Week Ahead – Fed and Earnings Eyed
Major week for US markets All eyes on the US next week as the Fed meets and we head into peak earnings season. The central bank will discuss its exit strategy from emergency era stimulus and investors will be looking for any hints on the timing and execut
Major week for US markets
All eyes on the US next week as the Fed meets and we head into peak earnings season. The central bank will discuss its exit strategy from emergency era stimulus and investors will be looking for any hints on the timing and execution.
Earnings season is off to a very strong start and it will step up a notch next week with a number of big tech companies reporting. There’ll also be a raft of economic releases which will grab the attention of investors.
Europe also offers a wide range of economic data which, coming shortly after the ECB announced a tweak to its mandate, will be very closely monitored.
Rupee in focus amid fears over third wave
US
This will be a huge week on Wall Street as the Fed will be providing some clarity over taper timing and how they will reduce asset purchases, monster earnings from big-tech, and the first look at second quarter GDP, personal consumption, and core PCE, the Fed’s preferred inflation index. Financial markets are waiting to see if the latest global growth concerns will be enough reason for the Fed to hold off on discussing potential strategies for tapering their monthly purchases of $80 billion in Treasury securities and $40 billion in mortgage securities.
This is peak earnings season and many traders will closely watch to see if mega-cap stocks, Apple, Alphabet, Facebook, Microsoft, and Amazon can crush second quarter expectations and signal the growth story is not moderating too quickly.
US economic growth is expected to accelerate from 6.4% to 8.4%, with a wide consensus range from 6.0% to 11.9%. Economists are upbeat for a robust summer of economic activity given every American who is eligible to get vaccinated has had an opportunity to do so. Pent up consumer demand, reopening of businesses, and lots of cash to spend suggests we could see some upside surprises.
It is crunch time for infrastructure negotiations and while Democrats are pushing to get a vote done early next week, we could see some Republican resistance brew over the weekend.
EU
The ECB is in no rush to pare back it’s package of measures aimed at lifting inflation to its new target of 2%. At the meeting on Thursday, the central bank made clear that it is committed to the new target, following the strategy review, and that it would briefly tolerate a slight overshoot in order to achieve it.
While all of this sounds encouraging, it’s worth remembering that this is the same central bank that has seriously struggled to even come close to its old target of below but close to 2%. With that in mind, barring a dramatic shift in its policy response in the upcoming meetings, it doesn’t really feel like an enormous amount has changed.
A broad selection of data from the euro area next week, with the big hitters coming on Friday in the shape of the flash CPI numbers, GDP and unemployment.
UK
With restrictions fully lifted, Prime Minister Boris Johnson will be hoping for a bumper summer for the UK economy after an extremely challenging 16 months. But with no restrictions comes high Covid case loads and the UK is seeing a severe surge which preceded Freedom Day.
At this stage, that’s only coming with a modest increase in hospitalisations and a much lower number of fatalities compared with previous surges. The next couple of weeks will be a huge test of whether the country is ready for a life with no restrictions.
Emerging Markets
Russia
The central bank raised interest rates by 100 basis points to 6.5% on Friday, in line with expectations. The currency was relatively stable as a result.
Next week sees the release of retail sales and unemployment data on Wednesday.
South Africa
The South African Reserve Bank kept interest rates unchanged at 3.50%, as expected this week. The central bank pushed back expectations for a rate hike until later in the year, although some think it may not come until 2022.
Next week brings a selection of tier two and three data releases including PPI and trade balance.
Asia Pacific
China
China markets have been immune to the delta-variant volatility sweeping the world this week and are likely to remain so next week with Industrial Profits on Tuesday, the week’s only major data release. Official and Caixin PMI are released next weekend meaning the first day of August should see some volatility.
Most volatility will be driven by the China government and its official crackdown on big-tech China. Officials are allegedly preparing major penalties on Didi Global Inc. Meanwhile, debt worries continue to escalate in the property developer sector, led by Evergrande whose stock and bond endured a torrid week. Most of this volatility will be reflected in Hong Kong where the major tech and property companies from the Mainland are listed.
A default by a major developer next week, or gruesome penalties for Didi, could send Hong Kong markets sharply lower.
