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The markets month ahead: key events for your trading diary in October
Get a look at the coming month’s important market-moving events with our October trading preview.
Economic events to watch in October
OPEC-JMMC meetings – Monday 4th October
The month begins in earnest with OPEC-JMMC meetings. OPEC+ comes together for its monthly policy talks. No shocking surprises are expected this month. Instead, we’ll probably see a rubber-stamping of the planned output increase of 400,000 bpd.
RBA rate statement – Tuesday 5th October
The Reserve Bank of Australia releases its newest rate statement at the start of the month. Markets forecast no hike for the foreseeable future. The cash rate will probably stay at its historic low.
RBNZ rate statement – Wednesday 6th October
Joining its Australian cousin in starting the month with a rate decision is the Reserve Bank of New Zealand. Economists think an increase in the 0.2% cash rate will come – but not the 0.5% increase forecast.
US nonfarm payrolls – Friday 8th October
Jerome Powell and the Fed, plus the wider markets, will be watching the month’s NFP data carefully. August’s data missed the mark by miles – will September’s stats point towards a US labour market surge?
US CPI data – Wednesday 13th October
Consumer Price Index rises cooled in August, backing the Fed’s stance that current high prices are all transitionary. Month-on-month price gains slowed to 0.3%. September’s CPI stats are released on Wednesday 13th of October.
US retail sales data – Friday 15th October
Retail sales across America picked up an unexpected bump in August. Sales were up 0.7% according to the Census Bureau. Observers were calling for a 0.7% decline, driven by rising Delta-variant COVID cases. Will we see an upward swing in September too?
UK CPI data – Tuesday 20th October
UK inflation is running hot. Last month’s report showed it growing at the fastest rate since records began, rising at 3.2%. It may be all transitionary, but if inflation punches above the Bank of England’s 4% target, then the UK’s central bank may be forced to act.
European PMIs – Friday October 22nd
Brace for the monthly European flash PMI blitz with all the key economic activity indicators from France, Germany, and the EU all inbound. Eurozone composite PMI readings for September missed expectations of 58.5 coming in at 56.1. Still in growth, but it looks like activity is starting to slow.
Bank of Canada rate statement – Wednesday October 27th
The first rate statement of Justin Trudeau’s third term comes this month. Governor Tiff Macklem and co. stuck to their guns in September, keeping the 0.25% rate in place and the QE pace the same. It’s probable October’s statement will bring much the same.
ECB Press Conference – Thursday October 28th
The European Central Bank scaled back its bond-buying programme in September in a bid to cool soaring inflation. Its October moves will likely all come down to how EU CPI reacted to the change. Rates stayed at 0% and it’s likely they will in the mid-term.
Major economic data
|Mon Oct-04||8:00am||EUR||Spanish Unemployment Change|
|All Day||All||OPEC Meetings|
|All Day||All||OPEC-JMMC Meetings|
|Tue Oct-05||4:30am||AUD||RBA Rate Statement|
|Tentative||JPY||BOJ Gov Kuroda Speaks|
|3:00pm||USD||ISM Services PMI|
|Wed Oct-06||2:00am||NZD||Official Cash Rate|
|2:00am||NZD||RBNZ Rate Statement|
|1:15pm||USD||ADP Non-Farm Employment Change|
|3:30pm||OIL||Crude Oil Inventories|
|Thu Oct-07||1:30pm||USD||Unemployment Claims|
|Fri Oct-08||1:30am||AUD||RBA Financial Stability Review|
|1:30pm||USD||Average Hourly Earnings m/m|
|1:30pm||USD||Non-Farm Employment Change|
|Tentative||USD||Treasury Currency Report|
|Tue Oct 12||3:00am||CNH||GDP q/y|
|3:00am||CNH||Retail Sales y/y|
|10:00am||EUR||ZEW Economic Sentiment|
|10:00am||EUR||German ZEW Economic Sentiment|
|3:00pm||USD||JOLTS Job Openings|
|6:00pm||USD||10-y Bond Auction|
|Wed Oct-13||1:30pm||USD||CPI m/m|
|1:30pm||USD||Core CPI m/m|
|6:01pm||USD||30-y Bond Auction|
|7:00pm||USD||FOMC Meeting Minutes|
