Key Events This Busy Week: Inflation, Powell, China Data Dump And Earnings After an eventful weekend which saw the G20 summit in Venice repeat trite talking points (which https://twitter.com/zerohedge/status/1414340662129004552!function(d,s,id){var js,fjs=d.getElementsByTagName(s)[0],p=/^http:/.test(d.location)?'http':'https';if(!d.getElementById(id)){js=d.createElement(s);js.id=id;js.src=p+"://platform.twitter.com/widgets.js";fjs.parentNode.insertBefore(js,fjs);}}(document,"script","twitter-wjs");from the whole "climate change" conversation), the Euro 20201 final much to the disappointment of millions of Brits, and the official launch of space tourism courtesy of Richard Branson, it’s likely to be an eventful week ahead for markets as well , with the US CPI reading for June (tomorrow) expected to set the tone after the reflation trade has deflated over recent weeks. We also have the first Treasury coupon issuance (today we get the 3Y and 10Y auctions, and the 30Y tomorrow) since June 24th in what has been a very very squeezed Treasury market with 9 Fed open market operations since. Other big US data of note comes with PPI (Wednesday), various manufacturing readings (Thursday) and a big day for the consumer on Friday with retail sales and consumer confidence prints. The highlight outside the US may be the Q2 GDP reading from China (Thursday). Earnings season also officially kicks off on Tuesday when JPM and Goldman are set to report. As DB's Jim Reid summarizes, on the central bank side, investors will also be paying attention to Fed Chair Powell’s congressional testimonies (Wednesday and Thursday), as well as the Bank of Japan’s latest monetary policy decision (Friday). Earnings season gets going too, with a number of US financials reporting from tomorrow, while important meetings of policymakers include the Eurogroup meeting on Monday, and that between President Biden and Chancellor Merkel at the White House on Thursday. Going through the main highlights in more details and we have to start with US CPI. Last month Reid said that this data release might be the most closely-watched inflation report of his career. It maybe was a for a few minutes but even though headline (5.0%) and core (3.8%) beat expectations by 0.3pp and were the highest for 12 and 29 years respectively, the report had limited follow through as most focused on the transitory elements. Subsequent concerns about the virus, the economy and strong technicals overshadowed the release. DB’s expectations this week are for energy prices to keep headline (+0.54% forecast vs. +0.64% last month) above core (+0.39% vs. +0.74%). The devil will all be in the detail though with used car prices for one likely to be a lot less troublesome than in recent months (they added nearly 30bps to last month’s release). Economists will also be watching for signs that higher inflation in Covid-centric categories such as airfares and lodging away are spreading to other categories such as rents. They haven’t spread much yet so all eyes on this. As we all know there has been a big battle to explain the rally in Treasuries after the huge inflation beats of the last couple of months. Some say it’s because of concerns over medium-to-long-term fundamentals, others say it’s technicals. Whatever the reason it’s been an impressive rally. If it is technicals, maybe we’ll get some clues this week as today sees the first Treasury coupon auctions since June 24th due to quirky calendar effects. Since then, there has been 9 near-consecutive Fed buyback operations, making this period the longest stretch of Fed OMOs without a supply event since the start of the pandemic. This week we see $120BN in coupon sales, with 3yr and 10yr auctions today and 30yr tomorrow. Perhaps the reversal from 1.25% on Thursday to 1.35% on Friday was a bit of preparation for the huge supply. DB’s Steven Zeng writes here that the broader treasury supply picture is still somewhat constrictive in the near term, and likely to stay low in July. However, this dynamic is expected to reverse after August as bill supply normalizes. It’s an eventful week ahead on the central bank side too, with four of the G20 central banks deciding on rates, including the Bank of Japan. In terms of what to expect there, the expectation is that they’ll maintain their present policy stance and only slightly revise their view in the quarterly outlook report. On top of those decisions, there’s also Congressional