UPCOMING
EVENTS:
- Monday: Japan Industrial Production and Retail Sales, Chinese PMIs, German CPI, Fed Chair Powell. (Canada on Holiday)
- Tuesday: Japan Unemployment Rate, BoJ Summary of Opinions, Australia Retail Sales, Swiss Retail Sales, Swiss Manufacturing PMI, Eurozone Flash CPI, Canada Manufacturing PMI, US ISM Manufacturing PMI, US Job Openings. (China on Holiday)
- Wednesday: Japan Tankan Index, Eurozone Unemployment Rate, US ADP. (China on Holiday)
- Thursday: Swiss CPI, Eurozone PPI, US Jobless Claims, Canada Services PMI, US ISM Services PMI. (China on Holiday)
- Friday: Swiss Unemployment Rate, US NFP. (China on Holiday)
Tuesday
The Eurozone CPI
Y/Y is expected at 1.9% vs. 2.2% prior, while the Core CPI Y/Y is seen at 2.8%
vs. 2.8% prior. The market has already priced in a back-to-back 25 bps cut in
October following the weak PMIs, and the soft French and Spain CPI numbers last
week. The expectations are for the ECB to cut by 25 bps at each meeting until
June 2025.
Eurozone Core CPI YoY
The US ISM
Manufacturing PMI is expected at 47.5 vs. 47.2 prior. This and the NFP report
are going to be the most important economic releases this week. The S&P Global PMIs last week showed the Manufacturing index falling
further into contraction.
It’s unlikely that
those PMIs and maybe even the ISM PMIs incorporated the latest Fed’s decision.
The ISM data though is collected the last week of the month, so there might be
some improvement compared to the S&P Global report.
Given the focus on
global growth following the Fed and especially the PBoC decisions, the market
might be ok with a benign figure and cheer a strong rebound.
The New Orders
index should be the one to watch as it should be the first to respond to the
recent developments. The focus will also be on the Employment index ahead of
the NFP report on Friday.
US ISM Manufacturing PMI
The US Job
Openings is expected at 7.670M vs. 7.673M prior. The last report surprised to the downside with a big drop. Despite
that, the hiring rate improved slightly while the layoffs rate remained low.
It’s a labour market where at the moment it’s hard to find a job but also low
risk of losing one. We will see in the next months how it evolves following the
recent developments.
US Job Openings
Thursday
The Switzerland
CPI Y/Y is expected at 1.1% vs. 1.1% prior, while the M/M figure is seen at
-0.1% vs. 0.0% prior. As a reminder, the SNB last week cut rates by just 25 bps bringing the policy rate to 1.00% and
said that it’s prepared to intervene in the FX market as necessary.
The central bank
also revised its inflation forecasts significantly lower leading the market to
price in more rate cuts beyond December 2024. Despite this, the Swiss Franc
strengthened as the market probably saw it as a weak move.
Switzerland CPI YoY
The US Jobless
Claims continues to be one of the most important releases to follow every week
as it’s a timelier indicator on the state of the labour market.
Initial Claims
remain inside the 200K-260K range created since 2022, while Continuing Claims
after rising sustainably during the summer improved considerably in the last
weeks.
This week Initial
Claims are expected at 220K vs. 218K prior, while there’s no consensus for
Continuing Claims at the time of writing although the prior release showed an
increase to 1834K.
US Jobless Claims
The US ISM
Services PMI is expected at 51.6 vs. 51.5 prior. This survey hasn’t been giving
any clear signal lately as it’s just been ranging since 2022, and it’s been
pretty unreliable. The market might focus just on the employment index ahead of
the NFP report the next day.
The recent S&P Global
Services PMI noted that
“the early survey indicators for September point to an economy that continues
to grow at a solid pace, albeit with a weakened manufacturing sector and
intensifying political uncertainty acting as substantial headwinds”.
“The sustained
robust expansion of output signalled by the PMI in September is consistent with
a healthy annualized rate of GDP growth of 2.2% in the third quarter. But there
are some warning lights flashing, notably in terms of the dependence on the
service sector for growth, as manufacturing remained in decline, and the
worrying drop in business confidence”.
“A reacceleration
of inflation is meanwhile also signalled, suggesting the Fed cannot totally
shift its focus away from its inflation target as it seeks to sustain the
economic upturn.”
US ISM Services PMI
Friday
The US NFP report
is expected to show 140K jobs added in September vs. 142K in August and the
Unemployment Rate to remain unchanged at 4.2%. The Average Hourly Earnings Y/Y
are seen at 3.8% vs. 3.8% prior, while the M/M figure at 0.3% vs. 0.4% prior.
The Fed projected
a 4.4% unemployment rate by the end of the year with 50 bps of easing. The
unemployment rate in 2024 has been rising due to increased labour supply rather
than more layoffs, which is something that jobless claims have been capturing
well.
The market is
pricing a 53% probability of another 50 bps cut in November and that could very
well increase if the NFP report were to be weak. Of course, the opposite is
true if the labour market report were to come in better than expected with a 25
bps cut becoming the most likely move.
US Unemployment Rate