|Thu Oct-14||1:30am||AUD||Employment Change|
|1:30pm||USD||Core PPI m/m|
|4:00pm||OIL||Crude Oil Inventories|
|Fri Oct-15||7:00am||GBP||Retail Sales m/m|
|1:30pm||USD||Core Retail Sales m/m|
|1:30pm||USD||Retail Sales m/m|
|1:30pm||USD||Empire State Manufacturing Index|
|3:00pm||USD||Prelim UoM Consumer Sentiment|
|Mon Oct-18||2:15pm||USD||Industrial Production m/m|
|3:30pm||CAD||BOC Business Outlook Survey|
|Tue Oct-19||1:30am||AUD||Monetary Policy Meeting Minutes|
|Wed Oct-20||7:00am||GBP||CPI y/y|
|1:30pm||CAD||Common CPI y/y|
|1:30pm||CAD||Core Retail Sales m/m|
|1:30pm||CAD||Median CPI y/y|
|1:30pm||CAD||Retail Sales m/m|
|1:30pm||CAD||Trimmed CPI y/y|
|3:30pm||OIL||Crude Oil Inventories|
|Thu Oct-21||1:30pm||USD||Philly Fed Manufacturing Index|
|Fri Oct-22||8:15am||EUR||French Flash Manufacturing PMI|
|8:15am||EUR||French Flash Services PMI|
|8:30am||EUR||German Flash Manufacturing PMI|
|8:30am||EUR||German Flash Services PMI|
|9:00am||EUR||Flash Manufacturing PMI|
|9:00am||EUR||Flash Services PMI|
|9:30am||GBP||Flash Manufacturing PMI|
|9:30am||GBP||Flash Services PMI|
|2:45pm||USD||Flash Manufacturing PMI|
|2:45pm||USD||Flash Services PMI|
|Mon Oct-25||9:00am||EUR||German ifo Business Climate|
|Tue Oct-26||1:30pm||USD||Core Durable Goods Orders m/m|
|1:30pm||USD||Durable Goods Orders m/m|
|3:00pm||USD||CB Consumer Confidence|
|Wed Oct-27||1:30am||AUD||CPI q/q|
|1:30am||AUD||Trimmed Mean CPI q/q|
|3:00pm||CAD||BOC Monetary Policy Report|
|3:00pm||CAD||BOC Rate Statement|
|3:30pm||OIL||Crude Oil Inventories|
|Tentative||CAD||BOC Press Conference|
|Thu Oct-28||Tentative||JPY||BOJ Outlook Report|
|Tentative||JPY||Monetary Policy Statement|
|Tentative||JPY||BOJ Press Conference|
|12:45pm||EUR||Monetary Policy Statement|
|12:45pm||EUR||Main Refinancing Rate|
|1:30pm||EUR||ECB Press Conference|
|1:30pm||USD||Advance GDP q/q|
|1:30pm||USD||Advance GDP Price Index q/q|
|3:00pm||USD||Pending Home Sales m/m|
|Fri Oct-29||8:00am||EUR||German Prelim GDP q/q|
|1:30pm||USD||Core PCE Price Index m/m|
|3:00pm||USD||Revised UoM Consumer Sentiment|
|Sat Oct-30||Day 1||All||G20 Meetings|
|Sun Oct-31||1:00am||CNH||Manufacturing PMI|
|Day 2||All||G20 Meetings|
Week Ahead: Central banks take centre stage
The week ahead is dominated by central bank statements. We’ve got three lined up, with the first coming from the ECB. Its dovish outlook runs counter to the Reserve Bank of Australia and Bank of Canada who’ve taken on a more hawkish character of late. We’re not expecting major policy shifts – but surprises are never far away in the world of economics.
The last glimpse inside the European Central Bank’s thinking we got came in the form of its July meeting minutes. In a world where central banks are starting to take more hawkish footings, the ECB is still relatively dovish.
The ECB announced its first major strategic financial policy in July. Inflation targets were revised away from trying to keep it below 2% by adopting a specific 2% headline inflation target. Since then, inflation in the Euro area has risen to a decade high of 3%, which is likely to encourage hawks on the Governing Council.
All very well and good, but what about COVID-19? The pandemic is by no means over, but some key ECB board members are confident even the impact of the Delta variant can’t stunt Europe’s return to the black.
Limited headwinds are expected. The sentiment is positive.
“I would say we’re broadly not too far away from what we expected in June for the full year,” Philip Lane, the ECB’s chief economist, told Reuters on Wednesday. “It’s a reasonably well-balanced picture.”
Importantly, the ECB has said it will keep a “persistently accommodative” stance going forward. Interest rates are likely to stay at their current exceptionally low levels. We’re not expecting to see a shift towards a more hawkish position any time soon.
Moving to Australia, the RBA has been fairly bullish in its most recent communications. A new rate statement will come the Reserve Bank of Australia on Tuesday morning and we’re not expecting the bank to stray too far from its current course.
