Ahead this week highlights.: The US Nonfarm Payrolls, FOMC Minutes, US Manufacturing and Services ISMs, the RBA rate decision, as well as the Canada jobs data.
Main global factors for the week Ahead Daywise
MONDAY
- BoJ Tankan Survey: A recent Reuters survey predicts that the improvement in Q2 factory sentiment in Japan will be the first since mid-2021, partly as a result of a resolution to the automotive chip supply situation. A rise in tourism is expected to propel the services sector’s growth above pre-pandemic levels, despite a global downturn in demand that is harming manufacturers. According to the median estimate, the confidence index for large manufacturers is expected to rise to 3 in June from 1 in March, which would be the first increase in seven quarters. The outlook for non-manufacturers is anticipated to have improved for a sixth consecutive quarter, helped by strong inbound tourism and the reclassification of COVID-19. The outlook for manufacturing is anticipated to continue to improve over the upcoming quarter, but the services sector could see a minor decline because of strong consumer inflation. This fiscal year, large enterprises are predicted to boost capital spending by 10.1%, a significant increase above the 3.2% increase predicted in the March poll, according to the report.
- US ISM Manufacturing PMI (Mon): The manufacturing gauge could improve to 47.2 in June from 46.9 in May. According to the S&P Global PMI series, manufacturing output fell at the fastest rate since January. S&P also reported a steep decline in manufacturer new orders, reflecting customer destocking and low customer confidence. S&P PMI data shows confidence slipping to a six-month low as manufacturers worry about inflation and sales.
- China PMI:- As China’s post-COVID economic recovery falters, the Caixin purchasing managers index will update manufacturing sector strength on Monday.The results may indicate the need for greater stimulus to boost domestic and foreign demand and stabilise the currency.The yuan is one of the worst-performing Asian currencies this year, losing over 5% versus the dollar Due to monetary policy divergence, U.S.-China bond rate differentials are widening, pressuring the yuan.
- The BoJ Tankan Survey for the second quarter
- Swiss CPI for June
- EZ/UK/US Manufacturing PMI Final for June
TUESDAY
NBH announcement, South Korean CPI (Jun), German Trade Balance (May), RBA announcement,
- RBA announcement:- Next week, the RBA will hold its policy meeting, and analyst forecasts suggest a coin-flip as 16 of 31 economists surveyed by Reuters expect another 25bps and 15 predict a pause at 4.10%, while money markets are more decisive and are pricing in just a 37% probability for a 25bps rate increase and a 63% chance for rates to remain unchanged. At the June meeting, the RBA noted that its actions were in response to the elevated inflationary environment and that data indicated that upside risks to the inflation outlook had increased. The statement remained hawkish and largely repeated the prior month’s rhetoric, with the Board resolute in its determination to return inflation to target and some further tightening of monetary policy may be needed. It also repeated that Australia’s inflation has passed its peak but is still too high at 7% and will take some time to return to target. After the meeting and subsequent comments by officials, Goldman Sachs raised its rate forecast to 4.85% in September from 4.35% in July, while NAB raised its forecast to 4.60% from 4.35% through back-to-back hikes in July and August. However, this hawkish impetus eventually unwound a couple of weeks later after the Minutes from the meeting revealed that the Board considered a rate rise of 25bps or holding steady and that the arguments were finely balanced, while softer-than-expected monthly inflation data from Australia slowed to 5.60% vs. Exp. 6.10% (Prev. 6.80%) adds to the case for the RBA to stand pat. As inflation remains below the central bank’s 2-3% goal range and the central bank has gone against the consensus for a halt at the last two meetings, another surprise hike is possible.
WEDNESDAY
- FOMC Minutes: The Fed held rates constant in June, as expected, but shocked investors by boosting its rate projections for 2023 and beyond. Rates for 2023 were raised by 50bps, signalling two further 25bps increases. Improved GDP growth, greater inflation expectations, and a lower jobless rate drove bullish estimates. Despite increasing revisions, the long-term “neutral” rate remained unchanged. Fed Chair Powell welcomed progress but stressed that tightening policy was still having an impact. Most policymakers predict rate hikes and weak growth. Powell recognized improvements in the labour market’s supply and demand balance, but demand still outstripped supply. Powell warned that lowering inflation may require below-trend growth and labour market reforms. In his Q&A, he called the rate hike a “skip,” suggesting a July increase. He stressed mild tightening. Powell didn’t expect a rate cut and didn’t worry about the financial crisis. He predicted RRP and reserve declines during the TGA reconstruction and commercial real estate issues. Since the meeting, Chair Powell has stated that the Fed’s forecasts will be influenced by incoming data and that a majority of Fed officials support two more rate hikes.
