Watch Mexican lawmakers, U.S. jobs, ECB

Genevieve Signoret & Patrick Signoret

Macro Views

Next week: the highlights

• During the week of 4 August. Mexico: Congress works on energy reform legislation. Both chambers have moved fast and all bills could be sent to President Peña Nieto in one or two weeks. So far, politicians are on track to validate our assumption that investor-friendly laws will be signed into law in August.
• Friday 1. USA: Nonfarm payrolls and unemployment rate (Jul). No other data release matches the U.S. labor in potential to move markets. The FOMC looks at more than just employment and underemployment. Watch for our full analysis in Timón Económico (mostly Spanish). Consensus estimates: unemployment rate unchanged at 6.1%; nonfarm payrolls to +231K from last month’s +288K.
• Thursday 7. Euro Area: European Central Bank monetary policy decision. With inflation having fallen even lower in July, to 0.4%, we expect Mario Draghi to say that the ECB is preparing to ease further by launching an asset purchase program but wants to first wait for its latest round of easing measures (interest rate cuts and, starting in September, cheap loans to banks) to take effect. The Executive Council will be relieved that the euro is finally trending down against the dollar (to 1.34 today from 1.39 in early May).

Next week in detail

Events in red are those most likely to shake markets.

Friday 1 August

• Global: Markit manufacturing PMIs (Jul). Last week’s flash PMIs showed manufacturing accelerating in China, maintaining a solid pace in USA, growing weakly in Japan, and slowing down in the euro area.
• Japan: BoJ speech: Kuroda.
• China: NBS manufacturing PMI (Jul).
• Korea: Consumer prices (Jul), Foreign trade (Jul).
• USA: ISM manufacturing PMI (Jul), personal income, consumption and saving (Jun). This release includes the PCE core inflation index, the Fed’s favorite. It has been moving up recently (to 1.8% in May) but is still below the 2.0% objective. June personal consumption data will feed into the BEA’s second Q2 GDP estimate. The first estimate, published last week, found that the U.S. economy rebounded strongly to 4.0% quarter-on-quarter annualized in Q2 from –2.1% in Q1 and that personal consumption picked up to 2.5% from 1.2%. Read details about that release on our sister blog, Timón Económico (mostly Spanish). Nonfarm payrolls and unemployment rate (Jul). No other data release matches the U.S. labor market report in potential to move markets. The FOMC looks at more than just employment and underemployment. Watch for our full analysis in Timón Económico (mostly Spanish). Consensus estimates: unemployment rate unchanged at 6.1%; nonfarm payrolls to +231K from last month’s +288K.
• Brazil: Foreign trade (Jul), industrial production (Jun).
• Mexico: Banxico survey of professional forecasters (Jul), family remittances (Jun), IMEF manufacturing and nonmanufacturing PMI (Jul).

During the next week

• India: Foreign trade (Jul).
• Mexico: Auto production and sales (Jul), Congress works on energy reform legislation. Both chambers have moved fast and all bills could be sent to President Peña Nieto in one or two weeks. So far, politicians are on track to validate our assumption that investor-friendly laws will be signed into law in August.

Tuesday 5

• Global: Markit services PMIs (Jul).
• India: Reserve Bank of India (RBI) monetary policy decision. Inflation moderated to 5-6% so far this year from over 7% in the second half of 2013, the RBI has been on pause at 8.00% since January. In its June statement, the Bank’s tone was neutral.
• USA: ISM nonmanufacturing PMI (Jul).
• Mexico: Consumer confidence (Jul).

Wednesday 6

• UK: Industrial production (Jun).
• USA: Foreign trade (Jun).

Thursday 7

• Euro Area: European Central Bank (ECB) monetary policy decision. With inflation having fallen even lower in July, to 0.4%, we expect Mario Draghi to say that the ECB is preparing to ease further by launching an asset purchase program but wants to first wait for its latest round of easing measures (interest rate cuts and, starting in September, cheap loans to banks) to take effect. The Executive Council will be relieved that the euro is finally trending down against the dollar (to 1.34 today from 1.39 in early May).
• Germany: Industrial production (Jun).
• UK: Bank of England monetary policy decision. We and the consensus expect no change to the policy rate at 0.50%. We think that this will be the first major bank to tighten but don’t think it will do so before year end.
• USA: Unemployment claims (Aug 2), consumer credit (Jun).
• Mexico: Consumer prices (Jul).

Friday 8

• Global: OPEC Monthly oil market report (Jul).
• Japan: Bank of Japan monetary policy decision. The monetary policy committee has shown no signs of wanting to increasing monetary stimulus soon, so we expect no change in the Bank’s target annual rate of monetary base expansion (60–70 bn). Inflation rates (excluding fiscal shocks) and medium-term inflation expectations are higher than 1% but lower than the Bank’s 2% target, and have shown no clear trend so far this year.
• China: Foreign trade (Jul). While foreign trade activity seems to have strengthened in some places, including the USA, both imports and exports have slowed down on trend all year long. The consensus estimate for exports is a slowdown to 6.5% year-on-year (from 7.2% in June).
• Germany: Foreign trade (Jun).
• UK: Foreign trade (Jun).
• Turkey: Industrial production (Jun).
• Brazil: Consumer prices (Jul).
• Mexico: Fixed investment (May).

Saturday 9

• China: Consumer prices (Jul).

Sunday 10

• Turkey: Presidential election.

Comment from Carlos Loperena - August 5, 2014 at 7:31 am

Muy buen resumen de variables que afectan el mercado, interesante link con el Timón Económico para quienes gustamos entrarle a lo Macro. Felicidades por el Blog Genevieve & Patrick Signoret

Comment from Genevieve Signoret - August 5, 2014 at 10:59 am

Muchas gracias por tu generoso comentario. Seguimos atentos a todo comentario, debate o sugerencia.