That is to say, tapering of the RBA’s bond buying programme will continue with the aim of scaling it back from September onwards. Rates will probably stay low too. We’re not expecting a hike until late 2022 at the earliest.
Much depends on how robust Australia’s economy fares in light of rising coronavirus cases and localised lockdowns.
“The board would be prepared to act in response to further bad news on the health front should that lead to a more significant setback for the economic recovery,” the RBA said in its August meeting minutes. “Experience to date had been that, once virus outbreaks were contained, the economy bounced back quickly.”
Governor Lowe and his colleagues have said a recession is not very likely, although growth prospects have been revised for 2021. This year, the RBA expects annual growth to be around 4%, lower than the 4.75% previously forecast, but will rise to 4.25% by the end of 2022.
Rounding off the week’s cavalcade of central bank statements is the Bank of Canada. The BOC is one of the more hawkish of the world’s central banks and has moved towards bond-buying tapering quite quickly, even though it is holding its overnight rate at 0.25%.
The BOC did point out that a fresh wave of infections and lockdowns in Q2 did inhibit growth, but the bank is confident growth will expand rapidly towards the end of the year.
The central bank said Canada’s economy is now expected to grow 6.0% in 2021, down from the April forecast of 6.5%, while it revised up its 2022 growth estimate to 4.6% from 3.7%.
Hot inflation is still floating in the air, with readings expected to stay at or above 3% through to 2022. Quite hot – and at the top of the BOC’s 1-3% range. However, the bank is confident this is all transitionary. It is unlikely to force a policy rethink.
Major economic data
|Tue 7-Sep||5.30am||AUD||RBA Rate Statement|
|10.00am||EUR||ZEW Economic Sentiment|
|10.00am||EUR||German ZEW Economic Sentiment|
|Wed 8-Sep||3.00pm||CAD||BOC Rate Statement|
|Tentative||CAD||BOC Press Conference|
|Thu 9-Sep||12.45pm||EUR||Monetary Policy Statement|
|12.45pm||EUR||Main Referencing Rate|
|1.30pm||EUR||ECB Press Conference|
|3.30pm||GAS||US Natural Gas Inventories|
|4.00pm||OIL||US Crude Oil Inventories|
|Fri 10-Sep||1.30pm||CAD||Employment Change|
|1.30pm||USD||Core PPI m/m|
|Tentative||GBP||Monetary Policy Hearings|
Week Ahead: All eyes on US jobs report
A busy week ahead for the markets with the US nonfarm payrolls as the marquee event, as well as two major central bank statements.
Let’s start with the latest US nonfarm payrolls print.
June’s reading performed way above expectations, and the markets will be watching closer than ever when the latest data is released on Friday.
850,000 payrolls were added to the US economy in June – way above the 720,000 forecast. This was also the sixth consecutive month where new additions were made.
However, the unemployment rate rose from 5.8% to 5.9% – higher than the predicted 5.6% rate forecast. Labour force participation, the go-to metric for gauging workforce shortages nationwide rate didn’t budge at 61.6%.
Hiring appears to have dipped a little overall throughout the spring. There are a couple of reasons for this: virus fears; childcare costs; better unemployment insurance; stimulus & furlough schemes. However, it’s been reported that firms have upped wages in order to entice workers into taking new positions.
The employment rate is also an important measure for Fed Chairman Jerome Powell when assessing stimulus and support levels for the US economy.
We know Powell and co. are relatively comfortable about letting the economy run hot, even in the face of rising inflation. As Powell pointed out at the last Fed meeting, there remains a gap of 7.5 million jobs missing from the US economy, although some reports suggest the figure is 6.8m. Until these open positions are filled, expected more Fed stimulus and support.
In terms of indices, the S&P 500 and Nasdaq responded very well to last month’s bumper jobs report, reaching new record highs. Indices traders will be hoping for more of the same with July’s print.
Sticking with US-related data, ISM, one of the key purchasing manager index reporters for the American economy, shares its manufacturing and services outlooks this week.
US manufacturing was still robust last month, according to ISM’s PMI report, but supply chain issues continue to inhibit growth. The factories printing was rated at 60.6 – down from the 61.2 score registered in May.
Momentum is still strong. Four out of the five subindexes rated by ISM showed high growth. Consumer interest in new goods is still high, despite rising prices. But labour shortages, coupled with the rising price of commodities and materials, has caused bottlenecks and shortages as manufacturers struggle to keep up with demand.
“Record-long raw-material lead times, wide-scale shortages of critical basic materials, rising commodities prices and difficulties in transporting products are continuing to affect all segments of the manufacturing economy,” said Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee.
