Macroeconomics: The Day Ahead for 5 May

  • Services PMIs/ISM and US ADP Employment in focus as China, Japan &  South Korea thin trading volumes; myriad of ECHB, Fed & BoE speakers;  Brazil BCB seen hiking rates again, Poland NBP on hold; EIA inventories in focus for oil; another busy day for earnings, resource companies dominate

  • Services PMIs: activity restrictions accounts for divergence; supply chain disruptions in focus on prices, orders and deliveries, may prompt modest US ISM setback

  • US ADP: labour demand seen picking up further, but Fed focussed on other  metrics; reaction to Yellen comments instructive 

EVENTS PREVIEW

Today’s schedule has rather more in the way of potential market moving data, with Services PMIs/ISM and US ADP Employment, though the holidays in China, Japan and South Korea will continue to thin trading volumes. The central bank schedule has numeorus Fed, ECB and BoE speakers, with Poland’s NBP expected to follow the Bank of Thailand in keeping rates unchanged, while Brazil’s BCB is seen hiking rates a further 75 bps to 3.50% and signalling more hikes to come, with markets expecting the Selic rate to reach 5.50% by year end. A busier day for govt bond auctions sees the UK sell 10 & 25-yr, and both Germany and Canada offering 5-yr. Another raft of corporate earnings from around the world is likely to have AP Moller-Maersk, Albemarle, Barrick Gold, General Motors, Marathon Oil and Uber among those making headlines.  With the not always reliable API data showing a sharp 7.7 Mln bbls drop in Crude Inventories, today’s official EIA data on crude and product stocks could prove pivotal to the ostensible upside break in oil prices.

 

** World – April Services PMIs/ISM **

As was seen in the G7 flash PMIs, divergent Services performance is very much a function of looser or tighter activity restrictions, but as with the Manufacturing PMIs, the focus is firmly on the impact of supply chain disruptions on prices, order backlogs and supplier deliveries. The US Services ISM will above all be in focus, with the consensus looking for a slight uptick to a fresh all-time record high of 64.2, after jumping to 62.7 from 55.3 in March. The risks look to be to the downside of the consensus, given that the March jump owed as much to a rapid re-opening of the services economy as well as a bounce back from February’s bad weather, and on the other hand plenty of reports of logistical and labour bottlenecks for the sector. That said, it will still signal a robust services recovery.

 

** U.S.A. April ADP Employment **

The ADP measure has lagged official Payrolls in 10 of the past 12 months, and is expected to do so again with an 873K gain following a 517K rise in March (when Private Payrolls rose 780K). While there is some risk of an upside surprise and/or an upward revision to March, Payrolls growth is clearly less relevant for the Fed in terms of considering some form of tapering than the labour force participation rate and the U-6 Underemployment Rate; per se today’s report will be primarily of interest in terms of the breakdown of Employment growth by business size and sector. Talking of tapering, market reaction to Yellen’s comments on the potential for rate hikes underlines just how sharp reaction to any Fed taper talk, let alone actual tapering.

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ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.                  

A subsidiary of Archer Daniels Midland Company.

© 2021 ADM Investor Services International Limited.

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