Asian markets open the week trading generally in red on revived talk of Fed rate hike. Nikkei is trading down -200 pts, or -1%, below 19000 handle at the time of writing. China stocks are also weighed down by confusions over the level of government support on the markets. The Shanghai composite ended a three day recovery and is trading down -3%. In the currency markets, major pairs and crosses are generally in tight range with dollar trading with a mild under tone. Crude oil's rebound lost some steam and is back below 45. Gold is staying in tight range around 1130. Economic data released today so far saw New Zealand building permits rose 20.4% mom in July. NBNZ business confidence dropped to -29.1 in August. Australia TD securities inflation expectation rose 0.1% mom in August. Japan industrial production dropped -0.6% mom in July. German retail sales, Eurozone CPI and Swiss KOF are the main feature in European session. US will release Chicago PMI later in US session.
Fed Vice chair Stanley Fischer's speech in Jackson Hole Symposium was seen as slightly more hawkish than expected. He noted that recent performance of job market data were "well above the amount needed to continue the strengthening of the labor market". Meanwhile, he also noted inflation would move higher as "forces holding down inflation dissipate further". And Fed can "probably remove accommodation at a gradual pace". He said that the case for September hike was "pretty strong" before China devaluated yuan. And Fed was "still watching how it unfolds". Meanwhile, he expressed optimism that the US economic performance have "been impressive" and was "returning to normal". Regarding September rate hike, Fischer noted that there was still a little over two weeks time to look at incoming data.
There are a number of important US economic data to be released this week. The list includes ISM manufacturing, ISM services and non-farm payroll. Also, Fed will release Beige Book economic report. In particular NFP is expected to show 220k growth in August, maintaining solid run of job growth. Nonetheless, there are talks in the markets that risks of reactions to the data are heavily skewed to one side. That is, a string of good data won't be enough to prompt Fed for a hike in September as Fed would need more than to see whether the recent turmoil in global financial markets would settle. On the other hand, bad data would certainly delay Fed's hike. Currently, markets are pricing higher chance for a October hike than September.
Elsewhere, it's a particular important week for Australia dollar. RBA, GDP, retail sales and trade balance will be featured. In addition, China will release a new set of PMI data. ECB is another focus but would likely be a non-event. UK will release a set of PMI. Meanwhile Canada will also release job data on Friday. Here are some highlights for the week.
- Tuesday: China PMIs; Australia building approvals, RBA; Eurozone PMI manufacturing, unemployment rate; UK PMI manufacturing; Canada GDP; US ISM manufacturing
- Wednesday: Australia GDP; UK construction PMI; US ADP employment, factory orders, Fed Beige Book
- Thursday: Australia retail sales, trade balance; Eurozone services PMI, ECB; UK services PMI; US jobless claims, ISM services
- Friday: Eurozone GDP revision; Canada job, Ivey PMI; US non-farm payroll.