The same can be said for the services sector: it expanded in June, but that expansion had softened compared with a best-ever May rating. In this case, the index fell from 63.5 to 60.1.
“The rate of expansion in the services sector remains strong, despite the slight pullback in the rate of growth from the previous month’s all-time high,” explained Chair of the ISM Services Business Survey Committee Anthony Nieves. “Challenges with materials shortages, inflation, logistics and employment resources continue to be an impediment to business conditions.”
Keeping that momentum going is all important for America’s economic health – especially as the US is expected to be the driving force behind the global economic recovery across the rest of this year and beyond.
Moving away from data, a pair of central bank statements are on the way next week.
Starting with the Bank of England, rising inflation is the big one here.
In June, inflation reached 2.5%, thanks to widespread increase in consumer goods. This could just be pent-up demand in the British economy finally being unleashed, but as inflation is now at its highest levels for three years, economists’ nerves may be tested.
Governor Bailey has already made his stance clear: the price jumps are only temporary, and we could see it run as high as 3% by the year’s end. It should then fall away back to acceptable levels after that. Currently, the BoE has a mandate to steer inflation towards 2% and keep it there.
However, Bailey has stated he would be ready to pitch rate hikes should inflation run out of this control.
The Reserve Bank of Australia also shares its latest policy thinking and direction this week.
Chances are, no big changes are coming. Governor Philip Lowe has been very clear that no rate hike will be forthcoming until at least 2024. That’s despite Australia’s strong economic fundamentals.
The historic low cash rate of 0.1% isn’t going anywhere. What’s interesting, however, is that July’s meeting led to some tweaks in Australia’s QE programme. The scale has been pulled back. From September onwards, the rate of RBA bond purchases will slow from AUD$5bn to AUD$4bn per week.
The groundwork for more tweaks to policy has been laid by Governor Lowe. Let’s see what this week’s meeting brings in terms of any small-scale changes.
We can’t finish a preview of the week’s key events without touching on US earnings season.
Week three of large cap earnings reports for Q2 2021 begins on Monday. It’s not as busy as the previous week’s reporting flurry, but we still have some significant reports coming in, namely Alibaba and Uber.
Check out our US earnings calendar for more information on which major firms are sharing earnings reports this week or see below.
Major economic data
|Mon 2-Aug||8.55am||EUR||German Final Manufacturing PMI|
|3.00pm||USD||US ISM Manufacturing PMI|
|Tue 3-Aug||5.30am||AUD||RBA Rate Statement|
|11.45pm||NZD||Employment Change q/q|
|Wed 4-Aug||2.30am||AUD||Retail Sales m/m|
|1.15pm||USD||ADP Nonfarm Employment Change|
|3.00pm||USD||US ISM Services PMI|
|3.30pm||OIL||US Crude Oil Inventories|
|Thu 5-Aug||12.00pm||GBP||Asset Purchase Facility|
|12.00pm||GBP||BOE Monetary Policy Report|
|12.00pm||GBP||MPC Asset Purchase Facility Votes|
|12.00pm||GBP||Monetary Policy Summary|
|12.00pm||GBP||MPC Official Bank Rate Votes|
|12.00pm||GBP||Official Bank Rate|
|3.30pm||GAS||US Natural Gas Inventories|
|Fri 6-Aug||2.30am||AUD||RBA Monetary Policy Statement|
|1.30pm||USD||Average Hourly Earnings q/q|
|1.30pm||USD||Nonfarm Employment Change|
Key earnings data
|Mon 2 Aug||Tue 3 Aug||Wed 4 Aug||Thu 5 Aug|
|Arista Networks||Alibaba||General Motors||Ball Corp|
|Activision Blizzard||The Kraft Heinz Co||Beyond Meat|
|Uber Technologies||Square Inc|
|The Trade Desk|
|Virgin Galactic Holdings|
Equities feel the hangover
Equity markets look a tad bleary-eyed and hungover this morning after a bit of binge. Call it exuberance, but the strong rally in China stoked by the state-run press left markets with only way to travel on Monday and now the price has to be paid. Meanwhile we continue to monitor the rising cases in the US and an emerging spat between the UK and China over Hong Kong and Huawei which simply evinces the fact that Covid is reshaping the world.
European stocks handed back some of Monday’s gains on the open on Tuesday after the strong start to the trading week pushed the FTSE 100 back above 6200. Energy and financials led the fall but all Stoxx 600 sectors dropped in the first hour of trade. Tokyo and Hong Kong fell, but shares in China continued to rally on very high volumes.
