Preview Of Key Events In The Coming Week

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.

Wall Street will look for another weak employment report in September with only 140K in job growth and potential upward revisions to August. The unemployment rate will likely remain unchanged at 4.9% and hourly earnings are expected to grow by a trendlike 0.2% m/m, bumping the year-over-year rate back up to 2.6%.

The balance of risks is asymmetrically skewed, with weaker data likely to have a more significant impact than upside surprises according to BofA. Factors limiting USD upside from better US data stem from the reluctance of the rates market to aggressively price in a higher probability of a Fed rate hike ahead of a close Presidential election.

In the Eurozone, retail sales, final PMIs and industrial production are due to be released. We also hear from a number of ECB speakers and get the accounts of the ECB meeting. In the UK, attention turns to PMIs, which should provide some clarity on economic momentum after July's despair and August's relief prints. We also get IP and trade balance data, and doubtless further commentary in the media on the form of Brexit.

Attention will also focus on Australia, where the new RBA Governor Lowe embarks on his 7-year term. Consensus expects no change to the cash rate for the whole rest of the year and does not expect a change to the broadly neutral tone of the statement. BofA expects another 25bp of easing next year, most likely in Q1, as persistent slack in the labor market keeps the lid on domestic cost pressures.

DB's Jim Reid provides a granular look at the daily events in the coming week:

This morning in Europe we’re kicking off with the manufacturing PMI’s where we’ll get the final revisions for the Euro area, Germany and France and a first look at the data for the UK and the periphery. Across the pond this afternoon the highlight is likely the ISM manufacturing print, while the final manufacturing PMI, construction spending for August and also September vehicles sales data will also be closely watched.

Tuesday morning starts with a couple of Central Bank meetings with the RBA and RBI decisions due (market expecting no change in policy at either). During the European session the sole release is Euro area PPI while there’s nothing of interest scheduled in the US.

Wednesday is another PMI day with services and composite prints due in Japan, Europe and the US in particular. We’ll also get Euro area retail sales for August along with important data in the US in the form of the September ADP print, August trade balance and September ISM non-manufacturing reading. August factory orders will also be released.

Moving to Thursday, Germany factory orders highlight a quiet morning session for data although we will get the latest ECB minutes. Over in the US initial jobless claims is the only data scheduled for release.

We’ve got a bumper end to the week on Friday. In Japan we’ll get labour cash earnings and the conference board’s leading index. During the European session we’ll get Germany industrial production as well as France and UK trade data and industrial production. Over in the US it’s all about the September employment report including the all important payrolls number. Wholesale inventories and trade sales along with consumer credit will also be released. China is also due to release its September foreign reserves reading at some stage on Friday.

Away from the data, the Fed’s Lacker (Tuesday and Wednesday), Evans (Wednesday), Kashkari (Wednesday), Fischer (Friday), Mester (Friday), George (Friday) and Brainard (Friday) are due to speak in a packed week of Fedspeak. The other potentially interesting event is the Vice-President nominees debate tomorrow between Pence and Kaine, before Clinton and Trump square off again next Sunday. UK PM Theresa May is also due to give a keynote speech on Wednesday at the Conservative Party conference

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Looking at just the US, here are the key events together with consensus estimates, courtesy of Goldman:

Monday, October 3

  • 09:45 AM Markit Flash US Manufacturing PMI, September final (consensus 51.4, last 51.4)
  • 10:00 AM Construction spending, August (GS +0.2%, consensus +0.3%, last flat): We expect construction spending to improve in August following a mixed July report in which construction spending was flat but June figures were revised up.
  • 10:00 AM ISM manufacturing, September (GS 51.0, consensus 50.2, last 49.4): All regional manufacturing surveys improved moderately in September, and we expect ISM manufacturing to climb up to 51.0. The Philadelphia Fed survey improved substantially (+10.8pt to 12.8) and the Empire state survey rose modestly (+2.2 to -2.0), but the components remained at levels indicating more weakness than what the headline figures suggested. While both the Richmond Fed (+3pt to -8) and Dallas Fed (+2.5 to -3.7) surveys increased, they still remain at contractionary levels. On net, our manufacturing survey tracker—which is scaled to the ISM Index—increased to 52.1.
  • 04:00 PM Total vehicle sales, September (GS 17.6mn, consensus 17.4mn, last 16.9mn): Domestic vehicle sales, September (GS 14.1mn, consensus 13.3mn, last 13.1mn)

Tuesday, October 4

  • 08:05 AM Richmond Fed President Lacker (FOMC non-voter) speaks: Federal Reserve Bank of Richmond President Jeffrey Lacker will give a speech on the economic outlook at the West Virginia Economic Outlook Conference in Charleston, West Virginia. Audience and media Q&A is expected.
  • 07:40 PM Chicago Fed President Evans (FOMC non-voter) speaks: Federal Reserve Bank of Chicago President Charles Evans will give a speech at a CFA Society luncheon in Auckland, New Zealand. Audience and media Q&A is expected. President Evans recently remarked that U.S. monetary policy appears to be less expansionary now, and the Fed could “normalize policy much faster than currently envisioned and still keep the pace gradual.”

