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Week Ahead: Recession Fears Mounting

By MarketPulse (Craig Erlam)Market OverviewSep 25, 2022 12:29AM ET
www.investing.com/analysis/week-ahead-recession-fears-mounting-200630261
Week Ahead: Recession Fears Mounting
By MarketPulse (Craig Erlam)   |  Sep 25, 2022 12:29AM ET
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Now that Wall Street has had some time to digest the FOMC decision, the focus shifts to how quickly the economy is weakening and a wave of Fed speak. A wide range of economic releases includes more Fed regional surveys, durable goods orders, consumer confidence, new home sales, initial jobless claims, personal income and spending, and the PCE deflator.

An overwhelming amount of Fed speak include 16 appearances by policymakers. Monday is filled with comments from Fed’s Collins, Bostic, Logan, and Mester. On Tuesday, Chair Powell will participate in a panel on digital currencies. Evans, Bullard, and Daly will also speak. Wednesday has appearances from Bostic, Bullard, and Evans. Thursday’s speakers include Bullard, Mester, and Daly. On Friday, both Brainard and Williams speak at the Fed conference on Financial Stability.

EU

This week is littered with appearances from ECB policymakers which comes at a good time following a raft of massive rate hikes around the world and as we get the latest flash inflation figures for September.

The results from the Italian general election will also be interesting, with it expected to end in victory for the far-right.

UK

There was a lot to process last week from the latest rate hike to the supposed “mini-budget” and subsequent sterling plunge. There’s a lot of heat on the UK economy and government at the moment and all of that tax cutting has added fuel to the fire rather than put it out. This week will tell us if the UK could already be in recession as the final reading of second-quarter GDP is released. The last reading was -0.1% so a small positive revision could be enough to kick the technical recession down the road, not that it actually changes anything.

Apart from that, we have a few appearances from BoE policymakers to look forward to.

Russia

The focus next week will be on the “referendums” in Russian-controlled territories of eastern Ukraine and what the Kremlin will do next. The rhetoric has become far more aggressive recently amid constant reference to its nuclear might and ability to use it.

On the economy, unemployment data will be released which seems very insignificant in the grand scheme of things.

South Africa

PPI data is expected to show pressures slightly softening, albeit from 18% to 17.6%. This comes after CPI data last week fell at a slower pace than expected and the SARB hiked rates by 75 basis points to 6.25%. With two of the five members of the MPC voting for 100bps, further tightening looks likely at upcoming meetings.

Turkey

With inflation running above 80%, the CBRT obviously cut the repo rate by another 100bps to 12%. Which makes observing the data feel a bit pointless at times but only here will the cost of this monetary policy experiment show up. Next week has little to offer on that front, with the few releases being tier two and three.

Switzerland

The SNB opted for a 75bps rate hike this month and warned that it could intervene in the currency markets – despite referencing the benefits of the stronger franc – and hold an emergency meeting if necessary before the next scheduled quarterly gathering in December.

As far as this week is concerned, the quarterly bulletin on Tuesday will be of interest, as will the retail sales number and KOF and ZEW surveys.

China

On Friday, manufacturing and non-manufacturing PMIs will be released. As a result of the historically hot and dry weather extremes in 14 provinces and cities in China from July to August, many provinces are experiencing water and electricity shortages. At the same time, China’s house prices have been falling for 12 consecutive months, and the house price inflation rate has dropped to -2.1 % on an annual basis.

Real estate has always been the main component of Chinese household wealth and a pillar industry of the economy. The continuous decline of this data indicates that consumption is and will remain weak.

This may suggest further weakness in the data and could further weigh on the yuan as the PBOC continues to prop it up.

India

The RBI is expected to raise the repo rate again on Friday but by a smaller margin of just 35bps. There is scope for more though, with some suggesting 50 could be on the table.

Australia And New Zealand

The August retail sales are to be released next Wednesday. Data from China, Australia’s largest trading partner, could have an impact on the Australian dollar next week, as could risk appetite which has weighed on the currency in recent weeks.

A serious downturn in the New Zealand ANZ business outlook and confidence for September on Thursday could weigh on the kiwi in the short term and even get the attention of the central bank as it aggressively tightens monetary policy. The currency could also be sensitive to Chinse data and the risk environment.

Japan

The Ministry of Finance stole the spotlight on Thursday as it conducted its first FX intervention in 24 years. This came as the BoJ held firm on its monetary policy stance after the Fed hiked by 75 basis points, sending USD/JPY above 145. It was around this point that the BoJ carried out a rate check recently and just above here that the last intervention was conducted in 1998.

Next week brings a whole host of economic data as well as the BoJ minutes (from the July meeting, not September). Pressure could mount on the BoJ in the coming months as it can’t rely on the MoF to tame the decline in the currency longer term.

Singapore

Industrial production figures will be released on Monday.

Data last week showed inflation rising from 7% to 7.5% in August, far ahead of expectations of 7.2%. Singapore’s Minister of Finance, Lawrence Wong, has said that inflation in Singapore will peak by the end of this year.

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Week Ahead: Recession Fears Mounting
 

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Week Ahead: Recession Fears Mounting

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