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Weekend Agenda: The Week Ahead, September 22 – 26

Macro risk factors come back into focus as investors recalibrate after the Scottish vote and FOMC announcement.

As the dust settles from the Scottish vote and Federal Open Markets Committee announcement, the coming week for global markets is relatively uneventful. With geopolitical tensions running high across multiple regions, however, the potential for volatility remains high, with multiple strategists also noting that long-term correlations between assets appear to have weakened in recent weeks. In particular, U.S. bond markets appear to be factoring in slightly more risk of a mid-term shift in FOMC policy than the U.S. equity market. Commodities are charting their own course, as a North American supply glut for oil outweighs currency moves. One of the biggest unknowns is whether targeted stimulus in China will be able to soften the blow for growth levels as the economy there continues to shift towards a focus on domestic demand.

Monday, September 22: The week gets underway with euro zone September consumer confidence numbers and a speech by European Central Bank President Mario Draghi, in which he is expected to touch on what’s weighing on European growth. In the U.S., existing home sales for August are on deck. In July the annual pace of sales rose to a seasonally adjusted multimonth high of 5.15 million, despite declining distressed sales.

Tuesday, September 23: September HSBC manufacturing purchasing managers index (PMI) numbers for China will be carefully watched for any further signal of cooling activity, with commodities markets poised to react negatively to any softness. PMI data will also be released in Europe, with a particular focus on France and Germany, the euro zone’s two largest economies, for investors trying to parse the ECB’s next move. In the U.S., manufacturing PMI and July Federal Housing Finance Agency housing price index levels are scheduled for release in the morning.

Wednesday, September 24: IFO sentiment indicators for September will be released in Germany, with consensus forecasts for a contraction as the crisis in Ukraine continues to weigh heavily on Germany’s economy. In the U.S., new homes sales numbers and weekly Energy Information Administration oil supply data are on deck. With North American oil supply levels on the rise, a primary narrative impacting the price of oil, any surprise in the EIA report will be a point of interest.

Thursday, September 25: Euro zone M3 levels and private lending for August will be released on Thursday. After the lackluster results of the recently closed ECB lending facility, private-sector lending continues to be a concern for European markets. In the U.S., durable goods for August and weekly initial jobless claims will be released. After last week’s surprise improvement in claims, consensus forecasts call for a moderate rise in the newly jobless.

Friday, September 26: Gfk consumer sentiment index data for August will be released in Germany. The U.S. has a slew of critical data points on deck for the day, including revised second-quarter gross domestic product; August consumer credit; second-quarter personal consumption expenditure and revised University of Michigan consumer sentiment index levels.

Portfolio Perspective: U.S. Oil Production in FocusVincent Fernando, Religare Capital Markets

The EIA has once again hiked U.S. oil output forecasts for 2015, now expecting output to grow by ! million barrels per day (bpd), up from the previously predicted growth of 800,000 bpd “Rising monthly crude oil production, which will approach 10 million barrels a day in late 2015, will help cut U.S. fuel imports next year to just 21 percent of domestic demand, the lowest level since 1968,” said EIA Administrator Adam Sieminski, according to oil industry publication Rigzone. The EIA’s forecast for U.S. 2014 oil output was also hiked, up to 8.53 million bpd from 8.46 million bpd, implying that U.S. oil output growth will account for a whopping 91 percent of expansion in global oil output. This trends underlies the disruptive transformation of global energy markets that is underway and the emergence of the U.S. as a key driver of energy dynamics.

Vincent Fernando is an analyst at Religare Capital Markets in Singapore.

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