While August traditionally sees markets enter the summer lull, action so far has been far from slow while increasingly fractious US-China trade relations drive volatility higher.
No let-up is expected any time soon after China's finance ministry unveiled retaliatory tariffs on $60 billion of goods from the United States and accused the country of blackmail.
As a result, July trade figures from China will be of particular interest on Wednesday. Growth in exports is forecast to moderate to 10%, from the 11.3% in June, although they could surprise to the downside in view of the slowing new export orders in the recent manufacturing PMIs. Imports are seen rising by 20.8% year on year.
At the same time geopolitical volatility seems set to rise; the United Nations reported North Korea is continuing its nuclear and missile development programs, while an assassination attempt on Venezuelan President Nicolás Maduro and US sanctions against Turkey point to further emerging volatility.
Figures at the time of writing on Monday August 6 showed German factory orders dropped 4% in June, reflecting increasing trade pressures, while investor confidence in the eurozone has strengthened, rising to 14.7 in August from 12.1, according to the latest Sentix reading.
Monetary policy in Australia is the focus at the start of Tuesday. The Reserve Bank of Australia is forecast to keep monetary policy on hold, but markets will be sensitive to comment from governor Phillip Lowe in view of the recent tightening by other central banks against a background of weaker prices in the domestic property market.
Germany and France will announce trade figures for June; Germany will also publish industrial production results.
Jolts job openings for June are forecast to show the US economy added 6.7 million jobs up from the 6.64 million in May.
IBD/TIPP economic optimism is forecast to rise to 57.2 to in June – the highest since 2004, from 56.4 in May.
On Wednesday, aside from Chinese trade data, figures from Japan will report bank lending and current account reading for July.
Reserve Bank of Australia governor Lowe, will deliver a speech titled ‘Demographic change and recent monetary policy’ – at the Anika Foundation Luncheon, in Sydney.
Canada will report building permits for June while US Federal Reserve of Richmond governor Thomas Barkin is scheduled to speak.
China’s latest inflation readings are also scheduled for Thursday, with markets sensitive to shifting inflation expectations given rising input costs as well as how the People’s Bank will balance the impact of persistent currency weakness.
Chinese borrowing and money supply figures for July are also expected towards the end of this week. Net loans are forecast to slow to 1.2 trillion yuan ($190 billion) after they jumped to 1.84 trillion yuan in June amid recent easing by the Peoples Bank of China. Given that most new loans are used to buy property, these remain an important gauge for construction activity in China.
Figures from Japan will show machinery and tool orders.
Canada will report housing starts later that day; the US will report producer prices for July and wholesale inventories for June.
Markets face a busy agenda Friday, which starts with second-quarter GDP from Japan, forecast to show the economy expanded at an annualized rate of 1.4% after contracting by 0.6% in the first quarter.
The RBA will publish the statement of Tuesday’s monetary policy meeting.
A host of industrial production, construction and manufacturing figures are due from the United Kingdom, as well as its GDP estimates for the second quarter, forecast to show the economy expanded by an annualized rate of 1.2%.
But markets will be sensitive to increasing economic headwinds from Brexit-related uncertainties amid rising expectations the UK is heading for a no-deal Brexit. Bank of England governor Mark Carney warned the risk of such are "uncomfortably high" despite the decision to raise interest rates.
Meanwhile CPI inflation readings from the US are expected to show headline inflation edged up to an annualized 2.9% in July, supporting the hawkish shift in Fed monetary policy. Core CPI is seen holding at 2.3%.
This article was first published by FastMarkets as the weekly Economic Outlook report.
James Moore
FastMarkets