Wednesday, October 5

  • 08:15 AM ADP employment report, September (GS +160k, consensus +163k, last +177k): We recently found that while the ADP employment report holds limited value for forecasting the BLS’s nonfarm payrolls report, large ADP payroll deviations from consensus forecasts are directionally correlated with NFP surprises. Based on our understanding of how ADP filters its own proprietary data with other publicly available information, we expect a 160k gain in ADP payroll employment in September.
  • 08:30 AM Trade balance, August (GS -$39.2bn, consensus -$39.2bn, last -$39.5bn): We expect the trade balance to remain roughly unchanged in August. The Census Bureau’s new Advance Economic Indicators report showed a solid increase in exports which outpaced an increase in imports. Overall, we expect the total trade deficit to be -$39.2bn.
  • 09:30 AM Minneapolis Fed President Kashkari (FOMC non-voter) speaks: Federal Reserve Bank of Minneapolis President Neel Kashkari will give opening remarks at the Early Childhood Development in Indian Country conference at the Minneapolis Fed. Q&A is not expected.
  • 09:45 AM Markit Flash US Services PMI, September final (consensus 52.0, last 51.9)
  • 10:00 AM ISM non-manufacturing, September (GS 53.5, consensus 53.0, last 51.4): Service sector surveys mostly improved in September, and we expect ISM non-manufacturing to increase to 53.5. The Richmond Fed (+13.0pt to +13) and the NSA measure for the New York Fed (+11.2pt to -8.67) both strengthened while the Philly Fed (-1.1pt to +23.7) softened a touch. The Markit Services PMI also rose in September. Last month, the ISM non-manufacturing index declined by 4.1pt to 51.4.
  • 10:00 AM Factory orders, August (GS flat, consensus -0.3%, last +1.9%):  Factory orders were likely flat in August, after a mixed durable goods report which showed new durable goods orders were flat last month.
  • 01:00 PM Richmond Fed President Lacker (FOMC non-voter) speaks: Federal Reserve Bank of Richmond President Jeffrey Lacker will speak to students at Marshall University.
  • 05:00 PM Richmond Fed President Lacker (FOMC non-voter) speaks: Federal Reserve Bank of Richmond President Jeffrey Lacker will give a prepared speech on the topic “Does Federal Reserve Governance Need Reform?”

Thursday, October 6

  • 08:30 AM Initial jobless claims, week ended September 24 (GS 255k, consensus 256k, last 254k); Continuing jobless claims, week ended September 17 (last 2,113k): We expect initial jobless claims to tick up to 255k, after claims edged up to 254k last week. The rise in claims primarily reflected an increase in California, partially reversing a sharp drop during the prior week.

Friday, October 7

  • 8:30 AM Nonfarm payroll employment, October (GS +175k, consensus +171k, last +151k); Private payroll employment, October (GS +180k, consensus +170k, last +126k); Average hourly earnings (mom), October (GS +0.3%, consensus +0.3%, last +0.1%); Average hourly earnings (yoy), October (GS +2.7%, consensus +2.6%, last +2.4%); Unemployment rate, October (GS 4.8%, consensus 4.9%, last 4.9 %): We expect a September nonfarm payrolls gain of 175k, after a 151k increase in August. Our forecast partly reflects a decline in initial claims and an improvement in the Conference Board’s labor market differential. However, there is also a tendency for first-print September payrolls to be weak on average. The unemployment rate is likely to edge down one-tenth to 4.8%. We expect average hourly earnings to increase 0.3% month over month and rise 2.7% year over year.
  • 10:00 AM Wholesale inventories, August final (consensus -0.1%, last -0.1%)
  • 10:00 AM Fed Vice Chair Fischer (FOMC voter) speaks: Federal Reserve Vice Chair Stanley Fischer will speak on the economy and federal regulation at the Institute of International Finance’s annual meeting.
  • 12:45 PM Cleveland Fed President Mester (FOMC voter) speaks: Federal Reserve Bank of Cleveland President Loretta Mester will give a speech before the Shadow Open Market Committee on “Fed Communications”. At the September FOMC meeting, President Mester was one of three dissenters who preferred to increase the federal funds rate target.
  • 03:00 PM Consumer credit, August (consensus $17.0bn, last $17.7bn)
  • 03:00 PM Kansas City Fed President George (FOMC voter) speaks: Federal Reserve Bank of Kansas City President Esther George will give a speech on the economic outlook at the Institute of International Finance’s annual meeting. At the September FOMC meeting, President George was another one of the three dissenters who preferred to raise the federal funds rate target.
  • 04:00 PM Fed Governor Brainard (FOMC voter) speaks: Federal Reserve Governor Lael Brainard will give a speech on “Blockchain Technology” at the Institute for International Finance’s annual meeting. Recently, Governor Brainard has been more vocal about her preference for keeping rates close to zero, noting that the “case to tighten policy pre-emptively is less compelling.”

Source: BofA, DB, GS