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Light Data Weeks Could be Drive by Geopolitics

David Becker
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Markets are usually subdued during mid-August but there has been no lack of stress in the markets these days, which is simultaneously impacting and distracting from fundamentals. Though growth dynamics continue to swerve, the FOMC remains on track to end QE in a couple of months. But the real question remains, just when will interest rate start to move higher? With the next potential clues likely a week away, North America will have to make do with a few economic highlights and likely more exogenous threats.

The BoE is also edging toward rate hikes, though not quite with the same urgency. Meanwhile, the ECB retained the QE option amid deteriorating data and the uncertain effects of a veritable trade war with Russia amid precarious relations. Yet the ECB continues to bide its time until the TLTRO program launches in September. On the fundamental side, GDPs are due from several regions in Asia, plus China inflation, loan growth, retail and investment stats. GDP from the Eurozone and UK BoE quarterly inflation report are also on tap.

This week’s U.S. data on sales, manufacturing, and prices will be important, but not crucial to the outlook. July retail sales are expected to rise 0.3% overall and 0.4% excluding autos. The Empire State index should reflect some slowing in activity, while industrial production edges up 0.3%. Producer prices are seen posting a tame 0.1% headline increase with the core up 0.2%.

Initial jobless claims are forecast to dip 4k to 285k, though those surveyed look for a bigger back-up, while import prices may shrink 0.4% in July and export prices fall 0.3%. PPI is expected to remain inert at unchanged for July, rising 0.1% ex-food and energy, hardly the stuff of Fed nightmares.

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