Look Ahead 15/8/23: Japan GDP; RBA minutes; ZEW; China industrial production; Home Depot earnings
The focus on Tuesday turns to global retail sales, growth and inflation. Investors await growth data from Japan, the latest business morale reading from Germany and minutes from the RBA’s last meeting.
Big news for the JPY
Welcome to your Look Ahead to 15 August 2023. Japan is the big focus early on in the session because we are looking out for second-quarter GDP growth rate numbers. Expectations are for 0.8%, quarter-on-quarter.
I'm just showing you the JPY because this is a very interesting space for many of our IG clients because we've seen volatility recently. The currency versus the US dollar weakened to as low as 145522 per dollar early in the session. It's lowest level since 10 November before quickly a reversing course in a volatile start to the day.
The dollar last fetching around 14496 . It's now 14536. The Bank of Japan, of course, has stuck to its ultra-loose monetary policy as other global central banks heighten interest rates, making returns in other countries look more attractive. And this has weighed on the yen.
I want to show you last September as well, because this period is when the dollar rose past 145 yen, prompting the Ministry of Finance to buy the yen and push the pair back to around 140.
RBA volatility of note
Also looking at Australia because we've got RBA minutes there. These are the minutes of its last meeting. Taking a look at the cross here, because this here has also seen quite a lot of volatility.
A couple of weeks ago, the RBA unexpectedly kept its cash rate unchanged at 4.1 percent, despite inflation still being stuck at around 6%. The market anticipating or had anticipated a 25 basis point hike.
China a cause for concern
China is also a big focus for us because earlier in the session we saw some more concerns over the Chinese economy. After some moves in its property market, the Chinese authorities also unveiled more measures, more stimulus to try and boost the economy there.
Interestingly, tomorrow we have industrial production figures expectations for July 4.4%, year-on-year after strong gains for the global equity markets and, in particular, US equities.
If we see a further weakening of the Chinese economic indicators, we could see equity markets continue to lose momentum in August. Also, we have retail sales out of China.
UK unemployment data on the horizon
Turning to the United Kingdom, we've got jobless rate numbers, the expectations for June 4%.
Out of Germany look out for the Zentrum für Europäische Wirtschaftsforschung (ZEW) Economic Sentiment Index reading. The consensus for August -14.4.
Retail takes centres stage in US
Earlier this week we spoke to Tasty's Liz Dierking from Chicago who said that there might be a chance that many of these retailers continue to look robust as many consumers decide to continue spending on experiences rather than things.
We also have the NAB Housing Market Index and crude oil inventories as well. Looking at the dollar basket first because the dollar has had an extremely large amount of volatility too, as you can see here. Seeing a low of 9935 before bouncing back towards this resistance level here at 10330.
US interest rates may stay up
Hotter-than-expected US producer prices data last week banned concerns that the Federal Reserve Bank (Fed.) could keep interest rates higher for longer and this has been driving up US treasury yields and also slightly supporting the dollar, as you can see, but it has weighed on rate-sensitive, big tech and growth stocks, oil prices.
Just checking on that for you at US crude there. As you can see here, just zooming in for you, showing a fall of almost 1% as those concerns over China's faltering economy, economic recovery and a stronger dollar, as well, hurt oil.
Home Depot trend is revealing
In terms of earnings, we've got Legal & General reporting first-half earnings; Just Group as well. And also, as I mentioned earlier, Home Depot out of the US out with its second-quarter earnings.
Home Depot was one of the darlings during Covid, seeing lots of people go in droves to try and sort out their homes during lockdown. And there was a huge amount of home renovation and DIY as well.
Many of Home Depot's peers in Europe are also seeing similar trends, Castorama B and Q, uh, they have all come from quite a high base. Of course, once lockdown eased and finally went away, we've had to see a repositioning of its strategy.
So pay attention to what Home Depot says about consumer behavior, what people are now spending on, given high inflation still in the United States. And what they say about what they're going to potentially spend on in the second half.
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