Get ready for a tumultuous Friday - BBH

According to analysts from Brown Brother Harriman, Friday, July 29th could be the most challenging session of the third quarter.

Key Quotes:

“Tomorrow could be among the most challenging sessions of the third quarter. The focus is primarily on Japan and Europe, but the US reports its first estimate of Q2 GDP.”

“After a six-month soft patch that heightened fears in some quarters that the world's largest economy was headed for a recession, the US economy appears to have returned to trend growth. It enjoyed good momentum as the quarter wound down, and currently, Q3 GDP is also projected to be above trend.”

“Japan, though, will get the ball rolling. It will report a slew of data before the Bank of Japan announcement.  Due to the pending BOJ announcement, the data may have little impact.  However, the takeaway is despite a tight labor market and aggressive BOJ monetary policy, consumption, production is weak, and deflationary forces remain formidable.”

“If the BOJ were to do nothing, the market will be disappointed. It would likely take the yen higher. And even if the BOJ eases policy--cuts rates, buys ETFs and JGBs and provide forward guidance that it is prepared to do more, if necessary-- it is not clear that this would lead to a sustained rally in the yen.”

“Europe promises its own fireworks. There are three key reports. The CPI is expected to confirm June's preliminary estimate of 0.1%, which was the first positive reading since January.”

“The eurozone will also report its first estimate of Q2 GDP.”

“The European Banking Authority and the ECB will also announce the results of the latest stress test.  The focus has been in Italy's Monte Paschi, but it reportedly submitted a proposal to the ECB yesterday that seeks to sell a fifth of its bad loans or 10 bln euros to a combination of the new Atlas Fund and private investors and raise five bln euros of new capital from private investors. We are skeptical.”