India
India’s COVID-19 cases were appearing to be on the right track but a recent increase in cases has many worried that a third wave could be coming. The Rupee has recovered some recent losses this past week although the rapid recovery in oil prices means importers will need to keep buying US Dollars as India demand recovers, pressuring the currency.
No significant data this week, with India and ASEAN currencies to be dominated by their internal trajectories of the delta-variant Covid-19. The Rupee remains vulnerable to more US Dollar strength.
Australia & New Zealand
Australian stock markets are trading sideways, with nearly half the country now under some sort of movement restrictions, and the lockdown in Sydney being extended as cases continue climbing. The rapid recovery in overseas sentiment has balanced out the domestic risks leaving both the currency and equities treading water. The AUD, though, remains especially vulnerable to a sudden sharp deterioration in risk sentiment, especially in Asia, where the AUD is used as a correlation trade.
Australia releases inflation data and PPI this week, but the focus is going to remain on the virus situation domestically, and sentiment internationally.
No significant data from New Zealand and no market reaction to the suspension of the Australia/New Zealand travel bubble, as this was well telegraphed already.
Japan
Japanese stocks are gyrating wildly on swings in risk sentiment internationally, reflecting the heavy presence of retail fast money inthe Japan market. We expect this volatility to continue with only PMI releases to start the week. Japan releases Unemployment, Retail Sales and Industrial Production on Friday with domestic consumption set to ease as Covid restrictions continue.
USD/JPY has dissolved into a purely US/Japan interest rate differential play for now, and we expect that to continue next week, with USD/JPY remaining in a wider 109.50 to 111.00 range.
Key Economic Events
Sunday, July 25
-US Deputy Secretary of State Sherman meets with Chinese State Councilor and Foreign Minister Wang Yi in Tianjin, China
-Russian President Putin attends the annual Navy parade in St. Petersburg.
Monday, July 26
– Iraqi Prime Minister al-Kadhimi meets US President Biden
– EU finance ministers review the implementation of the Recovery and Resilience Facility, before assessing the European Commission’s new anti-money laundering package.
Economic Data/Events
US new home sales
New Zealand trade
Japan PMI
Germany IFO business climate/expectations
Mexico Unemployment rate
Singapore industrial production
Turkey capacity utilization
Belgium business confidence
Tesla Earnings (could provide guidance on Bitcoin action)
Tuesday, July 27
– RBA Deputy Governor Debelle, speaks at an online US foreign-exchange conference.
– US Secretary of State Blinken.to meet India’s Prime Minister Modi, National Security Advisor Doval and Foreign Minister Jaishankar
– IMF releases its World Economic Outlook Update.
Economic Data/Events
Apple and Alphabet report after the close
Japan PPI services
China industrial profits
Hungary Rate decisions: Expected to raise rates 15 bps to 1.05%
U.S. durable goods, Conf. Board consumer confidence, FHFA house price index
Denmark retail sales
Sweden trade balance, household lending
Wednesday, July 28
– US Defense Secretary Austin to meet Vietnamese Minister of National Defense Phan Van Giang.
– IMF Managing Director Georgieva and Banco de México Governor León speak at the annual Michel Camdessus Central Banking Lecture.
