ON DECK FOR TUESDAY, AUGUST 29
KEY POINTS:
- Mild risk-on sentiment supported by China’s moves
- China jawbones fiscal stimulus, mortgage and deposit rate cuts
- New RBA Governor’s hike warning ignored by markets
- US consumer confidence may face downside risk this time
- US repeat home sale prices probably increased again, downside ahead
- US job vacancies making slow progress toward lessening pressures
- Canada’s so-far mixed bank earnings season
Mixed risk appetite is characterized by flat N.A. equity futures versus mild gains across Europe that are led by the FTSE100 as the UK returns from holiday. Curves are little changed in the US and UK as bunds slightly bull flatten. The USD is flat on balance.
China jawboned fiscal stimulus. Anonymous sources guided that regulators may direct banks to cut mortgage rates on first homes as soon as today and for the first time since the GFC. Anonymous sources also indicated to the press that Chinese state banks may reduce deposit rates later this week in a plan reportedly approved by regulators.
New RBA Governor Bullock delivered her first speech overnight in her new capacity as Governor. The A$ and overall rates complex ignored her guidance that “we may have to raise interest rates again, but we’re watching the data very carefully.” Australia updates CPI for July tonight and the RBA delivers its next decision next Tuesday that kicks off the month’s global calendar of central bank decisions.
US data will focus upon the household sector:
- Watch consumer confidence as it probably faces downside risk as mortgage rates and gasoline prices rise alongside moderating wage gains (10amET). Also watch the ‘jobs plentiful’ measure as a labour market signal, and 1-year ahead inflation expectations.
- Another decent gain in repeat-sale home prices is expected, but it’s lagging June data before the 30-year mortgage rate move higher during July and August (9amET).
- Job vacancies will help to inform the degree to which the labour market may be bringing supply and demand conditions back into balance which the Fed desires (10amET). So far that has been a very slow process as indicated by the updated Beveridge Curve (chart 1).
Overnight developments included Japan’s jobless rate that unexpectedly moved up two-tenths to 2.7% in July. Sweden’s GDP fell by less than expected in Q2 (-0.8% q/q SA, -1.3% consensus) partly due to a downward revision to Q1 (0.4% from 0.6% previously)
BMO’s Q3 earnings sharply disappointed at C$2.78 versus consensus at $3.13 EPS. BNS slightly disappointed expectations with Q3 EPS at C$1.73 ($1.74 consensus). The bank’s investor presentation is here. Chart 2 shows the bank earnings season to date that has been characterized by one large miss, two small ones, and one modest beat with two more of the ‘big six’ still ahead.
DISCLAIMER
This report has been prepared by Scotiabank Economics as a resource for the clients of Scotiabank. Opinions, estimates and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. Neither Scotiabank nor any of its officers, directors, partners, employees or affiliates accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents.
These reports are provided to you for informational purposes only. This report is not, and is not constructed as, an offer to sell or solicitation of any offer to buy any financial instrument, nor shall this report be construed as an opinion as to whether you should enter into any swap or trading strategy involving a swap or any other transaction. The information contained in this report is not intended to be, and does not constitute, a recommendation of a swap or trading strategy involving a swap within the meaning of U.S. Commodity Futures Trading Commission Regulation 23.434 and Appendix A thereto. This material is not intended to be individually tailored to your needs or characteristics and should not be viewed as a “call to action” or suggestion that you enter into a swap or trading strategy involving a swap or any other transaction. Scotiabank may engage in transactions in a manner inconsistent with the views discussed this report and may have positions, or be in the process of acquiring or disposing of positions, referred to in this report.
Scotiabank, its affiliates and any of their respective officers, directors and employees may from time to time take positions in currencies, act as managers, co-managers or underwriters of a public offering or act as principals or agents, deal in, own or act as market makers or advisors, brokers or commercial and/or investment bankers in relation to securities or related derivatives. As a result of these actions, Scotiabank may receive remuneration. All Scotiabank products and services are subject to the terms of applicable agreements and local regulations. Officers, directors and employees of Scotiabank and its affiliates may serve as directors of corporations.
Any securities discussed in this report may not be suitable for all investors. Scotiabank recommends that investors independently evaluate any issuer and security discussed in this report, and consult with any advisors they deem necessary prior to making any investment.
This report and all information, opinions and conclusions contained in it are protected by copyright. This information may not be reproduced without the prior express written consent of Scotiabank.
™ Trademark of The Bank of Nova Scotia. Used under license, where applicable.
Scotiabank, together with “Global Banking and Markets”, is a marketing name for the global corporate and investment banking and capital markets businesses of The Bank of Nova Scotia and certain of its affiliates in the countries where they operate, including; Scotiabank Europe plc; Scotiabank (Ireland) Designated Activity Company; Scotiabank Inverlat S.A., Institución de Banca Múltiple, Grupo Financiero Scotiabank Inverlat, Scotia Inverlat Casa de Bolsa, S.A. de C.V., Grupo Financiero Scotiabank Inverlat, Scotia Inverlat Derivados S.A. de C.V. – all members of the Scotiabank group and authorized users of the Scotiabank mark. The Bank of Nova Scotia is incorporated in Canada with limited liability and is authorised and regulated by the Office of the Superintendent of Financial Institutions Canada. The Bank of Nova Scotia is authorized by the UK Prudential Regulation Authority and is subject to regulation by the UK Financial Conduct Authority and limited regulation by the UK Prudential Regulation Authority. Details about the extent of The Bank of Nova Scotia's regulation by the UK Prudential Regulation Authority are available from us on request. Scotiabank Europe plc is authorized by the UK Prudential Regulation Authority and regulated by the UK Financial Conduct Authority and the UK Prudential Regulation Authority.
Scotiabank Inverlat, S.A., Scotia Inverlat Casa de Bolsa, S.A. de C.V, Grupo Financiero Scotiabank Inverlat, and Scotia Inverlat Derivados, S.A. de C.V., are each authorized and regulated by the Mexican financial authorities.
Not all products and services are offered in all jurisdictions. Services described are available in jurisdictions where permitted by law.