Nasdaq hits fresh record high, but is a correction incoming for Wall Street?
Wall Street also rallied after the bump up in China, with the Nasdaq hitting a fresh all-time high, but yesterday had a feel of a frothy move based on nothing but fumes. The put/call ratio for the S&P 500, which reflects market positioning and sentiment, has fallen to levels that have in the past indicated a correction is in the offing. Speculators have also lately aggressively cut their net long positioning on S&P 500 futures.
The upcoming earnings season will be crucial, and investors may see earnings estimates reduced given that many companies simply scrapped guidance, which could call for a rethink of valuations. Indices continue to track the ranges of June, so until we break out in either direction the pattern is one of a choppy but sideways market as investors try to figure out the balance on offer between reopening & stimulus vs cases & permanent economic damage from falling confidence and increased saving.
Recovery is happening, but is it fast enough: German industrial production rose 7.8% in May, but the figure was short of the 11% that was expected. Meanwhile, BMW Q2 sales in China rose from the same period a year ago, which might be down to the pent-up demand from the shutdown in the country in Q1, but nevertheless indicates a decent pace of recovery in the world’s second largest economy.
The UK’s Halifax mortgage survey showed prices fell for a fourth month in a row in June, but activity levels are rebounding, with enquiries up 100% from May. It’s too early to tell if this rebound can be sustained – a truism across the economic data prints we see right now.
Fed’s Bostic cautious over US recovery
Meanwhile we got another dose of salt from Raphael Bostic, the Atlanta Fed president, who warned of signs the US recovery is levelling off. Indeed, the headline nonfarm payrolls number last Thursday masks a lot of ills. Not least of which, permanent job losses are on the rise: while the number of unemployed classed as being on temporary layoff decreased by 4.8m in June to 10.6m, following a decline of 2.7m in May, the number of permanent job losers continued to rise, increasing by 588,000 to 2.9m in June.
Additionally, the data for the June report was collected largely before the spike in cases in several of the big economically important states like Texas and California. Dr Fauci said the US is still ‘knee-deep’ in the first wave.
RBA holds rates, notes increased uncertainty on rising Covid-19 cases
The Reserve Bank of Australia left interest rates on hold at the record low 0.25%, but noted households and businesses are worried about the state of the economy after the jump in cases in Victoria raised doubts about the country’s handling of the outbreak, which had been assumed to be as good as New Zealand.
“The downturn has been less severe than earlier expected,” RBA governor Philip Lowe said in a statement, but added that “uncertainty about the health situation and the future strength of the economy is making many households and businesses cautious, and this is affecting consumption and investment plans”. Scott Morrison’s government will deliver a statement on July 23rd outlining further support on the fiscal side.
Gold still bullish, EUR and GBP drift lower
Elsewhere, gold’s bullish bias remains intact as it consolidates around $1780 and may be preparing for a fresh run towards $1800 – first up it needs to clear the seven-year highs at $1789. WTI (Aug) is steady at $40 for now and in FX we see the majors still trading within recent ranges as the dollar recovers a little from Monday’s risk-on sell-off.
EURUSD failed to break the June swing high at 1.1345 yesterday and has pulled back towards the middle of the bullish pennant. GBPUSD has also drifted lower after several failed attempts in the last session to clear the 1.2520 resistance, finding some immediate support on the 200-period SMA on the 4-hr chart. Sterling has that RoRo feel.
Week Ahead: Pressure builds on RBA to go negative, high hopes for US ISM
Coming up this week – can Eurozone retail sales follow in Germany’s forecast-shattering footsteps; will the US ISM Nonmanufacturing Index return to growth against expectations, and is the pressure mounting on the RBA to push interest rates into negative territory?
Read on for your full breakdown of the key events to watch this week.
Eurozone confidence and retail sales
Investor confidence in the Eurozone improved last month, although the Sentix index missed expectations with a rise from -41.8 to -24.8 against forecasts of a rebound to -22.5.
It still represented a solid rebound after May’s index barely moved, and participants reported a much more positive outlook than before. Since then we’ve had a lot of positive data in terms of PMIs and forecast-crushing German retail sales, which grew 13.9% on the month in May, against expectations of 3.9%, which could prompt another uptick in confidence when the next reading is published on Monday.
Eurozone retail sales figures are also due on Monday. Forecasts are for growth of 7.8% on the month after May’s -11.7% decline.
Surprise return to growth on the cards for US ISM Nonmanufacturing Index?
Last week’s US ISM Manufacturing Index smashed expectations with a surprise leap back into growth territory. Economists had expected the index to recover to 49.5, just shy of the 50 level that shows no change, but the index instead jumped to 52.6, with the majority of industries surveyed reporting expansion, in particular improvements in employment, production, and new orders.
