Week Ahead starting 2/10/23: US jobs; RBA, RBNZ rate decisions; OPEC+; Tesco; Greggs

(Video Transcript)

UK house price data due

Hello, welcome to IGTV. I'm Angeline Ong, and this is your Week Ahead starting 2 October 2023. Now, it's a really busy week ahead with plenty of economic news, largely to do with the consumer sector and also manufacturing.

First up, we've got the Tankan (Short-Term Economic Survey of Enterprises in Japan). We've also got nationwide house price data out of the United Kingdom. As you know, the companies that build properties in the UK have been hard-pressed this year, being buffeted by higher interest rates and also the cost-of-living-crisis that has been going on for about two years now.

We've also got the unemployment rate out of the Euro Zone and the manufacturing purchasing managers' index (PMI) numbers out of the US. Later on in the week, look out for an interest-rate decision out of Australia and also jobs opening numbers.

These are the jolts out of the US and API crude oil inventories. This will be key, of course, with prices recently creeping up towards the $100 mark.

Will New Zealand go the RBA way?

Midweek, it's really about interest rates again. This time, New Zealand is out with its decision. It may decide to follow the Reserve Bank of Australia (RBA), which is expected to hold rates at 4.1% in October but deliver one final hike by the end of 2023.

In terms of retail and the consumer, we've got retail sales out of Euro Zone and the producer price index (PPI) as well from the US. Look out for ADP numbers, services PMI, factory orders and the EIA crude oil inventories.

And of course, we have an OPEC+ meeting. Very certain that the latest rise in prices will be topical given the curbs recently that we've seen by Saudi Arabia and its counterparts as well.

And then further on in the week, we've got trade balance numbers out of Australia, Germany, industrial production numbers out of France and Canada also released its trade-balance figures.

Recession fears recede, bouyed by positive jobless data

In the US, we also get the similar numbers and also initial jobless claims. And, remember, the economy seems very robust given the weekly jobless claims out of the US were less than expected, giving further hope to those thinking that there could be a recession looming, that perhaps the US economy might still be able to sidestep this.

Later on in the week, we've got factory orders from Germany, the Halifax house price index out of the UK, unemployment numbers out of Canada, non-farm payrolls, of course, a big figure for the week, and the Baker Hughes oil recount.

AO: And on that note, let's cross over to Chicago now where we're joined by Tom Sosnockham. Where is the biggest sort of opportunity if investors wanted to trade volatility in the coming week?

TS: Well, you've come to the right place to ask that question, because that's basically all our positions are wrapped around volatility. I think that the best place to trade volatility in the next week or so is going to be from the short side.

Volatility has had a nice pop. You know, we saw the VIX futures almost approach 20 this week, and they're down to 17 right now. But intraday, they almost traded up to 20. And so right now, they're about 17, and VIX is slightly ahead of, slightly above kind of its mean and, you know, historical mean.

And I think that, you know, given what we've just gone through and given the little shakeout in crude oil, the shakeout in bonds, the shakeout in stocks a little bit, volatility is still probably sitting a little bit high. So we like the short side of it.

Volatility is a sign of an imminent move

Short side of volatility just means we'd rather be short options than long them. That's all volatility is. You know, like people get nervous when they hear the word volatility, but volatility is synonymous with, it means expected move. That's all it does.

And so when you hear the word volatility next time, just think of it in terms of expected move. So if volatility is high, expected move is high. If volatility is low, expected move is low. And you want to sell volatility when it's high, so it's a little high right now. So we like the short side of it.

Many people we've been speaking to have also said that oil is the last bit of the puzzle. And indeed, if we get oil hitting that $100 mark really soon, we're going to see volatility spike. Is that what you're hearing as well? You're talking about oil volatility.

You know, I don't care what the Saudis want you to believe, but oil is a very manipulated marketplace, especially by the Saudi government, (which) loves to manipulate oil prices. And I think they'd like nothing better than to think create a little bit of a short squeeze if oil was to run up to $100 and, you know, maybe get something going volatility wise.

Oil: 'one of the most overbought and overpriced commodities'

We don't see it that way at all. I'm looking at oil here in the $92, $93 area. It's up three-and-a-half, two days ago. It was down two yesterday. It's up a buck today. It's picking up a little more steam, volatility wise, but I think oil is one of the most overbought and overpriced commodities right now.

So we're trading oil from the short side. I mean, virtually every firm I know that makes markets in oil and oil gas is very different, but every prop firm I know that makes markets in oil and most of us here with our own positions, we're leaning short in oil.

So, it's at that level where it hasn't had a downtick since essentially low $70s. So you've seen a 30% run in oil without a downtick. I think I'd be really careful here about trading oil and expecting a hundred for the upside.

AO: Right. Thank you very much. Tom Sosnoff there from Tasty Life in Chicago saying he'd be very careful at trading oil given its recent climb. Other than that, we have a huge amount of corporate news out in the coming week as well.

Also, particularly focused in the consumer space, you've got Greggs out with a third-quarter trading statement. Boohoo, the online retailer, has been making positive and negative headlines recently.

Ryanair, a 'reveng travel' beneficiary

Also out with first-half earnings. Ryanair, one of the beneficiaries from the 'revenge travel' trend. Out with Traffic numbers for September. Watch out for what it says about the outlook in the coming months as that revenge travel theme starts to evaporate.

Then further on during the week, we've got Tesco, one of the key ones that's traded by our clients. First-half earnings out there. It's been a really tough space for growth given the competition and stubbornly high inflation.

And what we're seeing is many customers start to really embrace the shop brands. And this is looking like it's taking a foothold. And it's those names out there that have a wide variety of own brands that will strive and do better in the coming months. This is the expectation from analysts and those watching this sector.

Further along midweek, look out for Imperial Brands, Forexpo. Levi Strauss is another key one in the consumer space. Out with third-quarter earnings. And Constellation Brands as well.

And last but not least, let's have a look at J.B. Weatherspoon. Out with full-year earnings. This is the company that has so far weathered Brexit, weathered lockdown in terms of getting people back into pubs. However, it's now also battling the higher inflation. So any thing it says about the consumption trends moving forward will be pounced on.

And that's your Look Ahead to the coming week. For more news out of the US, do follow me on Beat the Street at 1.30pm UK time every weekday. And also at 07.30am, my colleague Jeremy Naylor will be with you to count down to the European market open. I'm Angeline Ong and this is IGTV.