- Services PMIs and US US labour report dominate schedule; US & Canada
Trade data also slated for release; JUne BoJ minutes to be digested;
plenty of large corporate earnings
- Services PMIs: likely to be less downbeat than Manufacturing prints;
Italy/Spain seen dipping in line with France: UK set to beat f'cast
following Construction surge; US ISM to remain very robust
- US Payrolls: forecast as ever agnostic; array of anecdotal evidence
beyond ADP implies upside risk, but Average Hourly Earnings still key
- Chart: China policy rate and RRR
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** EVENTS PREVIEW **
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So to end the week, there are the array of Services PMIs globally and the statistical behemoth that is the US labour report, which is accompanied by US and Canadian Trade data, and preceded by what will likely be another car crash set of inflation data for Turkey, just as its dispute with the US over arrested pastor Andrew Bunson escalates into outright confrontation. The overnight June BoJ minutes are now rather historical after Tuesday's policy tweaks, and while the corporate earnings schedule is rather less busy, it has a number of highlights: Toyota, Allianz, Credit Agricole, Man SE, RBS, Swiss Re, Kraft Heinz and Petrobras. Eminently markets will of course remain transfixed by any headlines relating to the ostensible escalation of US/China trade tensions.
** World - July Services PMIs/ISM **
- Following from a very mixed set of Manufacturing PMIs, today's Services PMIs should on balance be a little more upbeat, given the less obvious immediate threat from trade tensions, though that is not to say that the sector is by any means immune. For the Eurozone, the expectation is that Italy and Spain will mirror France and Germany in seeing a modest setback from better than forecast readings in June. Bugt after a sharper than expected retreat in the Italian Manufacturing PMI, there will be a perceived downside risk relative to the proejected dip to 53.7 from 54.3. By contrast, the generally quite strong correlation to the Construction PMI (at 55.8 vs. 53.1, best since May 2017) imparts a good deal of upside risk to the projected 54.7 vs. June's 55.1, which would in turn offer some further justification for yesterday's very underwhelming BoE rate hike. As for the US Non-Manufacturing ISM, a marginal dip to 58.8 from June's four month high of 59.1 is expected, and would fit well with the Fed's view of a 'strong' US economy.
** U.S.A. - July Labour data **
- Notwithstanding the slightly better than forecast ADP Priavate Employment, the consensus for Non-farm Payrolls is a very "usual" 192K, with the nowadays more market sensitive Average Hourly Earnings seen at 0.3% m/m for an unchanged 2.7% y/y, while the Unemployment Rate is forecast to dip back to 3.9% from 4.0%. Leaving aside the ADP report, other indicators including the dip in Initial Claims to a fresh 49 year low, a further pick up in the Manufacturing ISM's Employment index and perhaps most importantly, a sharpish jump in the Consumer Confidence's Labour Differential to another cyclical high of 28.1 (vs. June 25.3) all point to some upside risks relative to the consensus. However it will be the wages data that will determine market reaction, and without a surprise, this may prove to be yet another labour report that garners little more than a shrug in terms of market reaction.
As for the Trade data the primary point of interest will be whether it implies any revisions to the very robust 1.0 ppt contribution to last week's Q2 GDP data.
========================== ** THE DAY AHEAD ** ===========================
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from Marc Ostwald