The hot end of the holidays with a lot of key macro data

The markets are entering a hot period. Perhaps it is in the coming days that expectations will be finally shaped, what next steps will be taken by the leading central banks and in which direction the monetary policy will go on both sides of the Atlantic Ocean.

It's going to be a really hot end of the summer

Monday brought an improvement in market sentiment. All thanks to reports from China, where a decision was made to reduce the tax on trading in securities, and the press speculates about support for the Chinese real estate industry. This week, China will be at least once again in the spotlight of investors. This will take place on Thursday and Friday when the PMIs for China's manufacturing and services sectors are released. However, the main focus of the markets will be on the US and Europe.

Last week's central bankers' symposium in Jackson Hole brought nothing new. Both Powell and Lagarde repeated the theses that were made after the last meetings Fed i ECB. As a result, macroeconomic data again became the focus of attention, as they will allow us to guess what next steps regarding monetary policy will be taken by both central banks.

In Europe, the highlight of the week will be the release of flash inflation readings for August. On Wednesday, data for Spain and Germany will be released. A day later for France, Italy and the entire euro area. HICP inflation in the euro area is expected to decline to 5,1% in August. YoY from 5,3 percent. in July, and core inflation will fall to 5,3 percent. from 5,5 percent The greater the decline, the less chance for further interest rate hikes by the ECB. In fact, judging by the recent poor data, including the deterioration in European services signaled by the PMI indices, the ECB's monetary policy tightening cycle is over.

In addition to the data described above, data on the economic situation in the euro zone will be published on August 30, and the minutes from the last ECB meeting scheduled for August 31 will be published. PMI indices will not have a big impact, because most investors already know them.

US employment and inflation

This week in the US we have a real flood of macroeconomic data, but the focus should be primarily on labor market reports and inflation data. Let's start with the first ones. On Tuesday we will get July data on the number of vacancies (JOLTS). One day later, the ADP report for August (forecast: +195k) and on Thursday will be traditionally the report on unemployment benefits (forecast: 235k). However, this will only be a foretaste of the emotions that investors will expect on Friday, when data on employment in the non-agricultural sector (forecast: +170), unemployment (forecast: 3,5%) and hourly wage (forecast: 4,4%) will be published. 46,9% y/y). In the fifth, investors will also learn the August reading of the ISM index for American industry (forecast: XNUMX points), but it will be a bit proverbial "after dinner mustard".

Situation on the labor market will not be the only point of reference for expectations regarding next Fed decisions. Equally important will be published on the last day of August PCE indices for July. This is a heavily watched measure of inflation by the Fed. Analysts estimate that the PCE index rose to 3,3% in July. from 3 percent YoY in June, and the core PCE increased to 4,2 percent. from 4,1 percent Y/Y. The lower the readings, the greater the chances of an end to interest rate hikes.