Key Factors for The week Ahead at wall street: GDP Growth, House Price Index, ADP National Employment, PCE Price Index, Initial Jobless Claims etc.
Next week’s key pionts on watch in wall street
Key Takeaways
- The July Job Openings and Labor Turnover Survey (JOLTS), ADP’s National Employment data, and the Labor Department’s August nonfarm payrolls data will be released.
- The June Case-Shiller National Home Price Index will be released on Tuesday, delivering important home price data.
The BEA will release July’s Personal Consumption Expenditures (PCE) Price Index on Thursday, the Fed’s favored inflation gauge.
Pinduoduo, HP, Best Buy, Salesforce, Broadcom, UBS, Dell Technologies, and Lululemon Athletica will announce earnings.
Weekly Economic calendar USA
Monday
No events
Tuesday
JOLTs Job openings & Quits (jul),
House Price Index (Jun)
US CaseShiller (Jun)
Wednesday
Q2CY23 GDP Growth (2nd Estimates),
US ADP National Employment (Aug)
MBA Mortgage applications,
API & EIA Crude Oil Stock Change (For Week ended Aug 25);
Pending Home Sales (July)
Thursday
Initial Jobless Claims (For Week ended Aug 26);
US Challenger Layoffs (Aug)
Personal Income & Spending,
PCE Price Index (jul)
Friday
Unemployment Rate
Non-Farm Payrolls
S&P Global Manufacturing PMI Final (Aug)
Construction Spending (July)
US Labour Market Report (Aug)
Canadian GDP (Q2)
TOP FACTORS IN WALL STREET
Powell Rate Remarks
Powell said Friday at the Economic Policy Symposium in Jackson Hole that the US Fed may need to raise rates more to control inflation and bring it closer to the objective.
“Although inflation has moved down from its peak – a welcome development – it remains too high,” Powell remarked in his keynote address.
“We are prepared to raise rates further if appropriate and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective,” Powell added.
This made Friday US equity trade turbulent. After swinging between gains and losses, key indices rose as investors absorbed the remarks.
World Monitorable
Asian markets’ reaction to Powell’s comments will affect domestic equities. Investors will also watch the dollar index and US treasury yields.
Any dollar index or bond yield increase could prompt foreign investors to sell shares.
US GDP Estimates Q2CY23
The August 30 second US GDP estimate for Q2CY23 will be carefully watched by investors worldwide. According to advance estimates released this month, the US economy grew 2.4 percent annually, up from 2 percent in Q1CY23.
Global market participants will also watch July JOLTs job openings & quits on August 29, August unemployment rate & non-farm payrolls on September 1, and August manufacturing PMI statistics. The US unemployment rate should stay at 3.5 percent from last month.
US PCE
Headline PCE prices are predicted to rise 0.2% M/M in July (prev. 0.2%), while the core rate is expected to rise by the same magnitude and match the preceding; core inflation is expected to rise to 4.3% Y/Y from 4.1%. Credit Suisse expects the Fed’s favored inflation indicator, the PCE deflator, to confirm July’s CPI report’s disinflation. The bank meets consensus expectations. “Gradual disinflation in shelter should weigh on the run rate of PCE in the coming months,” it writes, “but shelter is a smaller weight in PCE than CPI inflation, and more limited progress on other core services, which are a higher weight, could keep PCE stickier than CPI later in the year.”
ISM Manufacturing PMI
In August, the consensus expects ISM Manufacturing PMI to rise to 47.0 from 46.9. Although the ISM data and S&P Global PMI statistics differ, the flash release of the latter showed the manufacturing PMI falling to a two-month low of 47.0 (from 49.0 in July) and the output index dipping below 50.0 to 47.5. S&P reported a “solid deterioration” in operating conditions midway through Q3; “the decline was the second-sharpest since January, as a renewed drop in output and steeper decrease in new orders weighed on the overall performance of the sector,” with lower new sales leading to a slower retrenchment among manufacturers. S&P said the drop in purchasing activity reduced the need to hold inputs and finished goods, lowering industrial inventories. S&P commented, “Despite lower demand, vendor performance improved to the smallest extent since February,” “some companies stated that a shortage of drivers at suppliers frustrated efforts to reduce delivery times.”
