Market sentiment: RiskOff – 22 days
Recap of the past week:
This past week was one hell of a ride, market sentiment indicator remained well in negative territory. Monday saw massive declines spurred by NFP data, concerns over a looming recession, and BoJ’s policies. Despite efforts, the market partially recovered thanks to a stronger ISM and Thursday’s reassuring US labor market data. However, underlying issues persist, leaving the market’s fate in the hands of upcoming US macroeconomic data.
Outlook for the following week:
Let’s have a look at the following week from the economic calendar perspective.
Monday starts off quietly with only the Monthly Budget Statement (Jul).
But things heat up on Tuesday with Australian inflation figures, UK labor data, the German ZEW, and the closely-watched US PPI. Bostic from the Fed is expected to deliver some policy remarks.
Wednesday, the main macro day of the week, kicks off with New Zealand’s rate decision (expected to hold), followed by UK CPI/PPI, initial EU Q2 GDP estimates, EU industrial production, and the critical US CPI report.
Thursday remains action-packed, with Japan’s Q2 GDP estimates, Australian employment data, and a couple of Chinese indicators. European markets will focus on the UK’s Q2 GDP and Industrial Production, while the US session will bring key labor market data, the NY Empire State Manufacturing Index, Philly Fed Manufacturing Survey, retail sales, capacity utilization, and industrial production figures. Fed’s Harker will wrap up the session.
On Friday, look out for New Zealand’s PPI, UK retail sales, Swiss industrial production, and the Michigan Consumer Sentiment Index with inflation expectations.
Long-term sentiment
Negative RiskOff sentiment continues into its fourth week (see more on waves statistics). Despite last week’s slight reprieve, the market’s concerns remain unchanged, primarily driven by recession fears, with little attention paid to the earnings season that’s nearly concluded. Wednesday’s US CPI will be pivotal. An increase could spell trouble (the impossibility of reducing rates), while a sharp drop might confirm recession fears. The market’s ideal scenario would be an unchanged CPI. But it’s not just about US inflation; Q2 GDP estimates could be crucial.
Ongoing geopolitical conflicts, including Ukraine’s unexpected advance in Russia and a potential Iranian strike on Israel, could further unsettle the markets.
Good luck! Team moodix!