Next week’s major focus will be on US inflation data, which will be at the top of the agenda. On Tuesday, we’ll receive the August CPI figure, and experts forecast a modest decrease in the headline number (–0.04% MoM) accompanied by an acceleration of 0.38 percent in the core, continuing the pattern from July’s reading (unchanged and +0.3%, respectively). The recent decline in commodities, with WTI below $100 per barrel for most of the month, is expected to put downward pressure on the headline number. In addition, the endurance of the labor market (you can view a recent chartbook from our US Economics team here) is one of several factors that could support an increase in the core gauge. The next reading will be published before the Federal Reserve’s meeting on September 21st, and it will be followed by Friday’s University of Michigan consumer survey. Our economists are expecting a Reading for the consumer sentiment indicator of 59.1, which would be an improvement from 58.2.
The Hot Zones this Week
Each week there are zones where trading can get wild. I call these the hot zones.
Tuesday
- CPI
- Core CP
Wednesday
- PPI
- Core PPI
Global Spotlight
Xi is expected to be present at the SCO summit. The 14th meeting of the Shanghai Cooperation Organization will take place September 15-16 in Tashkent, Uzbekistan. According to reports from the SCO and Russia, Chinese President Xi Jinping will attend, which would represent his first foreign visit in nearly three years, when he’ll meet with Russian President Vladimir Putin and Indian Prime Minister Narendra Modi on the margins. The heads of state of the SCO are expected to adopt a final document at the Samarkand summit, which will be a comprehensive agreement governing all SCO activities. This document is called the Samarkand Declaration. In addition, there are likely to be statements issued regarding increasing connective infrastructure between member states as well as reducing their reliance on using the dollar by gradually increasing national currencies used in mutual settlements. Before this meeting, Xi will likely meet with Kazakh President Kassym-Jomart Tokayev on September 14th in Kazakhstan.
South African President Cyril Ramaphosa will meet with U.S. President Joe Biden on Sept. 16 at the White House to discuss opportunities for deepening cooperation including trade, investment, infrastructure, climate, energy and health. Before this meeting, Ramaphosa’s visit takes place before the November COP27 climate conference in Egypt where wealthy nations will be discussing investments to support developing countries’ transitions concerning energy usage. The United States, together with the European Union, United Kingdom, France, and Germany, previously pledged $8.5 billion to help South Africa transition away from coal. Rumors are swirling that more than 80% of the money promised by Western countries will be loans rather than grants. If true, South Africa’s already overburdened electricity utility will have a hard time finding financial support from Western nations to prop up its decaying infrastructure, divest from coal, and allocate additional resources to wind and solar energy generation.
The two leaders discuss the recent Ukrainian grain agreement. Russia has expressed dissatisfaction with the agreement and wants to renegotiate it, suggesting that Moscow is attempting to destabilize food prices once more as a result of numerous Ukrainian battle actions. The European Union, wary of Russian expansionism, economic and military ties with the United States and an aggressive foreign policy under President Vladimir Putin, is attempting to prevent further deterioration in the Ukraine situation. Turkey’s position has been backed by Turkish President Recep Tayyip Erdogan, eager to maintain his role as a possible mediator to end the conflict and maintain good ties with Russia. This implies that Turkey may be attempting to alter the deal in a way that is detrimental to Ukraine. While food costs have been declining gradually over time, even threats against the agreement might cause ripples throughout global markets, putting fledgling economies at risk.
A new, major blockchain validation method for Ethereum will occur next week when it undergoes “The Merge.” The second most popular cryptocurrency will join forces with a different blockchain that uses a “proof-of-stake” algorithm instead of the current “proof-of-work” process. The new algorithm will not require mining, which elicits a lot of criticism because of the amount of energy it requires and its lack of scalability. A proof-of-stake concept will make Ethereum more environmentally friendly by estimated to reduce power consumption by 99.9%. Furthermore, it will enable transaction speed calculations to be done much quicker. Even if major cryptocurrencies have suffered significant losses in value in recent months, the underlying technology and wide applications of cryptocurrencies like Ethereum beyond simply financial value will continue to grow in importance moving forward. This makes it more important than ever for software upgrades that improve their long-term viability.
Stratfor.com
Economic Calendar
Next week, the key data highlight will be the US CPI report released on Friday. Inflation expectations from the University of Michigan consumer survey will also be closely watched. Retail sales data on Thursday will be important to consider as well.
Briefing.com has a good U.S. economic calendar for the week. Here are the main U.S. releases.
Briefing.com
Last Weeks Numbers
Review Last weeks numbers here.
Earnings
Aggregate Estimates and Revisions
- 22Q2 Y/Y earnings are expected to be 8.5%. Excluding the energy sector, the Y/Y earnings estimate is -2.1%.
- Of the 498 companies in the S&P 500 that have reported earnings to date for 22Q2, 77.5% have reported earnings above analyst estimates. This compares to a long-term average of 66.1% and prior four quarter average of 80.6%.
- During the week of Sep. 12, two S&P 500 companies are expected to report quarterly earnings.
Source I/B/E/S data from Refinitiv
The S&P 500 is expected to grow at an annual rate of 8.5% over the next year, according to Wall Street’s forecasts. The share-weighted earnings per share growth rate for 22Q2 is 8.5%. If the energy sector is excluded, the expansion rate falls to -2.1%. In 22Q2, the S&P 500 is anticipating total share-weighted earnings of $475.4 billion, compared with total share-weighted earnings of $438.1 billion in 21Q2 (based on the current 503 constituents’ year-earlier profits).
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