Weekly Market Outlook: Summer Lull Coming to an End

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Investors are looking to a relatively quiet trading week ahead in the run-up to the final few weeks of the summer months.

Focus will be shifting towards the United States which will have a somewhat busy week in comparison. On the cards is some top tier data, while elsewhere the G7 summit is scheduled to get underway.

The impact of this is expected to be limited. As a result, it would fall back on the economic data to drive the flows this week.

Germany to set the tone for the Eurozone

The week ahead will see quite a bit of data coming out of Germany. The outcome could give us a glimpse into how Europe’s leading economy has fared. It could also provide a broad idea of how the eurozone’s economy as a whole is getting on.

The recently released ECB minutes showed that policymakers saw a need for further stimulus. Economic data overall for the eurozone has, so far, been relatively subdued. A lack of any momentum is likely to see the ECB following through.

German Ifo Business Survey

The Ifo institute will be releasing the business survey report this week, on Monday. Forecasts point to a slight decline from 95.7 in July to 95.2 in August. The data would mark a decline in the index for the second consecutive month after registered 97.5 points in June. Within the survey, the manufacturing sector will be key to watch for. In the previous report, Ifo reported that the manufacturing sector was in a freefall.

Revised Q2 GDP Estimates to Remain Unchanged

The second-quarter GDP report will be due Tuesday. No changes are expected to this revision. This confirms that the German economy contracted 0.1% in the three months ending June 2019. On a year over year basis, the second-quarter GDP is expected to hold steady at 0.4%.

Eurozone Flash Inflation Estimates for August

The flash inflation estimates for August for the Eurozone is due on Friday. Headline inflation is expected to rise by 1.1% on the year ending August. This follows a revised 1.0% increase in consumer prices in July. Earlier, the flash estimates for July showed a 1.1% increase. The data, along with the German flash inflation reports, will likely strengthen the case for the ECB to act during its September monetary policy meeting.

Investors Could Overlook US Economic Data

Investors are focusing on larger themes such as trade wars, inverted yield curves, and monetary policy. Amid this backdrop, investors could likely overlook the economic reports coming out this week. Some of the high-ticket events include the revised GDP figures for the second quarter and the durable goods orders report. The US personal income and core PCE price index for July is also on the docket this week.

Durable Goods Orders to Rise 1.0%

Expectations are for the durable goods orders report for July to show a modest increase of 1.0% in July. This follows a 1.9% increase in June. Excluding transportation, durable goods orders are forecast to rise a mere 0.2% in July. This marks a slower pace of increase from a revised 1.0% registered in the month before.

US Q2 GDP Revisions

The second estimates for the GDP will be coming out on Friday. Economists are looking at a 2.0% increase in the three months ending June. This marks a slightly slower pace of GDP increase compared to the initial reports of a 2.1% increase. Besides the GDP data, the second quarter PCE and core PCE reports will also come under revision.

The decline in the GDP figures could likely not impact the market much. However, it would only strengthen the case for the Federal Reserve to cut rates once again, most likely in September this year.

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