US Jobs Report
The consensus expects 160k nonfarm payrolls in August (prev. 187k), a 3.5% unemployment rate, and 0.3% M/M average hourly earnings growth, down from 0.4% in July. Analysts expect employment growth to slow as the year winds down. The Fed expects the jobless rate to rise to 4.1% by the end of the year, but recent initial jobless claims data has failed to meaningfully spike higher. In the survey week that coincides with the BLS jobs report window, the four-week moving average was 234.5k (vs 237.5k going into July data), and continuing claims was 1.697mln. The BLS also released its prelim estimates for payroll employment benchmark revisions this week, lowering employment levels by 306k for the year through March 2023. The data was consistent with Moody’s expectations that “the eventual benchmark changes, released early next year, will impact the full period from April 2022 through March 2023,” and that “the monthly details are not yet known, the size of the revision would imply a 25k per month reduction in job growth.”
Manufacturing PMI
S&P Global Manufacturing PMI for August will be released on September 1. Most experts expect manufacturing activity to be good as the over 50 threshold signals expansion, but whether it extends fall like in June and July will be seen. India’s manufacturing sector expanded in July, but the S&P Global Purchasing Managers’ Index (PMI) fell to 57.7 from 57.8 in June. It peaked at 58.7 in May, 31 months ago.
Foreign exchange reserves for the week ending August 25 will also be revealed on that day. The week ended August 18 reserves were $594.89 billion, down from $601.45 billion.
Weekly Global Market Outlook/ Calendar (22 Aug-01 sep)
Monday, August 28
Australian Retail Sales (Jul)
Dallas Fed Manufacturing Index (Aug)
Tuesday, August 29
- NBH Announcement
- German GfK Consumer Sentiment (Sep),
- US CaseShiller (Jun)
- FHFA House Price Index (Jun)
- Job Openings and Labor Turnover Survey (JOLTS) (Jul)
- Conference Board Consumer Confidence Index (Aug)
- Dallas Fed Services Index (Aug)
Wednesday, August 30
- Australian CPI (Jul)
- Spanish Flash CPI (Aug)
- EZ Sentiment Survey (Aug)
- US ADP National Employment (Aug)
- U.S. Gross Domestic Product (GDP) – Second Estimate (Q2 2023)
- Real Consumer Spending (Q2 2023)
- Corporate Profits (Q2 2023)
- Pending Home Sales (Jul)
- U.S. Goods Trade Balance (Jul)
- Retail Inventories Excluding Autos (Jul)
Thursday, August 31
- ECB Minutes
- Japanese Retail Sales (Jul)
- Chinese Official PMI (Aug)
- German Retail Sales (Jul)
- German Unemployment (Aug)
- EZ Flash CPI (Aug)
- Challenger, Gray & Christmas Job Cuts (Aug)
- Personal Income and Spending (Jul)
- Personal Consumption Expenditures (PCE) Price Index (Jul)
- Chicago Purchasing Managers’ Index (PMI) (Aug)
Friday, Nov 01
- Chinese Caixin Manufacturing PMI (Aug)
- Swiss CPI (Aug)
- Nonfarm Payrolls (Aug)
- EZ/UK/US Final Manufacturing PMI (Aug)
- ISM Manufacturing PMI (Aug)
- S&P Global Manufacturing PMI – Final Reading (Aug)
- US Labour Market Report (Aug)
- Canadian GDP (Q2)
Day-Wise Events in details
Monday 28 AUG
Australian Retail Sales
Australian retail sales are expected to grow 0.3% MM in July after falling 0.8% in June. Westpac analysts forecast a slightly higher number due to a July firming in their Westpac Card Tracker. Population increase alone is 0.2%mth. Even if real (inflation-adjusted) per capita sales stay unchanged, nominal sales rise 0.4%mth. According to the desk, July should see a 0.4% growth.