testimonies from Fed Chair Powell, who’s speaking before the House Financial Services Committee on Wednesday, and the Senate Banking Committee on Thursday, where he’ll be delivering the semi-annual Monetary Policy Report to Congress. It won’t stray too far away from the FOMC text but expect lots of questions on inflation from the various politicians. Earnings season will begin to get going next week, with a number of US financials reporting, among others. Among the highlights include JPMorgan Chase, PepsiCo and Goldman Sachs tomorrow. Then on Wednesday we’ll hear from Bank of America, Wells Fargo, Citigroup and BlackRock. Thursday sees reports from UnitedHealth Group, Morgan Stanley, US Bancorp and BNY Mellon. Finally on Friday, we’ll hear from Charles Schwab. Courtesy of Deutsche Bank, here is a day-by-day calendar of events Monday July 12 Data: Japan May core machine orders, June PPI Central Banks: Fed’s Kashkari speaks Tuesday July 13 Data: US June CPI, NFIB small business optimism index, monthly budget statement, China June trade balance Central Banks: Fed’s Kashkari, Bostic and Rosengren speak Earnings: JPMorgan Chase, PepsiCo, Goldman Sachs Wednesday July 14 Data: UK June CPI, Euro Area May industrial production, US PPI Central Banks: Monetary policy decisions from the Bank of Canada and Central Bank of Turkey, Federal Reserve releases Beige Book, Fed Chair Powell, Fed’s Kashkari and BoE’s Ramsden speak Earnings: Bank of America, Wells Fargo, Citigroup, BlackRock Thursday July 15 Data: China Q2 GDP, June retail sales, industrial production, Japan May tertiary industry index, UK May unemployment, US July Empire State manufacturing survey, Philadelphia Fed business outlook, weekly initial jobless claims, June industrial production, capacity utilisation Central Banks: Bank of Korea monetary policy decision, Fed Chair Powell, Fed’s Evans and BoE’s Saunders speak Earnings: UnitedHealth Group, Morgan Stanley, US Bancorp, BNY Mellon Politics: US President Biden meets German Chancellor Merkel at the White House Friday July 16 Data: EU June new car registrations, Euro Area May trade balance, US June retail sales, preliminary July University of Michigan consumer sentiment index Central Banks: Bank of Japan monetary policy decision, Fed’s Williams speaks Earnings: Charles Schwab Finally, focusing on just the US, Goldman writes that the key economic data releases this week are the CPI report on Tuesday, the Philadelphia Fed manufacturing index on Thursday, and the retail sales report on Friday. There are several speaking engagements from Fed officials this week, including Chair Powell’s semi-annual testimony to the House Financial Services Committee on Wednesday and to the Senate Banking Committee on Thursday. Monday, July 12 There are no major economic data releases scheduled. 09:30 AM New York Fed President Williams (FOMC voter) speaks: New York Fed President John Williams will give keynote remarks at an event on “Inflation: Dynamics, Expectations, and Targeting” hosted by the Bank of Israel and the Centre for Economic Policy Research. Prepared text and moderated Q&A are expected. 12:00 PM Minneapolis Fed President Kashkari (FOMC non-voter) speaks: Minneapolis Fed President Neel Kashkari will take part in an Allianz employee virtual townhall discussion. Tuesday, July 13 06:00 AM NFIB small business optimism, June (consensus 99.5, last 99.6); 08:30 AM CPI (mom), June (GS +0.66%, consensus +0.5%, last +0.6%); Core CPI (mom), June (GS +0.53%, consensus +0.4%, last +0.7%); CPI (yoy), June (GS +5.14%, consensus +4.9%, last +5.0%); Core CPI (yoy), June (GS +4.09%, consensus +4.0%, last +3.8%): We estimate a 0.53% increase in June core CPI (mom sa), which would boost the year-on-year rate by three tenths to 4.09%. Our monthly core inflation forecast reflects another large rise in used car prices reflecting the tail-end of stimulus and microchip effects. We also expect strength in airfares and hotel prices due to the interaction of reopening and the summer tourism season. Given the pickup in our shelter tracker and continued strength in the housing market, we expect another firm reading in housing categories, albeit sequentially lower than in May: we estimate rent +0.22% and OER +0.27%. The sharp acceleration in low-end wage growth is also likely to boost restaurant prices and possibly other labor-sensitive categories. We estimate a 0.66% increase in headline CPI (mom sa), reflecting higher restaurant, grocery, and energy prices. 