In this holiday shortened week, which sees Canada shut to start the week, and US markets close at 1pm on Monday ahead of the July 4th holiday on Tuesday, the focus will be on US Nonfarm payrolls (consensus expect 185k), the FOMC minutes and central bank meetings by the RBA and Riksbank. Traders will also look at June auto sales data, Global Flash PMIs for June, while on the political front, the top event is the G20 summit kicking off in Germany on Friday.
A quick look at the key event: June payrolls: Consensus expects nonfarm payrolls to increase by 185k in June after a weaker-than-expected 138k job gain in May. Some sayd the weak job growth in the prior month could have been due to the early timing of the survey reference period. The unemployment rate should remain unchanged at 4.3% and average hourly earnings may grow by 0.3% mom.
Also watch for FOMC minutes along with Riksbank & RBA: The minutes of the June FOMC meeting are likely to sound more cautious than the statement or press conference. BofA economists signal that the themes to watch are the debate over inflation, the agreement over balance sheet normalization and the discussion on financial conditions. They expect minutes to still point to balance sheet normalization in the September meeting and a path of higher rates.
Two central banks are due this week: This is likely to be another placeholder meeting for the Reserve Bank of Australia (RBA) and policy is set to remain neutral with the cash rate remaining at 1.5%. There looks to be little risk that the RBA will follow other central banks with a hawkish signal. Against the backdrop of normalizing global monetary policy, we remain cognizant that the Riksbank have frequently disappointed in the past and this remains a risk, but their previous insistence on an easing bias is looking increasingly at odds with economic reality and out of step with other major central banks.
In other data:
- In the US, we mainly wait for labor market report and FOMC meeting minutes. There will also be ISM and trade balance.
- In the Eurozone, releases include retail sales, factory orders and industrial production. We also have final PMI releases where we expect prior readings to be confirmed.
- In UK, beyond PMIs, we wait for industrial production, trade balance and house prices.
- In Japan, we mainly have confidence indicators.
- In Canada, we have PMIs, building permits and labor market data.
- In China, key releases include PMI, foreign reserves and consumer inflation
A visual breakdown of the key events across the DM space, courtesy of Bank of America:
Courtesy of DB, here is a breakdown of the key events by day:
- Today we’re kicking off in Europe with the final revisions to the June manufacturing PMIs along with a first look at the data for the UK and periphery. Also due out this morning is the Euro area unemployment rate for May. Over in the US this afternoon we’ll also receive the final manufacturing PMI revision along with the manufacturing ISM for June and May construction spending. Later this evening we’ll also get June vehicle sales data.
- Tuesday looks to be quiet with Independence Day in the US. The main attraction is likely the RBA meeting overnight while the only data due out is Euro area PPI.
- Wednesday looks to be much busier. Overnight in Asia we’ll receive the remaining Caixin PMIs in China and Nikkei PMIs in Japan. In Europe we’ll also get the remaining services and composite PMI revisions as well as retail sales data for the Euro area. In the US on Wednesday data due out includes factory orders for May and the final durable and capital goods orders revisions for May. The FOMC minutes from the June meeting will then be out in the evening.
- Turning to Thursday, factory orders in Germany is the only release of note in Europe while in the US we’ll get the June ADP print, initial jobless claims, May trade balance, ISM non-manufacturing for June and the final PMI revisions (services and composite).
- We close out the week in Europe on Friday with industrial production in Germany and trade data and industrial production in France and the UK. In the US on Friday it’s all about the June employment report including nonfarm payrolls.
Away from the data, the Fedspeak this week consists of Bullard this morning, Powell on Thursday and Fischer on Friday. The ECB’s Praet and Nowotny speak tomorrow and Weidmann and Nowotny speak on Thursday on the future of the euro. The ECB minutes are also due out on Thursday. Other events to note this week are China President Xi Jinping’s visit to Moscow on Tuesday where he is due to meet Putin. Germany’s Merkel and China’s Xi meet ahead of the G20 summit on Wednesday and the summit itself is on Friday and Saturday. The Fed will also publish its 2017 monetary policy report to Congress on Friday ahead of Yellen’s testimony on July 12th.
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Finally, here is Goldman with a breakdown of key events in the US together with expectations:
The key economic releases this week are ISM manufacturing on Monday, ISM non-manufacturing on Thursday, and the employment report on Friday. There are several scheduled speaking engagements by Fed officials this week, including a speech by Fed Vice Chair Fischer on Thursday. The minutes from the June FOMC meeting will be released on Wednesday. Additionally, the Federal Reserve will publish the July 2017 Monetary Policy Report to Congress on Friday ahead of Chair Yellen’s testimony to Congress the following week.
Monday, July 3
- 04:35 AM St. Louis Fed President Bullard (FOMC non-voter) speaks: St. Louis Fed President James Bullard will give the keynote speech at the “Applications of Behavioural Economics and Multiple Equilibrium Models to Macroeconomic Policy Conference” organized by the Bank of England, the National Institute of Economic Research, Warwick University, and the ESRC Centre of Macroeconomics in London, UK.
- 10:00 AM ISM manufacturing, June (GS 55.8, consensus 55.2, last 54.9): We expect the ISM manufacturing index to climb 0.9pt to 55.8 in the June report. Overall, regional manufacturing surveys were mixed in June. The Empire State (+20.8pt to +19.8), Richmond Fed (+6pt to +7), Kansas City Fed (+3.0pt to +11), and Chicago PMI surveys showed notable improvements. However, the Philly Fed (-11.2pt to +27.6), Dallas Fed (-2.2pt to +15.0), and Markit PMI manufacturing surveys all showed month-over month declines. On net, our manufacturing survey tracker—which is scaled to the ISM index—rose to 57.2 in June from 55.5 last month.