This week’s nonmanufacturing index is predicted to improve from 45.4 to 49, but after the strength seen in the manufacturing counterpart, markets will be hoping to see a reading above 50 here as well to reinforce hopes of a quick recovery for the US economy.
Markets bet on Reserve Bank of Australia rate cut
The Reserve Bank of Australia held interest rates at 0.25% during its last policy meeting. ASX 30 Day Interbank Cash Rate Futures show the market is pricing in a 60% chance that the RBA will cut rates to 0% during the next board meeting. Doing so would effectively take rates negative, which policymakers have been reluctant to do.
However, pressure is mounting after localised spikes in coronavirus infections forced the government to lockdown parts of Melbourne. A further spread of infections could hamper Australia’s economic recovery, forcing the RBA to unleash more stimulus.
Corporate earnings: Paychex, Walgreens Boots Alliance
Paychex is expected to report earnings of $0.61 per share for the quarter ended May 2020, down -3.1% on the same period the previous year. Revenue is projected -7% lower compared to Q4 of the previous fiscal year at $911 million. The stock has moved largely in tandem with the S&P 500 all year, although since the March selloff Paychex has struggled to recoup losses as quickly, leaving it down -10% on the year, compared to -4% for the S&P 500.
Walgreens Boots Alliance stock is up 11% from its year-to-date low, but remains over 30% lower since January 1st. According to research from Thompson Reuters, the stock has an average “Hold” rating amongst 21 analysts – you can download the full report from the Key Statistics tab in the platform. Q3 earnings are due ahead of the market open on July 9th.
Weekly US jobless claims remain in focus
US weekly jobless claims figures have proven stubbornly high over the past few weeks, despite having come down significantly from the record high of 6.6 million reported on April 5th. However, while initial claims have continued to disappoint forecasts, the number of continuing claims has come down a bit more than expected – although at 19.5 million it remains remarkably high and shows just how far there is to go to restoring anything like normal levels of employment.
The latest figures are due on Thursday.
Highlights on XRay this Week
Read the full schedule of financial market analysis and training.
|07.15 UTC||Daily||European Morning Call|
|20.00 UTC||06-Jul||10 Trading Rules to Live By|
|From 15.30 UTC||07-Jul||Weekly Gold, Silver, and Oil Forecasts|
|17.00 UTC||08-Jul||Blonde Markets|
|09.00 UTC||09-Jul||How to Use the 200-day Moving Average Indicator|
Key Events this Week
Watch out for the biggest events on the economic calendar this week:
|08.30 UTC||06-Jul||Eurozone Sentix Investor Confidence Index|
|09.00 UTC||06-Jul||Eurozone Retail Sales|
|14.00 UTC||06-Jul||US ISM Nonmanufacturing|
|14.30 UTC||06-Jul||CA BOC Business Outlook Survey|
|04.30 UTC||07-Jul||RBA Official Cash Rate Decision|
|06.00 UTC||07-Jul||German Industrial Production|
|Pre-Market||07-Jul||Paychex – Q4 2020|
|After-Market||07-Jul||Levi’s – Q2 2020|
|05.00 UTC||08-Jul||Japan Eco Watchers Survey|
|14.30 UTC||08-Jul||US EIA Crude Oil Inventories|
|08-Jul||FirstGroup – Q4 2020 (Preliminary)|
|Pre-Market||09-Jul||Walgreens Boots Alliance – Q3 2020|
|12.30 UTC||09-Jul||US Weekly Jobless Claims|
|14.30 UTC||09-Jul||US EIA Natural Gas Storage|
|12.30 UTC||10-Jul||Canada Employment Change & Unemployment Rate|
Week Ahead: RBA and BoE, Disney Earnings, US NFP
Expect policy decisions from the RBA and BoE, a host more earnings reports, the US nonmanufacturing PMI, and of course the highly anticipated/dreaded April nonfarm payrolls report. Keep track of the biggest market-moving events with the Events Calendar in the Marketsx trading platform.
Reserve Bank of Australia interest rate decision
Data is tentatively showing that lockdown measures in Australia might have succeeded in flattening the curve of infections, and several states have already started relaxing social distancing rules.
The Reserve Bank of Australia has previously stated that it believes the economy will begin to rebound once the outbreak was contained, therefore it seems unlikely we will be getting any further stimulus announcements as a result of this week’s meeting. It’s too early to expect the board to start tightening again, but we could see some comments regarding plans to begin tapering the quantitative easing programme.
