Key Events This Week: Payrolls, PCE, ISM, BOJ, BOE And Lots Of Earnings

It’s yet another exciting week with a variety of events and data releases to mull over. With month-end on Wednesday, there will also be plenty of commentary on what for some equity markets is on course to be the worst month of this long bull market. If you’re going to have an accident in markets, October always seems to be a time to have it, notes Deutsche Bank’s Craig Nicol adding that “It’ll be interesting to see if the normal positive seasonals kick in from November.”  Markets also tend to rally post midterms which occur the week after next. So an interesting end into YE coming.

The highlights of the next week are the BoJ and the BoE monetary policy meetings, the October nonfarm payrolls release in the US, advance Q3 GDP release for the Euro-area, US September PCE, preliminary October CPI for the Euro-area, the release of the final October manufacturing PMIs in Europe and the US, and the UK’s budget. Meanwhile earnings remain in full swing in both the US and Europe.

In that order, the BoJ monetary policy meeting on Wednesday is likely to be a non event, with no change in rates and QE expected. However, market participants will be keen to see if the BoJ revises its assessment of price growth upwards, especially after comments by Governor Kuroda last week that consumer prices excluding fresh food were currently rising at around 1%, compared with the BOJ’s existing view that prices are going up in a 0.5% to 1% range which was lowered at the June meeting.

The BoE is expected to keep rates unchanged at its upcoming monetary policy meeting on Thursday. However, market participants are likely to closely watch the BoE’s latest inflation report in the light of recent up-tick in wage growth. It will be interesting to listen to BoE Governor Carney’s thoughts on Brexit, volatility in sterling and the growth outlook.

We will get the big data release on Friday with the US October non-farm payrolls report. The market consensus at the time of writing is for a 190k nonfarm payrolls reading. This follows a below expectations 134k reading in September, largely on the back of idiosyncratic factors like abnormal weather conditions due to Hurricane Florence. However, the main focus for the market will likely be on the earnings data once again, where the consensus is for a +0.2% mom average hourly earnings reading down from the +0.3% mom reading last month. Despite this, base effects should see the annual rate increase 0.3 percentage points to +3.1% yoy – which would be the highest since 2009. In the meantime, the unemployment rate is expected to remain steady at 3.7% with hours holding steady at 34.5hrs.

Away from this, we will also be getting a first look of Q3 GDP for the Euro Area on Tuesday, where the current consensus is for growth to remain steady at 0.4% qoq. We will also get Q3 GDP for France (+0.4% qoq expected) and Italy (+0.2% qoq) on Tuesday and that for Spain (+0.6% qoq) on Wednesday.

Another key data highlight is the release of latest inflation prints in the US and Europe. On Monday we’ll get the September PCE report in the US where the consensus expects a +0.1% mom print which would bring the annual rate down two-tenth to +2.0% yoy. In Europe we’ll get the preliminary October CPI report for the Euro Area on Wednesday with the consensus expecting core inflation to move up by 0.1 percentage point to 1.0% yoy. Country level data in Europe is also due out in Germany (Tue), Spain (Tue), France (Wed), and Italy (Wed).

The final October manufacturing PMI revisions around the world are also likely to be closely watched. We’ll get final manufacturing revisions on Thursday in the US and Friday in Europe – including a first look at the periphery where Italy is expected to continue to remain stagnant at 50.0. Any number with a 4-handle might start to create more intense growth fears. Meanwhile Spain’s expansion is expected to slow to 50.9 from 51.4 in September. We will also get the UK’s manufacturing PMI on Thursday and construction PMI on Friday. Away from that we have October’s ISM manufacturing in the US on Thursday, and October’s ADP employment change and Chicago purchasing manager index on Wednesday. In China we will get the official October PMIs on Wednesday and Caixin manufacturing PMI on Thursday.