WEDNESDAY 30 AUG
Australian CPI
The Australian CPI is predicted to fall to 5.2% in July from 5.4% in June. Since data was previously released quarterly, these monthly inflation metrics are crucial for the RBA’s data-dependent policy guiding. Westpac’s desk says “Electricity presents a key risk this quarter both in terms of state energy rebates and bill increases.” The ABS recently established a monthly power price series for the CPI, however it only goes back to September 2017, therefore we don’t know the monthly seasonality of electricity prices. Governor Lowe stated at the latest RBA meeting that “Returning inflation to target within a reasonable timeframe remains the Board’s priority” but added that “To date, medium-term inflation expectations have been consistent with the inflation target and it is important that this remains the case.” The ASX 30 Day Interbank Cash Rate Futures presently price a 90% chance of a hold at 4.10%, while Governor Lowe warned that “Some further tightening of monetary policy may be required”.
THURSDAY AUG 31
Chinese PMIs
China’s NBS Manufacturing PMI is predicted to rise to 49.5 in August (prev. 49.3 in July), but stay in contraction territory. No expectations exist for non-manufacturing and Composite measurements. China’s economic woes have been telegraphed by poor trade, inflation, and activity data, which highlighted weak domestic and international demand. Since then, Chinese authorities have taken steps to strengthen the economy and stabilize stock markets, but economists say it will take time for the stimulus to take effect. ING analysts predict the official and Caixin Chinese PMIs to worsen “as we await more substantial support from the government to boost domestic demand while global demand remains weak.” Conversely, the desk believes, “One positive next week would be that the non-manufacturing PMI may still register a modest expansion even if the index edges lower, as it is still the summer holiday season when many families travel and boost business.”
EZ Flash CPI
August headline Y/Y flash CPI is expected to dip to 5.1% from 5.3%, with super-core measure falling to 5.3% from 5.5%. The headline fell from 5.5% to 5.3% due to energy prices, while ING said the super-core figure kept unchanged “due to diverging developments between non-energy industrial goods and services inflation”. Moody’s analysts expect food and core inflation to lower the headline for the forthcoming release, counteracting a likely energy inflation spike due to rising crude oil prices. Analysts expect core inflationary pressures to diminish “as services inflation stabilizes and core goods inflation falls thanks to lower producer prices”. However, the desk warns “that services inflation may tick up, buoying overall core inflation”. Last week’s dismal PMI data triggered a dovish repricing for the ECB’s September meeting, with a coin flip between unchanged and a 25bps hike. ECB momentum for a rate hike pause is building as recession fears deepen, according to following source reporting. The article noted that inflation data are due this week and that any pause would need to indicate future hikes. Several authorities warned against overinterpreting survey data like the August PMIs due to the widening gap between hard data and sentiment estimates. Thus, next week’s inflation measurements may cause a major repricing.
ECB Minutes
As expected, the ECB raised the deposit rate by 25bps to 3.75% in its minutes. The announcement focused on the Bank’s small change to future decisions, which will now indicate that key ECB interest rates will be “set at” suitably restrictive levels for as long as necessary instead of “brought to”. Later, the GC fixed minimum reserve pay at 0% instead than mirroring the deposit rate. In the follow-up press briefing, Lagarde said policymakers agreed. When asked if the Bank has more area to cover, she said the choice will be based on data and the GC is “open-minded”. Lagarde said she “would not say so” about there being more ground to cover when pressed later in the press conference. Given the mixed interpretations of this statement, it will be interesting to see if the account can clarify the matter. Lagarde stated on the balance sheet that a reduction had not been discussed and that rates and QT would not be traded. The primary lesson ahead of the September meeting was that the ECB was willing to suspend rate hikes or tighten further, depending on data. After the weaker PMI data for August triggered a dovish repricing last week, the inflation data the morning of the release may tilt the balance for the September meeting, which is a near-enough coin flip between unchanged and a 25bps raise. As usual, the previous meeting’s account will be deemed stale and passed over without any ceremony.