Regeneron Pharmaceuticals is one of the leading companies in the race to find treatments and a vaccine for COVID-19. The stock is up 40% since the start of the year, and is a constituent of our Corona Blend. Analysts are expecting EPS of $5.99 per share – growth of 34.6% on the year. Revenue is forecast up 16% from the same period a year ago at $1.99 billion.
US ISM Nonmanufacturing PMI
Last month the US ISM Nonmanufacturing PMI fared much better than expected, clocking in at 52.5 versus the consensus forecast of 43.0. Companies reported a jump in supplier deliveries, with the sub–index leaping to 62.1 versus 52.4 the previous month.
Digging further into numbers, however, it’s clear to see that this helped mask wider weakness. The employment index recorded the largest drop since 2008, tumbling from 55.6 to 47.0, and the business activity index dropped almost 10 points to 48.0. New export orders and imports also collapsed.
April’s report is likely to see the headline number more accurately reflecting the weakness in the sub-indices – some forecasts suggest a drop to as low as 32.0.
Walt Disney earnings
Disney’s latest earnings report will be more of a preview than the main event. The company’s second-quarter period ends just a couple of weeks after social distancing measures and business closures were enforced. Like so much of the current data and reports, the rule is to expect bad news now, and brace for even worse to come.
Business closures and social distancing will have hit Disney from all directions, forcing closures of its parks, curtailing or delaying theatrical releases of its latest films, and hurting demand in its retail stores.
The effect has clearly been significant: the company has already announced that it would slash executive salaries.
The one positive in the report is likely to be the strong performance of the company’s streaming service, Disney+. The service enjoyed a strong launch, and demand is likely to have been bolstered even further thanks to global lockdowns.
Guidance for the next quarter won’t be able to answer all investor’s questions – such as whether parks will be able to reopen in time for the busy summer season – but will give details on how the company plans to endure these punishing conditions until the economy gets back to something that vaguely resembles normality.
PayPal stock has been one of the most resilient of those belonging to the payment processing industry. The company is likely to benefit from a surge in online shopping and demand for online services.
However, PayPal has also announced various measures to support its smaller partners, such as deferring business loan payments and waving certain fees for small business customers who are most affected by the impact of COVID-19. This will hit the company’s bottom line and revenue growth is expected to be negative for the quarter.
Bank of England interest rate decision
The Bank of England faces the same situation as the Fed and ECB – interest rates are already as low as policymakers are willing to go (for the time being, at least), so it’s unlikely we will see any change to the base rate on Thursday. We could see an increase in the size of the asset purchasing programme, however, or alterations to its short-term repo operations.
The BoE also publishes its latest Inflation Report, which will detail the expected hit to the UK economy from the coronavirus pandemic. The latest decision and report will be announced at 06.00 UTC on Thursday May 7th, instead of the usual time of 11.00 UTC.
Last month, the nonfarm payrolls report showed a drop of 701,000 jobs in March. The unemployment rate leapt past expectations to 4.4%. The market reaction was muted, however, because everyone from economists to traders knew that there was far worse to come.
Since the 21st of March, over 25 million Americans have filed jobless claims. March’s NFP may have been the worst report since 2009, but the numbers will seem trifling compared to those reported for April.
We’ve seen recently that markets are able to shrug off backward-looking data even if the readings are dire. It was the fear of numbers like these, after all, that saw stock markets posting record declines in Q1.
It is also worth noting that, since late March, the number of Americans filing for new jobless claims has fallen each week, suggesting the worst of the job losses may be behind us.
But there is a risk that the numbers will be so appalling that markets will have to rethink their already bearish forecasts.
