Fed cut back on its pandemic stimulus package will begin this year, an opinion Fed chief Jerome Powell can echo, while pointing out that an interest rate hike is still a long way off.
The Bank of Japan, which also meets on Tuesday and Wednesday, will keep its policy stable but may well warn of growing risks to exports from supply disruptions.
(2) Other major central bank meetings likely to follow the Fed’s example
Confirmation that a large central bank is raising interest rates rather than talking about it will be meaningful to markets addicted to cheap liquidity. Norway’s central bank is expected to become the first in the developed world to hike rates since the pandemic on Thursday, likely raising its main rate from 0% to 0.25%.
The Bank of England is unlikely to change its policy, but with consumer price growth to a 9-year high in August, traders are forecasting a rate hike next May. The BoE could signal at its meeting on Thursday whether it still views inflation as transient.
We will also hear from the laggards – Switzerland is only likely to start reducing its balance sheet or raising rates, the lowest in the world, long after the others. Sweden is expected to keep rates at 0% until 2024, but its monetary policy announcement on Tuesday may well reflect a revision after strong inflation readings.
(3) Does Evergrande Toast?
Chinese real estate developer running out of money Evergrande must provide $ 120 million in bond coupon payments.
That such a small amount could be the tipping point for a $ 355 billion giant with over 1,300 developments across China and over $ 300 billion in liabilities shows how bad things are.
China’s no. Developer 2 has been scrambling to raise funds, with flaring sales of apartments and sales of stakes in its sprawling commercial network, but with little success.
As it oscillates between a messy collapse, a managed collapse or – the less likely – a government bailout, the risk of contagion is the center of attention. Hong Kong-listed Evergrande shares have plunged more than 80% this year; a high yielding Chinese dollar debt index is at a 17-month low.
(4) Are the Delta Variant Dent Manufacturing PMIs?
Purchasing Managers’ Indices, an oft-used indicator of economic growth and corporate sentiment, are well above historical averages, but early readings for September – expected in many countries on Thursday – will likely show PMIs move further away from the highs reached earlier this year.
The Delta COVID-19 variant, supply chain bottlenecks and soaring input costs have appeared in PMIs in recent months. IHS Markit’s eurozone manufacturing PMIs, for example, slipped in August to 61.4 from 63 in July, and are expected to decline further this month to 60.5.
A JPMorgan Global Composite PMI Index stood at 52.6 in August, six points off the record set in May. It’s still healthy readings, above the 50 mark that separates growth from contraction, so central bankers meeting in the next few days probably have no reason to worry just yet. .
(5) Canadian elections are held today
Canadian Prime Minister Justin Trudeau has gambled by calling an early election, but opinion polls indicate it could backfire.
Ahead of Monday’s vote, Trudeau’s Liberals are virtually tied with opposition Tories, suggesting that no party will be able to form even a stable minority government.
The prospect of a deadlock hampering Ottawa’s response to COVID-19 sparks some anxiety – the Canadian dollar has lost 1% since Trudeau called the vote in mid-August (two years ahead of schedule) , and stocks are near their three-week low.
Political uncertainty looms elsewhere as well, with the September 26 elections in Germany potentially leading to protracted coalition talks.
Zacks # 1 Ranking Stock (Strong Buy)
Let’s take a look at the top-selling stocks on our # 1 list this week.
(1) Apple (AAPL – Free report): It’s a 2.46-ton market-cap stock, priced at $ 147 a share. I see a Zacks Value score of F, a Zacks Growth score of C, and a Zacks Momentum score of F.
(2) Shopify (STORE – Free report): It’s a $ 184 billion market-cap stock, priced at a shocking $ 1,461 per share. I see a Zacks Value score of F, a Zacks Growth score of D, and a Zacks Momentum score of B.
(3) Construction Bank of China (CICHY – Free report): It’s a stock with a market cap of $ 181.3 billion, priced at $ 14.43 a share. I see a Zacks Value score of B, a Zacks Growth score of F, and a Zacks Momentum score of A.
Crazy: look at the difference in share price between STORE and CICHY.
The first four-digit share price shows the power of dynamic trading. The second double-digit share price shows concern over heavier Chinese regulations.
Global key macro
In addition to a number of central bank meetings, keep an eye on housing statistics in the United States.
Monday, the US housing index NAHB comes out. I see that a 75 is a consensus, after a 75 printed the previous month.
China has a mid-autumn festival.
Tuesday, US building permits are expected to be 1.61 million, while housing starts appear to be 1.58 million. This US housing data still looks strong, but not too strong.
FedEx, AutoZone and Adobe report their profits.
Wednesday, global traders will be able to inspect a rate decision from the People’s Bank of China (PBoC).
There will also be a rate decision from the Bank of Japan (BoJ).
There will be a Fed rate decision, to conclude, from a monetary policy perspective. We get a new set of economic projections from the Fed from this meeting. Powell will do a presser.
KB Home reports income.
Thusday, the Eurozone Markit manufacturing PMI should be 62. Fairly strong.
The US manufacturing PMI Markit is expected to be 62.5. Also, quite strong.
Bank of England (BoE) issues rate decision.
Costco and Rite Aid report profits.
Friday, Japan’s Jibun Bank Manufacturing PMI is expected to be close to the previous reading of 52.7.
New home sales in the United States are expected to be around 700K for August.
Before the outbreak of the Fed meeting, count on a consensual timetable from economists of a reduction in bond purchases by the Fed in November or December, to be included in the market reflection.
What will be most interesting to watch, after the FOMC meeting is disbanded—
(1) What major deviation from the (concentrated) consensus of economists appears?
(2) How do the various related stock markets re-price their risk offers?
There is no sense in forecasting more, until the risk markets show us a weighted opinion. On all the decisions of the central bank that stem from the coming world week.
Happy trading and investing everyone!