Take in the views from Jackson Hole

Activity indicators in the eurozone and an inflation gauge in the United States are also on the agenda, while rate cuts might be looming in China.

Voici un aperu de la semaine venir par Tommy Wilkes et Marc Jones Londres, Kevin Buckland Tokyo, Ira Iosebashvili et Lewis Krauskopf New York, Riddhima Talwani New Delhi, Sumanta Sen Mumbai et Vineet Sachdev Bengaluru.

1/JACKSON HOLE JAMBOREE

How big will future rate hikes be? How strong is the economy? What regarding quantitative tightening?

Investors hope the Federal Reserve will shed some light on these issues when the central bank heavyweights gather Aug. 25-27 for their annual Jackson Hole, Wyoming, symposium.

US stocks have roared higher this summer, despite warnings from the Fed that expectations of a spike in inflation and a so-called central bank Dovish pivot might be premature.

Some investors believe Chairman Jerome Powell will push back on market optimism once more, reminding investors that there is still an inflation report and another jobs number ahead of the Fed’s September meeting.

Further details are also pending on the Fed’s $9 trillion reduction in its balance sheet, known as quantitative tightening, which some investors have flagged as a potential risk to market liquidity.

Chart: Quantitative tightening –

2/ STILL PMI PAIN?

Concerns regarding the eurozone economy heading into recession are mounting. Data from the PMI flash survey should provide some indication of how soon this might happen.

August figures, due on Tuesday, might show another month of contraction in economic activity following S&P Global’s final composite Purchasing Managers’ Index (PMI), seen as a good health indicator economy, falling to 49.9 in July, its lowest level for 17 months.

Eurozone businesses are battling soaring energy prices and shortages, runaway inflation and expectations of higher interest rates. The Economic Sentiment Index for Germany, one of the euro zone’s major powers, recently showed that investor sentiment fell in August as fears grew that the rising cost of living might hit private consumption.

Tuesday will also include the release of flash PMI figures for the United States and Great Britain.

Chart: Slowdown in business activity –

3/THE LIQUIDITY PIGE OF CHINA

Further rate cuts are looming in China, but analysts and investors doubt they will provide any support to an economy ravaged by a housing crisis and strangling COVID-19 lockdowns.

The People’s Bank of China sets the Loan Prime Rate for one-year and five-year borrowings – the basis for commercial loans and mortgages, respectively – on Monday following recently surprising markets by cutting key bank lending rates.

The move fueled fears of a slowdown that pushed the yuan to its lowest level in two months.

The PBOC encourages banks to lend more and inject money into the financial system. But the demand for borrowing just isn’t there, with businesses worried regarding the economic outlook and consumers wary of falling property prices.

Chart: Fall in demand –

4/POINTS OF VIEW ON PRICES

As markets rumble on the slightest suspicion that runaway inflation has peaked or remains at four-decade highs, the US Federal Reserve’s favorite price gauge is due on August 26.

The release of the personal consumption expenditure price index for July comes following another key measure of inflation, the consumer price index, remained flat on a monthly basis in July, the biggest deceleration monthly rise in prices since 1973, a result that has encouraged stock market investors.

In the 12 months to June, the PCE price index rose 6.8%, the biggest increase since January 1982.

With recession fears lingering and investors eager for any clues regarding the strength of the economy, new home sales data will be released on Tuesday and durable goods on Wednesday.

Has US inflation peaked? –

5/SIX MONTHS OF WAR

Wednesday marks the six-month anniversary of Russia’s invasion of Ukraine, or special military operation as Moscow has called it.

Not only has this invasion been a humanitarian tragedy and plunged the world into a new Cold War, but it has also been a key factor in growing recession-related concerns, particularly in Europe where a gas crisis is looming.

Gas prices in the region have nearly tripled since June alone. Rationing in powerful economies like Germany may well be necessary, but the ECB, Bank of England and others are adamant they must simply crush the inflation it fuels.

Other very sensitive markets proved to be remarkably elastic. Wheat and maize – of which Ukraine and Russia are both huge suppliers – have plummeted, while Moscow’s main source of income, oil, is now selling for less than at the start of the year. ‘invasion.

Graphic: Six months of war in Ukraine –