WEEKLY MARKET SNAPSHOT 2/10-6/10|Could an extremely low NFP number take the markets by surprise?

Sep 29 • Extras • 1341 Views • No Comments

It’s that time of month again; when the NFP number is published on the first Friday of the new month. For novice traders they may wonder what all the fuss is about, however, traders who were involved in the markets during the Great Recession, when NFP numbers could show a loss of over 700k jobs in a single month, will always place great store in the number. It’s been a while since we experienced a shock in the NFP data, which is sufficient to move the USA equity markets, or the value of the dollar, but on Friday the forecast is for only 50k jobs to have been created in September, marking this Friday out as an event to monitor positions carefully.

Other outstanding high impact events for the coming week include: the RBA setting Australia’s interest rate, ISM readings for the USA and Markit PMI readings for all the leading European nations and the USA. The Swiss CPI is published, as is the latest Canadian unemployment and employment data.

Sunday begins with Australia’s AiG manufacturing index, currently at 59.8 for August only a moderate upward change is forecast. Thereafter we’ll receive a raft of Japanese Tankan data, the most prominent of which will be the large manufacturers and non manufacturers index and outlook readings. The series of readings are all forecast to reveal modest improvements and with Japan’s current government dissolved, as prime minister Abe called a snap election, Japan’s economic data is likely to come under closer scrutiny over the coming weeks, in relation to its impact on yen. Japan’s vehicle sales and its Nikkei PMI for manufacturing, will also be published.

As Europe’s markets open on Monday Swiss retail figures will be published, having fallen by -0.7% in August, improvements will be looked for. The Swiss SVME PMI for September will also be published, at 61.2 for August, the expectation is for the reading to be maintained. Manufacturing PMIs for France, Germany and Italy will be delivered by Markit, as will be a combined reading for Eurozone manufacturing, at 60.6 for August this figure is expected to be maintained, if not bettered. The UK’s Manufacturing PMI will be released, of particular interest given that orthodox economic theory suggests that the weak pound, experienced in the first two quarters of 2017, should have led to a manufacturing/export boom in the U.K. Canada’s manufacturing Markit PMI is published on Monday, as is the series of ISM readings for the USA, these ISM readings are more highly valued in the USA than Markit’s PMIs, the key reading is for manufacturing, expected to come in at 57.8, down from 58.8 in August. Construction spend in the USA is forecast to have risen in August to 0.5% growth, from a 0.6% fall in July.

Tuesday begins with New Zealand’s traditional monthly data on dairy auction prices, including milk power. Dairy products are a major export of N.Z. to Asia, with N.Z. recently experiencing a hung parliament in the general election and the decision to maintain the interest rate at 1.75%, consistency in the data will be looked for. Australia’s central bank (the RBA) will reveal its decision on interest rates, predicted to remain unchanged at 1.5%. Japan’s consumer confidence reading will come under close scrutiny, coming so close to prime minister Abe calling a snap election, the maintenance of confidence is highly relevant. The UK’s construction PMI will be printed, at 51.1 for August it revealed growth, however, this has been out of step with the UK’s ONS data. Are the UK’s constructors holding back on projects, due to Brexit uncertainty? Late evening various data readings concerning Australia and New Zealand will be published, the most prominent is the AiG performance of service index.

Wednesday witnesses Japan’s services and composite PMIs published, as Europe’s markets open a raft of PMIs relating to Europe are published, the manufacturing, services and composites for France, Italy, Germany, Eurozone and the U.K. are published. The UK’s are arguably the most keenly watched, given the Brexit situation, services at 53.7 and the composite at 54 for August, should be maintained. If not then sterling may come under pressure. Eurozone retail YoY data will be revealed, the expectation is for the current figure of 2.6% to be consistent. As focus shifts to the USA, the ISM non manufacturing ISM reading is published, forecast to come in at 55.3 for September, the identical reading recorded in August. Late evening European time, Janet Yellen, chair of the Fed, will deliver a speech on community banking in St. Louis. The day ends with Japan data concerning the purchase of foreign bonds and stocks.

Thursday opens with Australian data on retail sales and the trade balance, with a decision made earlier in the week regarding the Aus interest rate, these hard data figures will come under extra scrutiny, to ascertain if the rate decision was in line with the overall economic performance. As Europe’s markets ready to open, the latest Swiss CPI metric will be published, no change from the current 0.5% YoY figure is anticipated. Germany’s construction PMI will be revealed, the 54.9 reading for August should be maintained, Markit will also reveal the retail PMIs for Germany, the Eurozone, France and Italy. Europe’s key data for the day ends with a report on the recent policy meeting published. There’s quite a mixed data push (of hard and soft data), from the USA in the afternoon; Challenger job cuts, weekly unemployment claims, trade balance, factory orders, durable goods orders, whilst two Fed officials give talks at banking and workforce conferences.

Friday reveals Japanese wage and cash earnings, which both fell in August, both the leading and coefficient indices for Japan will also be published. Germany factory orders will also be published, currently running at 5% growth YoY, the MoM figures recently took a seasonal dip (down -0.7% in July), a return to growth is anticipated. Canada’s latest employment and unemployment data will be published, of particular interest coming the month after Canada’s central bank increased its interest rate. The current unemployment rate of 6.2% is not expected to alter.

The customary monthly NPF (non farm payroll) will be published on Friday, only 50k new jobs for the month of September are anticipated, significantly below the 156k created in August and substantially below the average monthly figure of circa 250k. Despite NFP data not producing fireworks over recent months (or years), this may change if such a low figure takes analysts and investors by surprise. Average earnings are predicted to rise by 0.3%, up from 0.1% in August, which may increase the annual wage growth, above the current annualised 2.5% growth figure.

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