ON DECK FOR FRIDAY, JULY 19 |
![ON DECK FOR FRIDAY, JULY 19](/content/experience-fragments/scotiabank/global_economics/en/daily_points/july_2024/2024-07-19/master/_jcr_content/root/image.img.png/1721388228347.png)
KEY POINTS:
- Large scale IT outages hit multiple industries
- Markets are functioning well with a mild risk-off bias
- UK retail sales fall more than expected, trend is still going nowhere
- Japanese core inflation ticks up, follows timelier Tokyo gauge
- Canadian retail sales to be updated for May and June, inform Q2 tracking
And this was supposed to be a dull Friday with only a handful of regional macro reports to consider. A CrowdStrike program update of its Falcon cybersecurity software messed up Microsoft Windows and is combining with Microsoft’s problems with its Azure cloud service and 365 Office suite. The company says it was not a cyberattack or security issue and that a fix has been deployed, yet the damage will mess up Friday and probably beyond for a lot of folks. The effects are wreaking havoc on multiple businesses from airlines to banks, the LSE to a multitude of other types of businesses. This is being billed as the largest overall IT outage in history. Financial markets are functioning, but in mild risk-off territory with stocks down by up to ¾% in Europe, and flat S&P futures. Sovereign bond yields little changed. The dollar is broadly but modestly stronger.
UK retail sales volumes fell by more than expected in June (-1.2% m/m, -0.6% consensus) after a 2.9% prior gain (chart 1). Gilts and sterling barely noticed if at all. Weakness was broadly based. To give back a fair portion of the prior month’s surge isn’t especially surprising, but the smoothed trend has been moving sideways ever since the start of last year and volumes are slightly weaker than they were before the pandemic.
![Chart 1: UK Retail Sales Volumes](/content/experience-fragments/scotiabank/global_economics/en/daily_points/july_2024/2024-07-19/master/_jcr_content/root/image_12312310.img.png/1721388347636.png)
Japan’s inflation rate largely followed the timelier Tokyo gauge that was released toward the end of June. National core inflation ex-food and energy ticked up to 2.2% y/y, following the Tokyo gauge’s up tick and m/m continues to accelerate (chart 2). The yen and JGBs walked it off but the BoJ may not on July 31st.
![Chart 2: Japanese Core Inflation](/content/experience-fragments/scotiabank/global_economics/en/daily_points/july_2024/2024-07-19/master/_jcr_content/root/image_1164823377.img.png/1721388362058.png)
Canada reports retail sales for May and June (8:30amET). Statcan previously guided that May was down -0.6% m/m SA in nominal terms based on a partial ‘flash’ sample but this can be subject to significant revisions. We’ll also get details for May like volumes, and the flash estimate for June sans details. Volumes have been tracking poorly in Q2 (chart 3) but recall that retail sales in Canada exclude all services.
![Chart 3: Canadian Real Retail Sales Growth](/content/experience-fragments/scotiabank/global_economics/en/daily_points/july_2024/2024-07-19/master/_jcr_content/root/image_966177796.img.png/1721388379825.png)
Canada also reports producer prices for June (8:30amET); the raw materials gauge reflects already known information about commodities, but watch the industrial product index for whether the flat May reading was an aberration.
The US faces no major releases and light Fed-speak (Williams 10:40amET, Bostic 1pmET).
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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.