In the US we get September personal income and real personal spending on Monday, October Conf. board confidence survey on Tuesday, latest weekly MBA mortgage applications and Q3 employment cost index on Wednesday, preliminary Q3 nonfarm productivity and unit labor costs along with October Challenger job cuts and total vehicle sales, latest weekly initial jobless claims and continuing claims and September construction spending on Thursday and final September durable goods and capital goods orders on Friday.

In Europe, on Monday we get the UK’s September net consumer credit, mortgage approvals and M4 money supply along with October CBI reported retail sales. On Tuesday, we get September consumer spending in France, Germany’s October unemployment report and October confidence indicators for the Euro Area and Italy. On Wednesday, we get the UK’s October GfK consumer confidence and BRC shop price index, and the Euro Area’s September unemployment rate. On Friday, we get France’s September YtD budget balance. In Asia, we get Japan’s September jobless rate on Monday and preliminary September industrial production on Tuesday.

A host of companies including Facebook, Mastercard, Mondelez, Coca-Cola, General Electric, Pfizer, Sony, Samsung, Airbus, General Motors, Apple, eBay, Alibaba, Berkshire Hathaway, Exxon Mobil, Chevron, Duke Energy, BP, Repsol, Royal Dutch Shell, MetLife, AIG, HSBC, BNP Paribas, Macquarie Group, Credit Suisse and Banco Santander will release their earnings.

In central bank speak, the Fed’s Evans will speak on Monday. The ECB Governing Council members Ewald Nowotny and Ignazio Visco, and Italian Finance Minister Tria will be speaking on Wednesday.

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Summary of key events in the week ahead broken down daily, courtesy of DB:

• Monday: It’s a busy Monday. There is no overnight data releases of note though. In the UK, we get September net consumer credit, mortgage approvals, M4 money supply and October CBI retailing reported sales along with Italy’s September PPI. There is no other data release in Europe. In the US, we get September’s PCE deflator and core PCE along with September personal income and real personal spending data releases, and October Dallas Fed manufacturing activity index. Late night, we get Japan’s September jobless rate. Away from data, the Fed’s Evans will be speaking at an event and the UK’s Chancellor of the Exchequer Philip Hammond will present his budget. The WTO’s dispute settlement body is also set to consider a US request to investigate possible violations related to China’s intellectual property policies. In addition, Mondelez and HSBC will report their earnings.
• Tuesday: Data releases pick up further pace on Tuesday. There is no overnight data release in Asia. In Europe, we get advance Q3 GDP release for the Euro Area, France and Italy along with preliminary October CPI for Germany and Spain, and October confidence indicators for the Euro Area and Italy. In the US, we get October Conf. board consumer confidence and expectations survey. Late night, we get Japan’s preliminary September industrial production. In addition, Facebook, Mastercard, Coca-Cola, General Electric, Pfizer, Sony, eBay, BP and BNP Paribas will release their earnings.
• Wednesday: The key highlight of the day is the outcome of the BoJ monetary policy meeting. Overnight, we get the UK’s October GfK consumer confidence and BRC shop price index along with China’s official October PMIs. In Europe, we get the advance Q3 GDP release for Spain along with preliminary October CPI for the Euro Area, France and Italy, and the Euro Area’s September unemployment rate. In the US, we get the latest Q3 employment cost index, weekly MBA mortgage applications, October ADP employment change and Chicago purchasing manager index. Away from data, ECB Governing Council member Ewald Nowotny and Ignazio Visco, and Italian Finance Minister Tria will be speaking at different times. In addition, Samsung, Airbus, General Motors, Repsol, AIG and Banco Santander will release their earnings.
• Thursday: The key highlight of the day is the outcome of the BoE monetary policy meeting followed by BOE Governor Carney’s presser. Overnight, we get Japan’s final October manufacturing PMI and China’s October Caixin manufacturing PMI. In Europe, we get the UK’s October manufacturing PMI and the BoE’s inflation report. In the US, we get preliminary Q3 nonfarm productivity and labour costs along with latest weekly initial jobless claims and continuing claims, final October manufacturing PMI, September construction spending and, October ISM manufacturing survey and wards total vehicle sales. Late night, we get Japan’s October monetary base. Away from data, North and South Korea will begin enforcing a military agreement to end all hostile activities between the two countries at the Korean demilitarized zone. In addition, Apple, Royal Dutch Shell, Credit Suisse and Metlife will report their earnings.
• Friday: It’s a payrolls Friday. There is no overnight data release in Asia. In Europe, we get final October manufacturing PMIs for the Euro Area, Germany, France, Spain and Italy along with UK’s October construction PMI and France’s YTD September budget balance. In the US, we get October’s nonfarm payrolls report along with September factory orders and final September durable goods and capital goods orders. In addition, Alibaba, Berkshire Hathaway, Exxon-Mobil, Chevron, Duke Energy and Macquarie Group will release their earnings.