Heads-Up on Earnings
The following companies are set to publish their quarterly earnings reports this week:
|Pre-Market||05-May||Thompson Reuters – Q1 2020|
|Pre-Market||05-May||Regeneron Pharmaceuticals – Q1 2020|
|12.00 UTC||05-May||BNP Paribas – Q1 2020|
|By 13.00 UTC||05-May||Fiat Chrysler – Q1 2020|
|After-Market||05-May||Walt Disney – Q2 2020|
|After-Market||05-May||Activision Blizzard – Q1 2020|
|After-Market||05-May||Prudential Financial – Q1 2020|
|After-Market||05-May||Occidental Petroleum – Q1 2020|
|Pre-Market (Europe)||06-May||BMW – Q1 2020|
|06-May||Credit Agricole – Q1 2020|
|06-May||Shopify – Q1 2020|
|Pre-Market||06-May||General Motors – Q1 2020|
|After-Market||06-May||PayPal – Q1 2020|
|After-Market||06-May||T-Mobile US – Q1 2020|
|After-Market||06-May||Lyft – Q1 2020|
|07-May||BT Group – Q4 2020|
|Pre-Market||07-May||Wheaton Precious Metals – Q1 2020|
|08-May||Siemens – Q2 2020|
Highlights on XRay this Week
|07.15 UTC||Daily||European Morning Call|
|09.00 UTC||Daily||Earnings Season Daily Special|
|10.00 UTC||May 6th||Live Market Analysis with Neil Wilson|
|12.20 UTC||May 8th||Platform Walkthrough|
|12.30 UTC||May 8th||US Nonfarm Payrolls Live|
Key Economic Events
Watch out for the biggest events on the economic calendar this week:
|08.15 – 09.00 UTC||04-May||Finalised Eurozone Member / Bloc Manufacturing PMIs|
|04.30 UTC||05-May||Reserve Bank of Australia Interest Rate Decision|
|14.00 UTC||05-May||US ISM Nonmanufacturing PMI|
|08.15 – 09.00 UTC||06-May||Finalised Eurozone Member / Bloc Services PMIs|
|14.30 UTC||06-May||US EIA crude Oil Inventories|
|01.30 UTC||07-May||Australia Trade Balance|
|01.45 UTC||07-May||Caixin Services PMI|
|10.00 UTC||07-May||EU Economic Forecasts|
|06.00 UTC||07-May||Bank of England Interest Rate Decision|
|12.30 UTC||07-May||US Jobless Claims|
|01.30 UTC||08-May||Reserve Bank of Australia Monetary Policy Statement|
|12.30 UTC||08-May||US Nonfarm Payrolls / Unemployment Rate|
RBA expected to hold policy, but for how long?
Up until a couple of weeks ago markets were pricing in strong odds that the Reserve Bank of Australia would cut the Official Cash Rate to 0.50% from 0.75%.
All that changed after December’s labour market data was released. Unemployment dropped for a second consecutive month, hitting the lowest levels since April 2019 at 5.1%. Unemployment decreased by 13,000, largely thanks to a 29,000 increase in the number of workers employed part-time.
While still leaving the jobless rate significantly above 4.5% – a level be RBA believes will prompt an acceleration in wage growth – the unexpectedly strong report saw markets slashing odds of further easing in February.
The Australian dollar snapped a 5-day downtrend against the US dollar, spiking to test 0.6880, but the selloff quickly resumed as the focus returned to the viral outbreak in China.
Bets on easing in February drop after jobs data
According to ASX 30 day interbank cash rate futures contracts for February 2020, the probability of a cut has fallen from 56% as of January 16th to 30% by January 28th.
Westpac also noted that the strong data lowered the odds of further accommodation, with chief economist Bill Evans stating:
“Prior to the release of the surprisingly strong December Employment Report we had expected the cuts to be timed for February and June.”
“Given this strength and the significance of the labour market in the mind of the RBA, we have consequently decided to push out our forecast for two further cash rate cuts from February and June to April and August 2020.”
However, Westpac believes that the recent strength in the labour market won’t last, supporting the call for further easing. Evans explained:
“The importance of the April date is that the Board will have seen another print of the national accounts for the December quarter which is likely to highlight the soft growth environment while we expect that the surprise improvement in the unemployment rate will be unravelling.”
Consensus: cuts are still coming
The general consensus is that the RBA will have to ease further as the year progresses. While some parts of the economy are stabilising, particularly the property market (which has of course been helped by 75 basis points worth of easing during 2019), others are flagging.
Construction and consumer confidence are weak, and expectations for retail sales over the Christmas period are low. Construction output has declined for five straight quarters, while consumer confidence has erased most of the rebound recorded after hitting the lowest levels since mid-2015 in October.
There are also questions over the impact of the bushfires upon monetary policy. It is believed that, despite the economic damage estimated to be in the region of $100 billion, the bushfires will have only a short-term impact and therefore may not have any bearing on monetary policy. However, if it serves to further knock consumer confidence, it could be a contributing factor in any decision to ease policy.
The Chinese coronavirus outbreak is another large unknown; Australia trades heavily with China, so talk of factory shutdowns and a reduction in consumption could hurt the Australian economy.
What will the guidance say?
It can take 12 to 18 months for the impact of monetary policy adjustments to be fully known, so the RBA is likely to claim next month that it needs more time to assess the effects of 2019’s trifecta of cuts.
But how much time? Some analysts, like Evans at Westpac, believe the RBA will tee up a cut for April, while others think we may have to wait until the second half of the year to see further easing.