Updated: 03, October
| DATE | REGION | EVENT | CURRENCY | MARKET CONSENSUS |
|---|---|---|---|---|
| 1st Oct | Australia | RBA Cash Rate Target | AUD | Rates unchanged due to low unemployment rate, positive business conditions, high level of investment in public infrastructure, and growth in resource exports |
| 1st Oct | Eurozone | Markit Eurozone Manufacturing PMI | USD + All currencies | Final Eurozone Manufacturing PMI at 45.7 in Sep (Flash: 45.6, August Final: 47.0). Output, new orders, and purchasing all fell leading to deteriorating conditions |
| 1st Oct | United States | ISM Manufacturing | USD + All currencies | The September PMI registered 47.8% (a decade low), 1.3% lower than the August reading of 49.1%. Reflects a continuous decrease in business confidence at a pace higher than in August |
| 4th Oct | India | RBI Repurchase Rate | INR | 25bps cut likely |
| 4th Oct | United States | Change in non-farm payrolls | USD + All currencies | To remain robust |
| 10th Oct | United Kingdom | Industrial Production MoM | GBP | To remain subdued. Brexit headwind weighing on |
| 15th Oct | China | CPI YoY | CNY + All currencies | Flat. Might hover a little lower due to renewed agro supplies from US |
| 16th Oct | Eurozone | CPI YoY | EUR | To remain subdued |
| 18th Oct | China | GDP YoY | CNR + all currencies | Flat |
| 23rd Oct | Eurozone | Consumer Confidence | EUR | Unchanged |
| 24th Oct | Eurozone | ECB Main Refinancing Rate | EUR | General expectation is that the rate will remain unchanged |
| 30th Oct | United States | GDP Annualized QoQ | USD + All currencies | Lower growth rate of 1.9% expected. But BEA has been beating estimates over a past few months regularly |
| 30th Oct | Canada | Bank of Canada | CAD | Likely to remain unchanged |
| 30th Oct | Brazil | Selic Rate | BRL | 25bps cut likely |
| 31st Oct | United States | FOMC Rate Decision (Upper Bound) | USD + All currencies | 25bps cut possible |
| 31st Oct | Japan | Industrial Production MoM | JPY | Neutral |
| 31st Oct | Eurozone | GDP SA QoQ | EUR | Underweight |
Outlook Commentary:
US Consumer spending remained strong, yet the near-term outlook for the corporate sector is bleak. Manufacturing recession and unending US-China trade spat might drag down other sectors. FED has been active, but its policy tools are depleting. Damage from trade war might prove to be to large to be overshadowed by rate cuts. Further yield curve inversion might come up which adds to downside risks for growth.
Slow-down in Eurozone economy, Brexit and trade war weight on the consumer and business confidence. This results in further deceleration in Germany, the biggest economy in Eurozone. Technical recession seems feasible if hard Brexit materializes and Europe is targeted in trade war. ECB might act with further stimulus measures, which should keep bond yields negative for extended period of time.
Political drama in UK doesn’t seem to abate any time soon. It’s likely that UK will be heading into an election. It is hard to predict when. The odds of hard Brexit on 31st October has not substantially subsided. Legislative efforts are in play to defer the Brexit deadline. In case, UK does delve into election, the outcome will be practically impossible to predict.
The tax cut puts corporate India on par with Asian neighbors. This is significantly positive for the economy over a longer-term. However, the aggressive stimulus adds to further delaying fiscal consolidation. There is no clarity about how the government will be financing the wider deficit. INR will likely be vulnerable to weakening public finances, the renewed threat of higher oil prices leading to higher domestic inflation, and the persistently wide current account deficit.
Despite large fiscal stimulus in infrastructure investment and PBOC’s rate cuts, it will be difficult to damage control the losses of export orders to US and the structural weakness in global demand for smartphones and related products (highly weighted in the industrial production data). Market’s expectation of 6% growth will be hard to achieve.
We maintain our view of staying conservative in the current environment and to target a 50:50 portfolio allocation between bonds and equity and also to add Gold to a portfolio on dips.
Disclaimer
The materials and data contained herein are for information only and shall in no event be construed as an offer to purchase or sell or the solicitation of an offer to purchase or sell any securities in any jurisdiction. Kristal Advisors does not make any representation, undertaking, warranty or guarantee as to the update, completeness, correctness, reliability or accuracy of the materials and data herein. All opinions, forecasts or estimation expressed herein are subject to change without prior notice. Kristal Advisors and its affiliates accept no liability or responsibility whatsoever for any direct or consequential loss and/or damages arising out of or in relation to any use of opinions, forecasts, materials and data contained herein or otherwise arising in connection therewith.