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Finally, here is Goldman looking at the key economic data releases in the US which this week are core PCE on Monday, ISM manufacturing on Wednesday, and the employment report on Friday. Do not expect any policy-related speeches by Fed officials, reflecting the blackout period ahead of the November meeting.

Monday, October 29

• 08:30 AM Personal income, September (GS +0.4%, consensus +0.4%, last +0.3%); Personal spending, September (GS +0.5%, consensus +0.4%, last +0.3%); PCE price index, September (GS +0.13%, consensus +0.1%, last +0.11%); Core PCE price index, September (GS +0.16%, consensus +0.1%, last +0.04%); PCE price index (yoy), September (GS +2.00%, consensus +2.0%, last +2.22%); Core PCE price index (yoy), September (GS +1.97%, consensus +2.0%, last +1.96%): Based on details in the PPI, CPI and import price reports, we forecast that the core PCE price index rose 0.16% month-over-month in September, or 1.97% from a year ago. Additionally, we expect that the headline PCE price index increased 0.13% in September, or 2.00% from a year earlier. We expect a 0.4% increase in September personal income and a 0.5% gain in personal spending.
• 10:30 AM Dallas Fed Manufacturing index, October (consensus +28.1, last +28.1)

Tuesday, October 30

• 09:00 AM S&P/Case-Shiller 20-city home price index, August (GS +0.2%, consensus +0.1%, last +0.1%); We expect the S&P/Case-Shiller 20-city home price index increased 0.2% in August, following a 0.1% increase in July. Our forecast of a relatively modest increase mostly reflects modest appreciation in other home prices indices such as the FHFA house price index.
• 10:00 AM Conference Board consumer confidence, October (GS 134.0, consensus 136.0, last 138.4); We estimate that the Conference Board consumer confidence index moved down to 134.0 from last month’s cycle high of 138.4.

Wednesday, October 31

• 08:15 AM ADP employment report, October (GS +170k, consensus +187k, last +230k); We expect a 170k gain in ADP payroll employment, reflecting a likely drag from inputs used in the ADP model. While we believe the ADP employment report holds limited value for forecasting the BLS nonfarm payrolls report, we find that large ADP surprises vs. consensus forecasts are directionally correlated with nonfarm payroll surprises.
• 08:30 AM Employment Cost Index, Q3 (GS +0.7% vs. consensus +0.7%, prior +0.6%); We estimate that the employment cost index rose 0.7% in Q3 (qoq sa). Wage growth measures generally firmed in the quarter, and our wage tracker picked up 0.15pp to 2.9% year-over-year (up from 2.3% at the end of last year). We believe wage growth will continue to firm given tight labor markets and strong momentum at the low end, and we look for strength in the underlying wage measures in the Q3 employment cost index. On the negative side, we note the possibility of a drag on the headline measure from benefit growth following a 4-year high pace in Q2. Accordingly, we expect the year-over-year pace to remain stable at 2.8%, which would match the cycle high.
• 09:45 AM Chicago PMI, October (GS 59.0, consensus 60.0, last 60.4); Given moderation in regional manufacturing surveys in October, we estimate that the Chicago PMI declined by 1.4pt to 59.0. The slowdown in global manufacturing and weakness in the automotive and industrial equipment sectors may also weigh on business sentiment in this report.