- 10:00 AM Construction spending, May (GS +0.3%, consensus +0.3%, last -1.4%): We expect construction spending to increase 0.3% after a weaker-than-expected report last month, which showed broad-based declines in private and public residential and nonresidential spending.
- 4:00 PM Total vehicle sales, June (GS 16.6mn, consensus 16.5mn, last 16.6mn): Domestic vehicle sales, June (GS 13.1mn, consensus 12.9mn, last 12.8mn): Our auto analysts expect total vehicle sales to decline on a year-over-year basis to 16.6mn, due to a pull-back in fleet and softness in retail auto sales.
Tuesday, July 4
- US Independence Day holiday. US equity and bond markets are closed.
Wednesday, July 5
- 10:00 AM Factory orders, May (GS -0.3%, consensus -0.5%, last -0.2%); Durable goods orders, May final (last -1.1%); Durable goods orders ex-transportation, May final (last +0.1%); Core capital goods orders, May final (last -0.2%); Core capital goods shipments, May final (last -0.2%): We estimate factory orders fell 0.3% in May, following a 0.2% decrease in April. The May durable goods report showed modest decreases in core capital goods orders and core capital goods shipments, both below expectations.
- 02:00 PM Minutes from the June 13-14 FOMC meeting: The June FOMC meeting delivered a hawkish surprise to markets that seemed to have expected the Fed to react more strongly to a string of three consecutive soft CPI reports. Instead, the FOMC signaled confidence in the inflation outlook, kept the dots largely stable, and announced a schedule of caps for the runoff of Treasuries and MBS. In the minutes, we will look for further discussion of the soft inflation data and the committee’s views on the weights attached to the inflation misses relative to the risk of a labor market overshoot.
Thursday, July 6
- 04:05 AM San Francisco Fed President Williams (FOMC non-voter) speaks: San Francisco Fed President John Williams will give a speech titled “The Global Growth Slump: Causes and Consequences” at The Economic Society of Australia’s Eminent Speaker Series 2017 in Sydney, New South Wales. Audience Q&A is expected.
- 08:30 AM Initial jobless claims, week ended July 1 (GS 245k, consensus 243k, last 244k); Continuing jobless claims, week ended June 24 (consensus 1,938k, last 1,948k): We estimate initial jobless claims edged up 1k to 245k in the week ended July 1. We see few notable outliers in the state-level data from last week. However, we note that initial claims can be particularly volatile around this time of year due to annual summer auto-plan shutdowns. Continuing claims – the number of persons receiving benefits through standard programs – have begun to trend up, following a sharp decline in the first four months of the year.
- 08:30 AM Trade balance, May (GS -$46.3bn, consensus -$46.3bn, last -$47.6bn): We estimate the trade deficit narrowed by $1.3bn in May. The Advance Economic Indicators report last week showed a narrower goods trade deficit, and we forecast a similar narrowing in the broader trade balance in this week’s report.
- 10:00 AM ISM non-manufacturing, June (GS 56.3, consensus 56.5, last 56.9): Service sector surveys were mixed in June, and we expect ISM non-manufacturing to move lower to 56.3. The Philly Fed (+10.4pt to +19.7) and Dallas Fed (+4.2pt to +11.9) non-manufacturing surveys rose, while the New York Fed (-4.0pt to +2.6, SA by GS) and Richmond Fed (-6pt to +13) surveys pulled back. On net, our non-manufacturing survey tracker declined to 55.4 in June from 56.0 last month.
- 10:00 AM Fed Governor Powell (FOMC voter) speaks: Federal Reserve Governor Jerome Powell will give a speech “The Case for Housing Finance Reform” at an event hosted by the American Enterprise Institute in Washington D.C. Audience Q&A is expected.
- 07:30 PM Fed Vice Chair Fischer (FOMC voter) speaks: Federal Reserve Vice Chair Stanley Fischer will give a speech on government policy and labor productivity at the Martha’s Vineyard Hebrew Center Summer Institute in Massachusetts. Audience Q&A is expected.
Friday, July 7
- 8:30 AM Nonfarm payroll employment, June (GS +180k, consensus +177k, last +138k); Private payroll employment, June (GS +175k, consensus +175k, last +147k); Average hourly earnings (mom), June (GS +0.3%, consensus +0.3%, last +0.2%); Average hourly earnings (yoy), June (GS +2.6%, consensus +2.6%, last +2.5%); Unemployment rate, June (GS 4.3%, consensus 4.3%, last 4.3%): We estimate nonfarm payrolls rose 180k in June, following a 138k increase in May and compared to three- and six-month moving averages of 121k and 161k, respectively. Labor market fundamentals remained broadly stable – business employment surveys remain at strong levels, and the Conference Board’s labor market differential rose to a new cycle high – though we note the month-over-month deterioration in jobless claims data. Additionally, we expect a reduced impact from labor supply constraints this month, reflecting students and graduates entering the labor force in June. This suggests scope for reacceleration in payroll growth relative to May. We expect the unemployment rate to remain stable at 4.3%, with some upside risk to 4.4% as continuing claims edged higher and the participation rate may rebound, reflecting entry of students and graduates into the labor force. Finally, we expect average hourly earnings to increase 0.3% month over month, reflecting somewhat favorable calendar effects, and 2.6% year-over-year (with upside risk to 2.7%).
- 11:00 AM Federal Reserve Board to publish July 2017 Monetary Policy Report to Congress
Source: BofA, Goldman, DB
via http://ift.tt/2tiyTVi Tyler Durden