Economic Data/Events
US FOMC rate decision: No changes to monetary policy expected; Taper deliberations to intensify
US Wholesale Inventories
Canada CPI
Australia CPI
Russia CPI
Germany Consumer confidence
France Consumer confidence
Italy Consumer confidence
Japan leading index, coincident index
Sweden Retail sales
European Bank Earnings from Deutsche Bank and Barclays
Facebook reports after the US close
EIA Crude Oil Inventory Report
Thursday, July 29
Economic Data/Events
US Q2 Advance GDP Q/Q: 8.3%e v 6.4% prior; Personal Consumption: 10.7%e v 11.4% prior; Core PCE Q/Q: 6.0%e v 2.5% prior, initial jobless claims
Eurozone economic/consumer confidence
Germany Unemployment CPI
Spain CPI
France PPI
Italy PPI
Australia import-export price indexes
Singapore Unemployment
New Zealand ANZ business confidence, activity outlook
Russia gold and forex reserves
South Africa money supply, private sector credit, PPI
U.K. mortgage approvals
Belgium GDP
Portugal retail sales
Amazon reports after the US close
Friday, July 30
Economic Data/Events
US personal income/spending, University of Michigan sentiment, Chicago PMI
Germany GDP
Eurozone GDP, Unemployment Rate, CPI
Russia Unemployment Rate
Denmark Unemployment Rate
Norway Unemployment Rate
Japan industrial production, retail sales, dept. store/supermarket sales, housing starts, jobless rate
Czech Republic GDP
France GDP, CPI
Mexico GDP
Italy GDP, CPI
Spain GDP
Canada GDP
Poland CPI
Australia
Thailand trade, BoP current account balance, foreign reserves, forward contracts
New Zealand building permits, ANZ consumer confidence
South Korea industrial production, business survey
South Africa trade balance, budget balance
Russia retail sales, real wages
Turkey trade balance, foreign tourist arrivals
Hungary trade balance
Spain Retail sales
Sovereign Rating Updates
– Hungary (Fitch)
– Ireland (Fitch)
– (S&P) Germany (Moody’s)
– Austria (DBRS)
treasury securities covid-19 emerging markets equities stocks bitcoin home sales currencies us dollar euro stock markets gold oilGovernment
Survey Shows Declining Concerns Among Americans About COVID-19
Survey Shows Declining Concerns Among Americans About COVID-19
A new survey reveals that only 20% of Americans view covid-19 as "a major threat"…
A new survey reveals that only 20% of Americans view covid-19 as "a major threat" to the health of the US population - a sharp decline from a high of 67% in July 2020.
What's more, the Pew Research Center survey conducted from Feb. 7 to Feb. 11 showed that just 10% of Americans are concerned that they will catch the disease and require hospitalization.
"This data represents a low ebb of public concern about the virus that reached its height in the summer and fall of 2020, when as many as two-thirds of Americans viewed COVID-19 as a major threat to public health," reads the report, which was published March 7.
According to the survey, half of the participants understand the significance of researchers and healthcare providers in understanding and treating long COVID - however 27% of participants consider this issue less important, while 22% of Americans are unaware of long COVID.
What's more, while Democrats were far more worried than Republicans in the past, that gap has narrowed significantly.
"In the pandemic’s first year, Democrats were routinely about 40 points more likely than Republicans to view the coronavirus as a major threat to the health of the U.S. population. This gap has waned as overall levels of concern have fallen," reads the report.
More via the Epoch Times;
The survey found that three in ten Democrats under 50 have received an updated COVID-19 vaccine, compared with 66 percent of Democrats ages 65 and older.
Moreover, 66 percent of Democrats ages 65 and older have received the updated COVID-19 vaccine, while only 24 percent of Republicans ages 65 and older have done so.
“This 42-point partisan gap is much wider now than at other points since the start of the outbreak. For instance, in August 2021, 93 percent of older Democrats and 78 percent of older Republicans said they had received all the shots needed to be fully vaccinated (a 15-point gap),” it noted.
COVID-19 No Longer an Emergency
The U.S. Centers for Disease Control and Prevention (CDC) recently issued its updated recommendations for the virus, which no longer require people to stay home for five days after testing positive for COVID-19.
The updated guidance recommends that people who contracted a respiratory virus stay home, and they can resume normal activities when their symptoms improve overall and their fever subsides for 24 hours without medication.
“We still must use the commonsense solutions we know work to protect ourselves and others from serious illness from respiratory viruses, this includes vaccination, treatment, and staying home when we get sick,” CDC director Dr. Mandy Cohen said in a statement.
The CDC said that while the virus remains a threat, it is now less likely to cause severe illness because of widespread immunity and improved tools to prevent and treat the disease.
“Importantly, states and countries that have already adjusted recommended isolation times have not seen increased hospitalizations or deaths related to COVID-19,” it stated.
The federal government suspended its free at-home COVID-19 test program on March 8, according to a website set up by the government, following a decrease in COVID-19-related hospitalizations.
According to the CDC, hospitalization rates for COVID-19 and influenza diseases remain “elevated” but are decreasing in some parts of the United States.
Government
Rand Paul Teases Senate GOP Leader Run – Musk Says “I Would Support”
Rand Paul Teases Senate GOP Leader Run – Musk Says "I Would Support"
Republican Kentucky Senator Rand Paul on Friday hinted that he may jump…
Republican Kentucky Senator Rand Paul on Friday hinted that he may jump into the race to become the next Senate GOP leader, and Elon Musk was quick to support the idea. Republicans must find a successor for periodically malfunctioning Mitch McConnell, who recently announced he'll step down in November, though intending to keep his Senate seat until his term ends in January 2027, when he'd be within weeks of turning 86.
