WEEKLY OUTLOOK 24-28 October 2016

WEEKLY OUTLOOK

On top of rating downgrade expectation from Fitch, heightened geopolitical risks and debates over Constitutional changes have negatively affected risk perception about Turkish domestic assets. However, the CBRT’s decision not to move policy rates in this month’s Monetary Policy Council meeting alleviated the pressure over exchange rate and CDS spreads eased to 246.6 on Friday from 252.9 a week ago. BIST100 ended the week at 78,844 on a 1.7% gain while the gain has been 2.1% in USD terms. USD/TRY on a 0.4% weekly drop, came down to 3.076 on Friday while 5Y and 10Y benchmark bond rates on a slight ease stood at 9.52% and 9.81% respectively, compared to previous week’s 9.54% and 9.96%. 

 

Fourth Inflation Report, real sector confidence as well as tourism data will be quite important this week inside while US and UK GDP growth as well as US durable goods orders will be the main releases to be followed globally. Besides, Fed Governor speeches will also be widely followed. 

You can find the brief overview of weekly data releases and events below. 

MONDAY

Turkey – 10:00 Homes Sales (Sep): There is no consensus on September home sales which will be announced on Monday at 10:00 (UTC+3) however market will seek a hint over whether recovery in the sector continues or note. Note that home sales have contracted 15.8% y/y in July and showed a pick up to 2% growth in August. Whether home sales have accelerated in September will help ups to assess third quarter growth performance more clearly.

Eurozone – 11:00 Manufacturing and Service PMI (Oct): Data will be important for the direction of EUR/USD which slid below 1.09 with ECB Governor Draghi’s statements  eliminating concerns over whether the ECB was preparing for tapering. Preliminary manufacturing and service PMI in October to be announced at 11:00 local time on Monday are expected to remain flat at 52.6 and 52.4 respectively compared to September. Any number better than previous month will be considered positive for growth and support EUR/USD.

US – 15:30 Chicago Fed National Activity Index (Sep): As an important regional indicator, Chicago Fed National Activity Index in September is expected to rise to -0.1 from -0.6 in August. Data has no material market impact.

US – 16:45 Markit Manufacturing PMI (Oct): As one of the most important indicators in US that provides signal about economic activity, Markit manufacturing PMI is expected to remain flat at 51.5 in October, according to preliminary numbers. Note that an index level above 50 points to expansion and a level below points to contraction in economy. A better than expected realization would support acceleration in dollar index, DXY.

TUESDAY

Turkey – 14:30 Capacity Utilization and Real Sector Confidence (Oct): October capacity utilization rate (CUR) and real sector confidence (RSC) which will be quite important to gauge growth performance in 4Q16 will be announced by the CBRT on Tuesday at 14:30 local time. Consensus estimate for capacity utilization is a rise to 76.9% from 75.5% in last year October. Seasonally adjusted CUR in September 2016 was 75.6%. RSC to be announced at the same time with CUR will give more hint about the real sector’s sentiment following the coup attempt and hence growth performance in the final quarter of the year. RSC in September 2016 was 107.1 in seasonally adjusted terms while it was 100.5 in last year October.

US – 17:00 Consumer Confidence Index (Sep): Another index that give hint about economic activity is consumer confidence index in US which will be announced on Tuesday at 17:00 Turkish time. Contrary to PMI, index level is expected to drop to 101.0 in October from 104.1 a month ago.

US – 17:00 Richmond Fed Manufacturing Index (Sep): As another important regional index, Richmond Fed manufacturing index is expected to recover to -4.0 in October from -8.0 in September. Data has no material market impact but may support DXY should all growth indicators point to recovery.

WEDNESDAY 

US – 16:45 Markit Service PMI (Oct): As a widely followed data release to gauge US economic activity, preliminary Markit service PMI in October is expected to remain flat at 52.3 compared to a month ago. Note that the index level below 50 point to contraction whereas a level above 50 signal economic recovery.