- China PMI As China’s post-COVID economic recovery falters, the Caixin purchasing managers index will update manufacturing sector strength on Monday.The results may indicate the need for greater stimulus to boost domestic and foreign demand and stabilise the currency.The yuan is one of the worst-performing Asian currencies this year, losing over 5% versus the dollar.Due to monetary policy divergence, U.S.-China bond rate differentials are widening, pressuring the yuan.
- EZ/UK/US services & composite PMI final (jun)
- US durable goods R final (may).
THURSDAY
- US ISM Services PMI: In June, the services gauge is expected to improve to 50.5 from 50.3. Services are more optimistic than manufacturing. S&P Global’s PMI report showed service sector enterprises growing well, adding to private sector growth. Foreign business remained strong although the services sector slowed from the previous month’s peak. “The question remains as to how resilient service sector growth can be in the face of the manufacturing decline and the lagged effect of prior rate hikes,” S&P Global said. “Any further rate hikes will of course have a further dampening effect on this sector which is especially susceptible to changes in borrowing costs.”
- NBP Announcement
- Australian Trade Balance
- EZ Retail Sales
- US ADP National Employment,
FRIDAY
- US Jobs Report : May JOLTS data and the weekly initial jobless claims series will impact labor market sentiment ahead of the BLS employment situation report. The JOLTS series, albeit old (we will get June’s NFP data, but the JOLTS data is for May), can still be relevant. Last month’s data for April showed an upside surprise, causing a hawkish market reaction. The initial jobless claims data receded in the latest week, but Moody’s estimates that the four-week average remains close to the break-even level (around 265k). Any sustained increase in claims would likely signal a deceleration in monthly job gains. The BLS employment situation report expects 200k payrolls (vs 339k previously) and a 3.7% unemployment rate. Average hourly earnings rose 0.3% M/M, matching May’s growth. The statistics may show continued labor market weakening, but Moody’s expects the FOMC to resume rate hikes in July. Fed Chair Powell has hinted at at least two more rate hikes, which the market expects in July.
- Canadian Jobs Report : The July BoC meeting will depend on next week’s jobs report, which is currently unanticipated. After holding rates since January, the BoC resumed raising in June because policy was not restrictive enough to balance supply and demand and return inflation to 2%. Since the June BoC meeting, the May Canadian jobs report missed estimates by 17k, led by a 33k full-time job decline. The average of the three BoC core measures dropped to 4.3% from 4.7%, but inflation was still above the BoC’s 2% target at 3.7%. After the lukewarm inflation reading, markets predict another 25bp move in July with a 60% chance. ING analysts forecast another BoC raise in July due to good growth, a tight labor market (to be confirmed by the next jobs data), and sticky inflation.
- German Industrial Output (May)
Global economic calendar for week ahead
MONDAY
U.S.A.
S&P Global Manufacturing PMI (Jun), Construction Spending (May), ISM Manufacturing New Order (Jun)
Euro Area
HCOB Manufacturing PMI (Jun)
Japan
Jibun Bank Manufacturing PMI (Jun)
China
Caixin Manufacturing PMI (JUN)
Tuesday
N/A
Wednesday
FOMC Minutes, Factory Order (May)
Euro Area
HCOB Services & Composite PMI (Jun), PPI (May), ECB Non-Monetary Policy Meeting
Japan
Jibun Bank Services & Composite PMI (Jun)
China
Caixin services & Composite PMI (PMI)
Thursday
USA
API & EIA Crude oil Stock Change, MBA Mortgage Applications (for week ended june 1);
JOLTs Job Openings & Quits, Balance of Trades (May); S&P Global Services & composite
PMI, Total Vehicle Sales (Jun)
Euro Area
HCOB Construction PMI (Jun), Retail Sales (May)
Friday
USA
Unemployment Rate, Non-Farm Payrolls (Jun)
Japan
Household Spending (May)