So far, the announced field consists of two quintessential establishment types: John Cornyn of Texas and John Thune of South Dakota. While John Barrasso's name had been thrown around as one of "The Three Johns" considered top contenders, the Wyoming senator on Tuesday said he'll instead seek the number two slot as party whip.
Paul used X to tease his potential bid for the position which -- if the GOP takes back the upper chamber in November -- could graduate from Minority Leader to Majority Leader. He started by telling his 5.1 million followers he'd had lots of people asking him about his interest in running...
Thousands of people have been asking if I'd run for Senate leadership...
— Rand Paul (@RandPaul) March 8, 2024
...then followed up with a poll in which he predictably annihilated Cornyn and Thune, taking a 96% share as of Friday night, with the other two below 2% each.
????????️VOTE NOW ????️ ???? Who would you like to be the next Senate leader?
— Rand Paul (@RandPaul) March 8, 2024
Elon Musk was quick to back the idea of Paul as GOP leader, while daring Cornyn and Thune to follow Paul's lead by throwing their names out for consideration by the Twitter-verse X-verse.
I would support Rand Paul and suspect that other candidates will not actually run polls out of concern for the results, but let’s see if they will!
— Elon Musk (@elonmusk) March 8, 2024
Paul has been a stalwart opponent of security-state mass surveillance, foreign interventionism -- to include shoveling billions of dollars into the proxy war in Ukraine -- and out-of-control spending in general. He demonstrated the latter passion on the Senate floor this week as he ridiculed the latest kick-the-can spending package:
This bill is an insult to the American people. The earmarks are all the wasteful spending that you could ever hope to see, and it should be defeated. Read more: https://t.co/Jt8K5iucA4 pic.twitter.com/I5okd4QgDg
— Senator Rand Paul (@SenRandPaul) March 8, 2024
In February, Paul used Senate rules to force his colleagues into a grueling Super Bowl weekend of votes, as he worked to derail a $95 billion foreign aid bill. "I think we should stay here as long as it takes,” said Paul. “If it takes a week or a month, I’ll force them to stay here to discuss why they think the border of Ukraine is more important than the US border.”
Don't expect a Majority Leader Paul to ditch the filibuster -- he's been a hardy user of the legislative delay tactic. In 2013, he spoke for 13 hours to fight the nomination of John Brennan as CIA director. In 2015, he orated for 10-and-a-half-hours to oppose extension of the Patriot Act.
Among the general public, Paul is probably best known as Capitol Hill's chief tormentor of Dr. Anthony Fauci, who was director of the National Institute of Allergy and Infectious Disease during the Covid-19 pandemic. Paul says the evidence indicates the virus emerged from China's Wuhan Institute of Virology. He's accused Fauci and other members of the US government public health apparatus of evading questions about their funding of the Chinese lab's "gain of function" research, which takes natural viruses and morphs them into something more dangerous. Paul has pointedly said that Fauci committed perjury in congressional hearings and that he belongs in jail "without question."
Musk is neither the only nor the first noteworthy figure to back Paul for party leader. Just hours after McConnell announced his upcoming step-down from leadership, independent 2024 presidential candidate Robert F. Kennedy, Jr voiced his support:
Mitch McConnell, who has served in the Senate for almost 40 years, announced he'll step down this November.
— Robert F. Kennedy Jr (@RobertKennedyJr) February 28, 2024
Part of public service is about knowing when to usher in a new generation. It’s time to promote leaders in Washington, DC who won’t kowtow to the military contractors or…
In a testament to the extent to which the establishment recoils at the libertarian-minded Paul, mainstream media outlets -- which have been quick to report on other developments in the majority leader race -- pretended not to notice that Paul had signaled his interest in the job. More than 24 hours after Paul's test-the-waters tweet-fest began, not a single major outlet had brought it to the attention of their audience.
That may be his strongest endorsement yet.
Government
The Great Replacement Loophole: Illegal Immigrants Score 5-Year Work Benefit While “Waiting” For Deporation, Asylum
The Great Replacement Loophole: Illegal Immigrants Score 5-Year Work Benefit While "Waiting" For Deporation, Asylum
Over the past several…
Over the past several months we've pointed out that there has been zero job creation for native-born workers since the summer of 2018...
