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Fundamentals and central banks

| Posted by: Paul Donovan | Tags: Paul Donovan

  • Chinese equities continue to move lower, and the economics of this
    continues to be of relatively little importance. Chinese equity moves do
    not appear to be driven by economic fundamentals, and the wealth effect
    is not likely to be important enough to impact economic fundamentals.
  • UK second quarter GDP is due. We forecast a consensus 0.7% qoq which
    translates into 2.6% in yoy terms (no annualisation here). The data is
    firm enough to move the Bank of England towards additional tightening in
    our view, with monetary tightening joining the existing quantitative and
    regulatory tightening.
  • The US Federal Reserve starts a two day meeting deliberating some
    similar issues to those of the UK. However, this meeting is seen as
    setting the stage for a tightening later this year, while retaining the
    ever present "data dependency" caveat. As such this meeting may be a bit
    of a non-event.
  • US durable goods data was a little weaker on capital spending, which
    may give some downside risks to second quarter US growth - although
    capital spending may not capture capital spending nowadays. The
    composite PMI of business sentiment, a little watched indicator, is due
    today.