12:00 PM Atlanta Fed President Bostic (FOMC voter), Minneapolis Fed President Kashkari (FOMC non-voter), and Boston Fed President Rosengren (FOMC non-voter) speak: Atlanta Fed President Raphael Bostic, Minneapolis Fed President Neel Kashkari, and Boston Fed President Eric Rosengren will speak at a Fed event on racism and the economy. Wednesday, July 14 08:30 AM PPI final demand, June (GS +0.6%, consensus +0.5%, last +0.8%); PPI ex-food and energy, June (GS +0.5%, consensus +0.5%, last +0.7%); PPI ex-food, energy, and trade, June (GS +0.5%, consensus +0.5%, last +0.7%): We estimate that headline PPI increased by 0.6% in June. We also expect a 0.5% increase in both core measures, reflecting a boost from continued supply chain bottlenecks and reopening pressures. 12:00 PM Fed Chair Powell (FOMC voter) speaks: Fed Chair Jerome Powell will appear before the House Financial Services Committee to deliver the Semi-Annual Monetary Policy Report to Congress. 01:30 PM Minneapolis Fed President Kashkari (FOMC non-voter) speaks: Minneapolis Fed President Neel Kashkari will take part in a panel discussion about strategies for targeting federal programs to meet the needs of Asian American and Pacific Islander communities. 02:00 PM Beige Book, July FOMC meeting period: The Fed’s Beige Book is a summary of regional economic anecdotes from the 12 Federal Reserve districts. In the July Beige Book, we look for anecdotes related to growth, labor markets, wages, price inflation, and supply chain disruptions. Thursday, July 15 08:30 AM Empire State manufacturing survey, July (consensus +18.0, last +17.4) 08:30 AM Import price index, June (consensus +1.2%, last +1.1%) 08:30 AM Initial jobless claims, week ended July 10 (GS 350k, consensus 350k, last 373k): Continuing jobless claims, week ended July 3 (consensus 3,300k, last 3,339k): We estimate initial jobless claims decreased to 350k in the week ended July 10. 08:30 AM Philadelphia Fed manufacturing index, July (GS 26.0, consensus 28.0, last 30.7): We estimate that the Philadelphia Fed manufacturing index declined by 4.7pt to 26.0 in July, reflecting continued production constraints from labor shortages and supply chain bottlenecks. 09:15 AM Industrial production, June (GS +0.4%, consensus +0.6%, last +0.8%): Manufacturing production, June (GS -0.3%, consensus +0.3%, last +0.9%); Capacity utilization, June (GS 75.5%, consensus 75.6%, last 75.2%): We estimate industrial production rose by 0.4% in June, reflecting strength in mining production and weakness in motor vehicle output from supply chain constraints. We estimate capacity utilization rose by 0.3pp to 75.5%. 09:30 AM Fed Chair Powell (FOMC voter) speaks: Fed Chair Jerome Powell will appear before the Senate Banking Committee to deliver the Semi-Annual Monetary Policy Report to Congress. 11:00 AM Chicago Fed President Evans (FOMC voter) speaks: Chicago Fed President Charles Evans will take part in the annual Rocky Mountain Economic Summit. Q&A is expected. Friday, July 16 08:30 AM Retail sales, June (GS flat, consensus -0.4%, last -1.3%); Retail sales ex-auto, June (GS +0.8%, consensus +0.4%, last -0.7%); Retail sales ex-auto & gas, June (GS +0.7%, consensus +0.4%, last -0.8%); Core retail sales, June (GS +0.5%, consensus +0.4%, last -0.7%): We estimate a 0.5% rebound in core retail sales (ex-autos, gasoline, and building materials) in June (mom sa). High-frequency data suggest stabilization of consumer goods spending following the post-stimulus pullback in May. We believe the reopening of the economy further shifted sequential spending towards restaurants from grocers, which would create a positive wedge between the ex-auto ex-gas reading and retail control. We estimate a flat headline reading, reflecting lower auto sales. 09:00 AM New York Fed President Williams (FOMC voter) speaks:New York Fed President John Williams will give opening and closing remarks for a panel discussion hosted by the New York Fed about post-pandemic workplace culture. 10:00 AM Business inventories, May (consensus +0.5%, last -0.2%) 10:00 AM University of Michigan consumer sentiment, July preliminary (GS 87.5, consensus 86.5, last 85.5): We expect the University of Michigan consumer sentiment index increased by 2.0pt to 87.5 in the preliminary July reading, reflecting further improvement in our Twitter Sentiment Index. Source: Goldman, DB, BofA Tyler Durden Mon, 07/12/2021 - 09:40