... and that since Joe Biden was sworn into office, most of the post-pandemic job gains the administration continuously brags about have gone foreign-born (read immigrants, mostly illegal ones) workers.
And while the left might find this data almost as verboten as FBI crime statistics - as it directly supports the so-called "great replacement theory" we're not supposed to discuss - it also coincides with record numbers of illegal crossings into the United States under Biden.
In short, the Biden administration opened the floodgates, 10 million illegal immigrants poured into the country, and most of the post-pandemic "jobs recovery" went to foreign-born workers, of which illegal immigrants represent the largest chunk.
'But Tyler, illegal immigrants can't possibly work in the United States whilst awaiting their asylum hearings,' one might hear from the peanut gallery. On the contrary: ever since Biden reversed a key aspect of Trump's labor policies, all illegal immigrants - even those awaiting deportation proceedings - have been given carte blanche to work while awaiting said proceedings for up to five years...
... something which even Elon Musk was shocked to learn.
Wow, learn something new every day https://t.co/8MDtEEZGam
— Elon Musk (@elonmusk) March 10, 2024
Which leads us to another question: recall that the primary concern for the Biden admin for much of 2022 and 2023 was soaring prices, i.e., relentless inflation in general, and rising wages in particular, which in turn prompted even Goldman to admit two years ago that the diabolical wage-price spiral had been unleashed in the US (diabolical, because nothing absent a major economic shock, read recession or depression, can short-circuit it once it is in place).
Well, there is one other thing that can break the wage-price spiral loop: a flood of ultra-cheap illegal immigrant workers. But don't take our word for it: here is Fed Chair Jerome Powell himself during his February 60 Minutes interview:
PELLEY: Why was immigration important?
POWELL: Because, you know, immigrants come in, and they tend to work at a rate that is at or above that for non-immigrants. Immigrants who come to the country tend to be in the workforce at a slightly higher level than native Americans do. But that's largely because of the age difference. They tend to skew younger.
PELLEY: Why is immigration so important to the economy?
POWELL: Well, first of all, immigration policy is not the Fed's job. The immigration policy of the United States is really important and really much under discussion right now, and that's none of our business. We don't set immigration policy. We don't comment on it.
I will say, over time, though, the U.S. economy has benefited from immigration. And, frankly, just in the last, year a big part of the story of the labor market coming back into better balance is immigration returning to levels that were more typical of the pre-pandemic era.
PELLEY: The country needed the workers.
POWELL: It did. And so, that's what's been happening.
Translation: Immigrants work hard, and Americans are lazy. But much more importantly, since illegal immigrants will work for any pay, and since Biden's Department of Homeland Security, via its Citizenship and Immigration Services Agency, has made it so illegal immigrants can work in the US perfectly legally for up to 5 years (if not more), one can argue that the flood of illegals through the southern border has been the primary reason why inflation - or rather mostly wage inflation, that all too critical component of the wage-price spiral - has moderated in in the past year, when the US labor market suddenly found itself flooded with millions of perfectly eligible workers, who just also happen to be illegal immigrants and thus have zero wage bargaining options.
None of this is to suggest that the relentless flood of immigrants into the US is not also driven by voting and census concerns - something Elon Musk has been pounding the table on in recent weeks, and has gone so far to call it "the biggest corruption of American democracy in the 21st century", but in retrospect, one can also argue that the only modest success the Biden admin has had in the past year - namely bringing inflation down from a torrid 9% annual rate to "only" 3% - has also been due to the millions of illegals he's imported into the country.
We would be remiss if we didn't also note that this so often carries catastrophic short-term consequences for the social fabric of the country (the Laken Riley fiasco being only the latest example), not to mention the far more dire long-term consequences for the future of the US - chief among them the trillions of dollars in debt the US will need to incur to pay for all those new illegal immigrants Democrat voters and low-paid workers. This is on top of the labor revolution that will kick in once AI leads to mass layoffs among high-paying, white-collar jobs, after which all those newly laid off native-born workers hoping to trade down to lower paying (if available) jobs will discover that hardened criminals from Honduras or Guatemala have already taken them, all thanks to Joe Biden.
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