All eyes on US labour data as Japan Wages & Household Spending, German Industrial Production all miss forecasts; Canada jobs and Saturday China Trade data also in view; upbeat RBA SOMP and as expected RBI no change to digest, modest run of corporate earnings
US Payrolls: unseasonal education patterns to boost expected strong headline gain, some downside risks on Private payrolls
US Unemployment Rate seen dropping, but focus on Participation Rate and Underemployment Rate; solid wage gain, strength in hours expected
EVENTS PREVIEW
A busy looking calendar of data has rather fewer highlights upon closer inspection, with an array of large “misses” on Japan’s wages, Household Spending and German Industrial Production to digest, with US and Canadian Labour data ahead, while Saturday will see China’s Trade data. In event terms there are the RBA’s Statement on Monetary Policy (SOMP) and the as expected no change from India’s RBI to mull over, with BoE’s Broadbent hosting an online briefing for businesses following yesterday’s MPC meeting. The latter was in truth something of a non-event, despite the higher than expected near-term forecast for CPI to peak at 4.0%, with the re-calibration of its QE exit policy to start with non-reinvestment of Gilt redemptions once Base Rate reaches 0.50% couched in a number of market related caveats, so as to render it to little more than a ‘what if’. Much the same applies to the promise to act if inflation proves to be stronger than expected, given that this was counterbalanced by the mention that it would use negative rates if required.
Next week’s schedule is dominated by inflation data via way of US and China CPI and PPI, along with Eurozone (final), Scandinavia, Brazil and Mexico CPI, while the UK looks to preliminary Q2 GDP, the array of monthly business activity indicators (Production, Trade and Construction Output), BRC Retail Sales and RICS survey. The US also has JOLTS Jobs Openings and the NFIB and Michigan surveys, Germany has Trade and ZEW survey, while Japan has PPI and Economy Watchers survey. There are a good number of Fed speakers, though mostly regional Fed presidents, and rate decisions in Mexico and Turkey. The US heads a seasonally light run of govt bond auctions with its quarterly refunding (3, 10 & 30yr), and the Q2 corporate earnings season starts to wind down. In the commodity space, the focus will be on the US WASDE and Brazil CONAB crop reports, while the US EIA publishes its monthly Short Term Energy Outlook.
U.S.A. – July Labour data
As previously noted the read across from the much weaker than expected ADP report to today’s official Private Payrolls apply, even if the ADP report did echo high frequency data from payrolls and time management companies (such as UKG and Homebase) for the 4 week period between the Payrolls surveys suggest hiring slowed relative to mid-June. The fact remains that the ADP report has been so wide of Private Payrolls over the past 18 months, though it does suggest greater market sensitivity to an as, or better than expected outcome. The termination of enhanced benefits and the large volume of vacancies (roughly 1:1 in ratio terms to the number of those seeking employment) does implies continued further strength, there are some downside risks. Firstly the anecdotal evidence suggests that contrary to some political narratives, fear of infection and lack of childcare facilities are much bigger hurdles than disincentives due to enhanced benefits (see attached chart on trends in those states which have terminated and those that have not). Per se the latest spike in infections could well act as a drag. Last but certainly not least skills mismatches continue to be cited as THE main reason cited for positions not being filled. Be that as it may, the consensus looks for an 870K headline rise (likely boosted by unseasonal hiring patterns in education) and a 715K jump for Private Payrolls (vs. June 662K), which would be the best since March’s 724K, though there have been considerable disappointments in recent months. In terms of the Fed’s “substantial further progress” metric, the focus will be on the labour force participation rate which is seen rising to 61.8 from 61.6%, and the Underemployment Rate (last 9.8%), both of which remain way off pre-pandemic levels of 63.5% and 7.0%.
To view the full report and to sign up for daily market commentary please email admisi@admisi.com
The information within this publication has been compiled for general purposes only. Although every attempt has been made to ensure the accuracy of the information, ADM Investor Services International Limited (ADMISI) assumes no responsibility for any errors or omissions and will not update it. The views in this publication reflect solely those of the authors and not necessarily those of ADMISI or its affiliated institutions. This publication and information herein should not be considered investment advice nor an offer to sell or an invitation to invest in any products mentioned by ADMISI.
Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
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.
Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
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.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.