US PCE
Headline PCE prices are predicted to rise 0.2% M/M in July (prev. 0.2%), while the core rate is expected to rise by the same magnitude and match the preceding; core inflation is expected to rise to 4.3% Y/Y from 4.1%. Credit Suisse expects the Fed’s favored inflation indicator, the PCE deflator, to confirm July’s CPI report’s disinflation. The bank meets consensus expectations. “Gradual disinflation in shelter should weigh on the run rate of PCE in the coming months,” it writes, “but shelter is a smaller weight in PCE than CPI inflation, and more limited progress on other core services, which are a higher weight, could keep PCE stickier than CPI later in the year.”
Swiss CPI
July’s 1.6% report met market forecasts and fell below the SNB’s June Q3 projection of 1.7%. The August metric looks for deviation around the SNB’s 1.7% projection. An above-expected number would worry policymakers since it would confirm their projection for inflation to rise above the 0-2% zone from Q1-2024. Market pricing presently suggests a 70% possibility of an unchanged rate decision at September’s meeting.
ISM Manufacturing PMI
In August, the consensus expects ISM Manufacturing PMI to rise to 47.0 from 46.9. Although the ISM data and S&P Global PMI statistics differ, the flash release of the latter showed the manufacturing PMI falling to a two-month low of 47.0 (from 49.0 in July) and the output index dipping below 50.0 to 47.5. S&P reported a “solid deterioration” in operating conditions midway through Q3; “the decline was the second-sharpest since January, as a renewed drop in output and steeper decrease in new orders weighed on the overall performance of the sector,” with lower new sales leading to a slower retrenchment among manufacturers. S&P said the drop in purchasing activity reduced the need to hold inputs and finished goods, lowering industrial inventories. S&P commented, “Despite lower demand, vendor performance improved to the smallest extent since February,” “some companies stated that a shortage of drivers at suppliers frustrated efforts to reduce delivery times.”
FRIDAY 01 Nov
US Jobs Report
The consensus expects 160k nonfarm payrolls in August (prev. 187k), a 3.5% unemployment rate, and 0.3% M/M average hourly earnings growth, down from 0.4% in July. Analysts expect employment growth to slow as the year winds down. The Fed expects the jobless rate to rise to 4.1% by the end of the year, but recent initial jobless claims data has failed to meaningfully spike higher. In the survey week that coincides with the BLS jobs report window, the four-week moving average was 234.5k (vs 237.5k going into July data), and continuing claims was 1.697mln. The BLS also released its prelim estimates for payroll employment benchmark revisions this week, lowering employment levels by 306k for the year through March 2023. The data was consistent with Moody’s expectations that “the eventual benchmark changes, released early next year, will impact the full period from April 2022 through March 2023,” and that “the monthly details are not yet known, the size of the revision would imply a 25k per month reduction in job growth.”
EARNINGS CALENDAR
Monday, August 28
- Heico Corporation (HEI)
Tuesday, August 29
- Pinduoduo (PDD), Bank of Montreal (BMO), Bank of Nova Scotia (BNS), HP Inc. (HPQ), Nio Inc. (NIO), Best Buy (BBY), J.M. Smucker Company (SJM), Catalent Inc. (CTLT), and Donaldson Company (DCI)
Wednesday, August 30
- Salesforce (CRM), CrowdStrike Holdings (CRWD), Brown Forman Corporation (BF.A, BF.B), Veeva Systems Inc. (VEEV), The Cooper Companies (COO), Chewy Inc. (CHWY), Okta Inc. (OKTA), and Five Below (FIVE)
Thursday, Aug 31
- Broadcom (AVGO), UBS (UBS), Vmware (VMW), Lululemon Athletica (LULU), Dell Technologies (DELL), Dollar General (DG), KE Holdings Inc. (BEKE), Hormel Foods Corp. (HRL), Campbell Soup Company (CPB), and Ciena Corporation (CIEN)
- For details
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