Thursday, November 1

• 08:30 AM Nonfarm productivity (qoq saar), Q3 preliminary (GS +2.1%, consensus +2.0%, last +2.9%); Unit labor costs, Q3 preliminary (GS +0.9%, consensus +1.1%, last +2.9%); We estimate non-farm productivity rose 2.1% in Q3, above the +0.75% trend achieved on average during this expansion. This reflects strong business output growth in Q3 partially offset by moderate growth in average hours worked. We expect Q3 unit labor costs—compensation per hour divided by output per hour—to rise by a modest 0.9% as a result of firm productivity growth in the quarter.
• 08:30 AM Initial jobless claims, week ended October 27 (GS 210k, consensus 212k, last 215k); Continuing jobless claims, week ended October 20 (consensus 1,639k, last 1,636k): We estimate jobless claims declined 5k to 210k in the week ended October 27, reflecting some reversion of the increase from Hurricane Michael. Initials claims increased by 4k in Florida and 3k in Georgia in the prior week.
• 10:00 AM Construction spending, September (GS +0.2%, consensus flat, last +0.1%); We estimate construction spending rose by 0.2% in September, following weaker than expected growth in August. We expect the effects of Hurricane Florence likely weakened spending growth in September.
• 10:00 AM ISM manufacturing, October (GS 58.5, consensus 59.0, last 59.8): Our manufacturing survey tracker – which is scaled to the ISM index – declined by 1.5pt following weaker manufacturing surveys on net in October. We expect the index to decline for the second month in a row after reaching a cycle high in August, decreasing by 1.3pt to 58.5. The slowdown in global manufacturing and weakness in the automotive and industrial equipment sectors may also weigh on business sentiment in this report.

Friday, November 2

• 08:30 AM Nonfarm payroll employment, October (GS +210k, consensus +193k, last +134k); Private payroll employment, October (GS +205k, consensus +190k, last 121k); Average hourly earnings (mom), October (GS +0.1%, consensus +0.2%, last +0.3%); Average hourly earnings (yoy), October (GS +3.0%, consensus +3.2%, last +2.8%); Unemployment rate, October (GS 3.7%, consensus 3.7%, last 3.7%); We estimate nonfarm payrolls increased 210k in October. Our forecast reflects rebounding employment in North and South Carolina following Hurricane Florence, more than offsetting the likely drag from Hurricane Michael in the Florida panhandle and parts of Georgia. Underlying job growth appears solid, given strength in employment surveys and very low jobless claims outside of hurricane-affected areas. We expect the unemployment rate to remain at 3.7%, following its two-tenth decline in September. Finally, we estimate average hourly earnings increased 0.1% month over month and 3.0% year-over-year, reflecting negative calendar effects and some possible payback from a hurricane boost in the Carolinas last month.
• 08:30 AM Trade balance, September (GS -$53.5bn, consensus -$53.6bn, last -$53.2bn); We estimate the trade deficit increased by $0.3bn in September, reflecting an increase in the goods trade deficit in the Advance Economic Indicators report last week.
• 10:00 AM Factory Orders, September (GS +0.6%, consensus +0.5%, last +2.3%); Durable goods orders, September final (last +0.8%); Durable goods orders ex-transportation, September final (last +0.1%); Core capital goods orders, September final (last -0.1%); Core capital goods shipments, September final (last flat): We estimate factory orders rose 0.6% in September following a 2.3% increase in August. Durable goods orders increased in the September advance report, driven primarily by an increase in aircraft orders. However, core measures were soft, with a decline in core capital goods orders and a flat reading in shipments.

Source: DB, BofA, GS

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