The key economic releases this week include industrial production on Monday, CPI on Tuesday, and housing starts on Wednesday. There are several scheduled speeches from Fed officials this week. The Beige Book for the November FOMC period will be released on Wednesday.
The distribution of guesses for tomorrow's "most important payrolls print ever" skews modestly to the upside after the biggest spike in ISM employment ever this week jarred some economists to the more optimistic side with Goldman Sachs expecting a Fed-inspiring drop in the unemployment rate, rise in average hourly earnings, and better than expected payrolls of 190k (172k exp).
Profits at roughly a quarter of Chinese companies in a Reuters analysis were too low in the first half of this year to cover their debt servicing obligations, as earnings tumble and as corporate debt soars to record highs.
Politics will continue to be in focus as US elections draw closer, with attention on post-debate polling numbers high. However, this week should see a pivot toward data with markets looking for evidence of the summer wobble in activity data reversing. In the US the main focus will be the NFP and ISM reports.
For the 21st month in a row, Dallas Fed's manufacturing outlook remains stuck in contraction (-3.7 vs -2.5 exp). This is the longest streak outside of recession in the survey's history as new orders cratered (one respondent noting "my order book is abysmal") and inventories tumbling (not good for GDP).
The week ahead is striking in the sheer number of central bank speakers, but with the Fed on hold until December and the BoJ’s new framework now revealed, focus turns squarely from central banks to US politics. The first US presidential debate at the start of the week will be a key focus.
While today's biggest event for both markets and politics will be tonight's highly anticipated first presidential debate between Trump and Hillary, markets are waking up to some early turmoil in both Asia and Europe, with declines in banks and energy producers dragging down stock-markets around the world, pushing investors to once again seek the safety of government bonds and the yen.
NY Attorney General Eric Schneiderman is probing why Exxon Mobil hasn’t written down the value of its assets, two years into a pronounced crash in oil prices. To be sure, it is most likely that Scheiderman is looking for another career-boosting witch hunt, which however is not to say that Exxon is blameless in this particular case.
August Non-farm Payrolls have been weaker than consensus expectations in each of the last 5 years and in 14 of the last 18 years of available data. However, with all eyes focused on how Janet will see it, Goldman notes that it is possible that Fed officials would look through moderate weakness given 1) the strength of the June/July payroll gain, 2) their sub-100k estimate of the “breakeven” payroll gain, and 3) the well-publicized tendency for weak first prints in August.
Having jumped miraculously from -18 to -1.3 in July, August's Dallas Fed plunged back to -6.2 - contracting for the 20th month in a row. The worse than expected headline data came despite a rise in new orders as the number of employees, average workweek, and capex all plunged into contraction. Hope also tumbled from 18.4 to 7.0 with inventories and new orders expected to slow.
After Friday's Jackson Hole repricing of Fed hike expectations, which made it clear that the fate of a September rate hike is now in the hands of the August payrolls number, the main risk event of the week is therefore this Friday's US NFPs for which consensus expects a reading of 180K, down from last month's 217K print. A number substantially above this will make a September hike virtually certain, and potentially risks roiling markets as good news will likely be bad news this time around.
The dollar index rose to a two-week high on Monday, while bond yields jumped to their highest since June and global stocks sold off after senior Federal Reserve officials indicated a U.S. interest rate increase was on the cards in the near term. The Fed effect - and the stronger dollar - reverberated through markets, pressuring stocks in Europe and emerging markets, pushing oil below $47 and the commodity complex lower.