The Market Today

Busy Week for Data; FOMC Headlines on Wednesday


by Craig Dismuke, Dudley Carter

This Week’s Economic Calendar – Busy with Housing; Confidence; GDP; and FOMC: This week’s economic calendar is packed with reports.  There will be four housing reports beginning this morning with the June Existing Home Sales report, followed by two home price reports tomorrow and the New Home Sales data on Wednesday.  Both of the sales reports are expected to show a rebound in activity after some relatively weaker prints. The Conference Board is expected to show a weaker reading on consumer confidence tomorrow while the University of Michigan’s report is expected to show an uptick on Friday.  Confidence is one of the many critical reports now as we watch the consumer/business reaction to the recent moderation of expectations.  The economy is projected to have expanded 2.6% in 2Q.  The BEA is scheduled to release the initial estimate on Friday.  There is also a flurry of earnings reports due out this week.

 

FOMC Wednesday: Hold on Rates; Wait for Balance Sheet Plans?: But the most important report this week will be the Official Statement from the FOMC’s Meeting on Wednesday.  The market has no expectations for a rate hike this week and only a 42% chance of one more hike before year-end.  The big question will be how they choose to handle the balance sheet discussion.  There are two events about which they will prep the markets – the start date of the new plan and the date on which they will announce the start date.  More hawkish FOMC observers expect that they could announce the start date at this week’s meeting.  This seems particularly data-independent given how weak inflation currently is.  Most economists seem to expect the Committee to announce the start date at their September meeting with the actual plan being implemented in December.  And surprise to that expectation would be met with a sharp market reaction.

 

Today’s Calendar – Trump Speech on Healthcare: As for today’s calendar, the Markit Services and Manufacturing PMIs will be released at 8:45 a.m. CT while the June Existing Home sales report will be released at 9:00 a.m.  President Trump is scheduled to speak at 2:15 p.m. on healthcare.  As of now, Senator Leader McConnell has a Tuesday vote scheduled for an outright appeal of the ACA, although it sounds like they are short on votes.

 

Overnight Activity – Yields Quiet in Front of Busy Week of Economic, Earnings Data: Sovereign yields are mixed Monday as global equities got off to a shaky start, oil prices improved, and the recent strength in the Euro eased. Longer yields in Germany, France, and Italy edged lower while those in Spain rose slightly. Spain’s 10-year yield dropped 19 bps in last week’s global rally. Treasury yields are quietly higher with the 2-year yield 1.2 bps higher at 1.35% and the 10-year yield up 0.7 bps at 2.25%. European equities weakened after a mostly positive day in Asia. U.S. futures are currently mixed. European carmakers weakened following a weekend report alleging certain German automakers may have colluded on technology in order to limit competition. The Eurozone’s Composite PMI dropped more than expected in the preliminary July release (56.3 to 55.8) on weaker manufacturing. The Euro pulled back slightly after last week’s surge but retained most if its recent gains against the Dollar. Oil is higher following a meeting of key world producers where Saudi Arabia reinforced its commitment to trimming world supply.

 

ICYMI – July 21, 2017 Weekly Recap: Global sovereign yields fell last week as prospects for U.S. healthcare reform dimmed and the ECB proved to be more dovish than expected. Click here for a summary of what happened and a link to download the full recap.

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