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Main Events This Week: Trade, Tariffs And Transitions

Courtesy of ZeroHedge. View original post here.

Following last week's hair-raising European drama, which saw Italian bond yields soaring to levels not seen since the European sovereign debt crisis, Deutsche Bank's Craig Nicol predicts that given the fairly sparse calendar of data releases and with central banks now entering their respective blackout periods, the main focus for markets next week will instead likely be the fallout from the latest trade war developments, most notably now between the US and EU, as well further clarification around the ongoing transition in the Italian political scene.

First, looking at the ongoing developments in Italy, following confirmation last night that Guiseppe Conte would be sworn in as Prime Minister, the new 5SM/League government is expected to face votes of confidence in the two houses, possibly as soon as Monday and Tuesday, which is the last hurdle to forming a government. Further confirmation of  government positions may also be announced over this weekend.

Given the escalating trade war developments this week also, it's worth noting that over the weekend, US Commerce Secretary Wilbur Ross travelled to Beijing for the 3rd round of trade talks with Vice Premier Liu He which did not lead to any resolution.

Away from that EU Trade Commissioner Cecilia Malmstrom is due to participate in the UN Conference on Trade and Development in Geneva on Monday. Geopolitics should also be a focus next week with Japan PM Abe due to meet with US President Trump at the White House on Thursday to talk about preparations for the planned summit with North Korea. Later in the week on Friday the G7 Leaders' Summit is due to kick off in Quebec, with the Summit expected to include Heads of State from the various nations.

Meanwhile, the data docket is particularly light next week, especially in the US given the usual lull post-payrolls. In terms of what we will get, final April durable and capital goods orders revisions are due to be made on Monday while Tuesday will see the final May PMI revisions made for the services and composite components. The May ISM non-manufacturing is also out on Tuesday with market expectations for a 1pt increase to 57.8. On Wednesday we've got the April trade balance which is expected to show a slightly wider deficit while on Thursday we'll get initial jobless claims, and Friday the April wholesale inventories print.

Europe might be a bit more exciting especially with the final May PMIs (services and composite) also due on Tuesday including a first look at the non-core and UK. On Thursday we'll also get the final Q1 GDP revision for the Euro area including the release of the various growth components. The current consensus for that is for no change to the +0.4% qoq and 2.5% yoy flash prints. Finally on Friday it'll be worth keeping an eye on the April industrial production prints in Germany and France.

In Asia the main highlights are likely to be China's May Caixin PMIs (services and composite) and Japan's Nikkei PMIs (services and composite on Tuesday), China's May trade stats on Friday and Japan's final Q1 GDP revisions on Friday. With regards to central banks next week, with the Fed now in its blackout period there is no Fedspeak scheduled while its set to be equally quiet over at the ECB with only Nowotny due to speak at a conference in Vienna on Monday.

Courtesy of Deutsche Bank, here are the key events in the next 5 days:

  • Monday: It's a fairly quiet start to the week with the most significant data releases being the May construction PMI in the UK, along with the June Sentix investor confidence and April PPI report for the Euro area, and final April factory, durable and capital goods orders in the US. Away from that the ECB's Nowotny is due to speak in the afternoon at a conference in Vienna. EU Trade Commissioner Malmstrom is also due to participate in the UN Conference on Trade and Development in Geneva, while votes of confidence on the new Italian government may happen on Monday (and  continuing into Tuesday).
  • Tuesday: The main highlight on Tuesday will likely be the final May services and composite PMIs in Japan, China (Caixin), Europe and the US. Outside of that we'll also get April retail sales data for the Euro area, and April JOLTS and the May ISM non-manufacturing prints in the US. Elsewhere, the Brussels Economic Forum is due to begin with Juncker and Moscovici due to speak.
  • Wednesday: A very quiet day for data with April cash earnings in Japan and Q1 nonfarm productivity and unit labour costs (final revisions) and the April trade balance in the US.
  • Thursday: In Europe, the final Q1 GDP revisions for the Euro area will be made along with the various growth  components, while April factory orders in Germany, April trade balance in France and May house prices data in the UK is also due. In the US the latest weekly initial jobless claims print will be out along with April consumer credit data. In China May foreign reserves will also be released at some point. Meanwhile Japan PM Abe is due to meet with US President Trump to discuss the planned US summit with North Korea.
  • Friday: Overnight, the final Q1 GDP revisions in Japan will be made along with the April trade balance, while in China May trade stats are set to be released. In Europe we'll get April trade and industrial production in Germany along with Q1 labour costs data, while in France April industrial and manufacturing production is due out. In the US the April wholesale trade sales and inventories data is due. Finally the G7 Leaders' Summit in Quebec is due to begin, ending on Saturday.

And visually:

Finally, here is a focus only on the US, together with consensus estimates from Goldman which writes that the key economic release this week is the ISM non-manufacturing report on Tuesday. There are no scheduled speaking  engagements from Fed officials this week.

Monday, June 4

  • 10:00 AM Factory orders, April (GS -0.7%, consensus -0.5%, last +1.6%); Durable goods orders, April final (last -1.7%); Durable goods orders ex-transportation, April final (last +0.9%); Core capital goods orders, April final (last +1.0%); Core capital goods shipments, April final (last +0.8%): We estimate factory orders declined 0.7% in April following a 1.6% increase in March. Headline durable goods orders were softer in the April advance report, reflecting a large decline in non-defense aircraft orders. Core measures were strong, however, with increases in both core capital goods orders and core capital goods shipments.

Tuesday, June 5

  • 10:00 AM ISM non-manufacturing, May (GS 57.3, consensus 58.0, last 56.8); We expect the ISM non-manufacturing index to move up 0.5pt to 57.3 in May. On net, our nonmanufacturing survey tracker moved up 1.9pt higher to 56.9. The survey is likely to remain at levels consistent with a solid pace of growth.
  • 10:00 JOLTS job openings, April (last 6,550k)

Wednesday, June 6

  • 08:30 AM Nonfarm productivity (qoq saar), Q1 final (GS +0.6%, consensus +0.7%, last +0.7%); Unit labor costs, Q1 final (GS +2.9%, consensus +2.8%, last +2.7%): We estimate non-farm productivity growth will be revised modestly lower to +0.6% in the second vintage, somewhat below the +0.75% trend achieved on average during this expansion. Reflecting this and the upward revision to compensation, we expect growth in Q1 unit labor costs – compensation per hour divided by output per hour – to be revised up two tenths to +2.9% (qoq saar).
  • 08:30 AM Trade balance, April (GS -$48.8bn, consensus -$49.2bn, last -$49.0bn): We estimate the trade deficit declined by $0.2bn in April to $48.8bn. We believe the modest further improvement in the goods balance shown in the Advance Economic Indicators report will be partially offset by a rebound in service imports, following weakness in March.

Thursday, June 7

  • 08:30 AM Initial jobless claims, week ended June 2 (GS 220k, consensus 225k, last 221k); Continuing jobless claims, week ended May 26 (consensus 1,750k, last 1,726k): We estimate initial jobless claims edged down by 1k to 220k in the week ending June 2. Despite the 13k pullback in the prior week, the level of jobless claims continues to look elevated in Michigan, where we suspect auto plant shutdowns may have boosted claims. Accordingly, we look for a further modest decline in national claims in this week’s report. Consensus expects continuing claims—the number of persons receiving benefits through standard programs—to rebound by 24k to 1,750k.

Friday, June 8

  • Wholesale inventories, April final (consensus +0.1%, last +0.3%)

Source: GS, BofA, DB

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