Macroeconomics: The Day Ahead for 18 November

After a feast of data to start the week, today’s schedule has nothing more than US weekly jobless claims and the Philly Fed Manufacturing survey, though the events calendar is once again chock full of central bank speakers, well as expected no change rate decisions in Indonesia, Philippines & South Africa. Retailers will again be the highlight of the corporate earnings run, via way of Alibaba, Kohl’s and Macy’s, with government bond supply taking the form of multi-tranche auctions in France and Spain, and US 10-yr TIPS. Given this sparse calendar, the focus may well turn to the woes of the TRY, which is effectively in freefall as Erdogan once again pushes for the central bank to cut rates; the Nikkei reports that Japan PM Kishida’s stimulus package will be around Y56 Trln, much higher than the Y30-40 Trln that had been mooted up until now, as well as the potential economic impact of thus far limited new activity restrictions which are being deployed in a number of European countries to combat the latest sharp spike in infection rates in much of Europe. The latter inevitably will doubtless fuel what has generally been a very poorly informed, and far too binary debate about the efficacy of vaccines and a activity restrictions, and obviously raises concerns about the public reaction, particularly as it may well lead many to question the authority of governments. In that vein the Biden administration’s request to China, India and Japan to join the US in drawing down on SPR oil reserves looks to be another example of tilting at windmills, given that the current upward pressures on oil prices remain about product, and not crude, with the sharp drop (ca 8.0%) in US refining output capacity, and the hostile govt attitude towards shale oil producers being the far more potent influences.

U.S.A. – Initial Claims, November KC and Philly Fed Manufacturing surveys 

– The downtrend in Initial Claims is expected to continue with a modest drop to 260K from 267K, though given that the reporting week also includes the Veterans Day holiday, the risk of an outlier is that much higher, but would not alter the underlying trend. Indeed at this stage of the pandemic recovery, it is a question about how to assess Underemployment and Participation rates rather than jobless claims, even if these do remain market sensitive. Following on from the much stronger than expected bounce in the NY Fed Manufacturing survey, the focus turns to the Philly and KC Fed readings, which are respectively seen little changed and down modestly from a strong October print, and are likely to underline that despite the numerous supply chain bottlenecks, sector output levels, along with price pressures and delivery times remain at high levels. As noted yesterday, the simple point is that the skew at the current juncture is to better than expected data, as far as the US economic surprise index goes, even if the inflation pressures are clearly dampening the mood of many consumers.