US – 17:00 New Home Sales (Sep): US housing market data is crucial to get a hint about economic activity. New home sales, which show the annualized single family home sales are expected to contract by 1.2% in September over previous month following 7.6% drop in August. A better than expected realization will signal a recovery in consumer activity in US economy. This would lead to an acceleration in dollar index and US bond yields

THURSDAY

Turkey – 10:30 Inflation Report (4Q2016): The CBRT will announce 4th Inflation Report of the year on Thursday at 10:30 a.m. local time via a press conference. The CBRT Governor will present the Bank’s inflation forecasts and underlying assumptions. The CBRT forecast for this year is 7.5%. The Bank expects food inflation to end the year at 9.0% whereas it is 4.2% as of September. Hence, a downward revision may be in the cards in food inflation however depreciation in the currency may prevent the CBRT from revising down overall inflation forecast. Q&A session will be important as market will follow whether the CBRT Governor will give a hint over whether simplification in monetary policy will be completed anytime soon.

Turkey - Foreign Tourist Arrivals (Sep): September tourism numbers will be quite important to see the damage over tourism revenues this year. Turkstat will announce the numbers on Thursday. Incoming tourists dropped by 38.0% in August and we will see whether recovery starts by September.

UK – 11:30 GDP Growth (3Q2016): First estimate of UK GDP growth in 3Q16 which will be announced at 11:30 is expected to be 2.1%. This points to a flat realization compared to previous quarter. Any realization below expectation after Brexit would hurt GBP/USD hovering slightly above 1.22.

Eurozone – 12:00 Economic Confidence (Oct): Economic activity indicators mostly pointing to a weakness in Eurozone after Brexit vote. Consumer confidence is expected to weaken to 104.8 from 104.9 while industrial confidence index in October is expected to slightly recover to -1.6 from -1.7 a month ago. Service sector confidence index in the meantime is expected to remain flat at 10.0.

Turkey – 14:30 House Price Index (Aug): There is no consensus over house price index which gives hint over growth and inflation however house price inflation was 14.0% y/y in July. We will follow whether prices show any ease by September.

US – 15:30 Initial Jobless Claims (Oct 22): Initial jobless claims which showed the lowest level in Oct 8 with 246k is expected to stay at 255k in the week to Oct 22. It was 260k in the previous week. A better than expected amount will convince the investors that initial jobless claims have dropped to a lower level permanently. Recall that initial claims have been under 300,000 for 85 straight weeks, the longest streak since 1970. Hence, a realization lower than 260k would have a positive market impact on dollar and US bond yields.

US – 15:30 Durable Goods Orders (Sep): Another widely followed indicator of economic activity, durable goods orders will be announced on Thursday at 15:30 Turkish time. Durable goods orders growth excluding transportation in September is expected to post 0.2% rise over previous month according to preliminary numbers. It posted 0.2% drop in the previous month. Data may lead to a pick up in dollar index and bond yields should realization comes better than expectations.

US - Pending Home Sales (Sep): Pending home sales which shows the home sales that has been contracted but not completed is expected to rise 1.1% in September, following 2.4% rise in August. No material market impact should be expected from the data however a realization worse than expectations will deter the recovery recently seen in US housing market.

US – 18:00 Kansas City Fed Manufacturing Activity Index (Oct):  Another regional indicator Kansas City Fed registered an index level of 6.0 in September and market will follow whether index will remain above it in October, as there is no market expectation. A recovery compared to previous month will be considered positive with limited market impact.

FRIDAY

Japan – 2:30 Inflation (Sep): CPI inflation in Japan which will be announced on Friday at  2:30 local time is expected to remain flat at -0.5% y/y in September. Core inflation is expected to rise to 0.2% from 0.1% a month ago. Any pick up in headline inflation will lead further drop in Yen against USD.

US – GDP Growth and Personal Consumption (3Q16): First estimate for 3Q16 GDP growth which will be released on Friday at 15:30 local time expected to be 2.5% following 1.4% registered in the previous quarter. Personal consumption growth on the other hand is expected to ease to 2.6% in 3Q16 from 4.3% in 2Q16. A stronger than expected outcome would increase dollar index and US bond yields. EM currencies would depreciate in such an outcome.

US – 17:00 Michigan Univ. Sentiment Index (Oct): Michigan University Sentiment Index which will be announced on Friday at 17:00 may remain secondary due to GDP growth however any pick up in the index will support recovery expectations in US economy. Index level is expected to rise to 88.1 in October from 87.9 in September.

03 Jul 18 (Tue)

11:27 am


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