It's a busy week with everything from politics (what's next for Italy), central banks (the ECB and BOJ), China's NPC, and US payrolls, where all eyes will be on the average hourly wages print, the catalyst that started the latest period of market volatility one month ago.
A key event will be the ECB meeting on Thursday, where most economists believe policy will remain unchanged, but expect the ECB will begin to gradually change their language by dropping the easing bias to QE, especially since any especially adverse developments from the Italian elections or German SPD vote this weekend were avoided. Given this base case, BofA's rates strategists anticipate a selloff in Bunds and tightening of swap spreads.
Friday's BoJ meeting should be a less exciting affair with the status quo maintained. Perhaps of most interest will be whether or not policy board member Goushi Kataoka officially puts forward his proposal for another easing.
Also look out for rates meetings in Japan, Canada and Australia, where central banks are expected to remain on hold. There are also monetary policy meetings in Turkey, Poland, Malaysia, Peru and Kazakhstan. Sovereign rating review in Kazakhstan. Real GDP release in South Africa. CPI inflation data in China, Brazil, Mexico and Turkey.
China's National People's Congress starts on Monday and continues through to March There are ten issues for investors to watch, summarized last night, including an amendment of the constitution, growth target, fiscal and monetary policy, property market regulation, financial regulation, personnel and institutional arrangement, industrial policies, further loosening in the birth policy, trade and opening up the service sector and finally environmental protection.
The main event, however, will be the US nonfarm payrolls print where consensus expects an unchanged 200k payrolls print in February, although BofA expects a slowdown from 200K to 160K due to sectors such as trade, transportation and warehousing, and retail trade experiencing negative payback after a strong January. They also believe the unemployment rate will remain unchanged at 4.1% for the fifth month in a row. Remember though
that it was the bumper average hourly earnings print last time out (+0.3% mom) which dominated headlines. The consensus is for another +0.3% mom in February however base effects mean that the YoY rate would hold at +2.9% if that is the case.
A visual recap of the week's main events from BofA:
A detailed breakdown of daily events from Deutsche Bank:
- Monday: Politics should dominate the start to the week for markets. In China the National People’s Congress is due to begin in Beijing, with Premier Li due to present a draft of his work plan for 2018 (continues to March 20th). Away from politics, the main data releases on Monday will be the final February services and composite PMIs around the globe, along with Euro area retail sales for January, the Sentix investor confidence reading for March and the February ISM non-manufacturing in the US. Elsewhere BOJ Deputy Governor nominee's confirmation hearing will begin, while the Fed's Quarles is also due to speak. It's worth also highlighting that EU Council President Donald Tusk may circulate draft negotiating guidelines about the future relationship between the EU and UK on Monday.
- Tuesday: Tuesday’s diary is a bit quieter by comparison. With nothing of note in Europe, the main focus should be on the US where we are due to receive January factory orders data along with final revisions to durable and capital goods orders. Over at the Fed, Dudley is due to speak at 12.30pm GMT.
- Wednesday: A relatively busy day for data releases with the highlight in the European session being the final revisions to Q4 GDP for the Euro area. UK house price data for February and France trade data will also be released. In the US the main focus should be on the February ADP employment change reading, while final Q4 revisions for nonfarm productivity and unit labour costs are due, as well as the January trade balance reading and consumer credit print. Away from the data, the Fed’s Brainard (12am GMT), Kaplan (1.30am GMT), Dudley (1pm GMT) and Bostic (1pm GMT) are all due to speak, while the Fed will also release the Beige Book. It’s worth noting that late in the evening Japan will release final revisions to Q4 GDP. Brexit will again be a focus with ambassadors from all EU countries excluding the UK due to meet to hold their first discussion on draft guidelines about the future relationship between the UK and EU.
- Thursday: The big highlight on Thursday will be the ECB meeting at 12.45pm GMT, followed by President Draghi’s press conference. In terms of data, China’s trade stats for February will most likely warrant the closest attention, while January factory orders in Germany and the latest weekly initial jobless claims reading in the US are also due.
- Friday: It should be an interesting end to the week on Friday. Overnight the main focus will be on the BoJ meeting outcome, however China’s CPI and PPI reports for February will also be closely watched. In Europe January trade data in Germany will be due along with January industrial production reports for Germany, France and the UK. Finally the week ends in the US with the February employment report including the ever important nonfarm payrolls print. Average hourly earnings data will be just as closely watched however. Following that report, the Fed’s Rosengren and Evans will speak at 5.00pm GMT and 5.45pm GMT on monetary policy.
Finally, looking at just the US...
... the key economic releases next week are the ISM nonmanufacturing index on Monday and the employment report on Friday. There are several speaking engagements from Fed officials this week. A full breakdown from Goldman Sachs:
Monday, March 5
- 09:45 AM Markit US Services PMI, February (last 55.9): Markit US Composite PMI, February (last 55.9)
- 10:00 AM ISM non-manufacturing index, February (GS 58.9, consensus 58.8, last 59.9): We estimate the ISM non-manufacturing index edged 1.0pt lower to 58.9 in February after the index rose to a new cycle high in the prior month. Regional surveys were mixed, as the Philly Fed and Richmond Fed service sector surveys strengthened while the New York Fed and Dallas Fed surveys pulled back. On net, our non-manufacturing survey tracker moved up 0.3pt to 58.0. Overall, the report is likely to continue to point toward a solid pace of growth in the service sector.
- 01:15 PM Vice Chairman for Supervision Quarles (FOMC voter) speaks: Federal Reserve Vice Chairman for Supervision Randal Quarles will give a speech on foreign bank regulation at the Institute of International Bankers annual conference in Washington. Audience Q&A is expected.
Tuesday, March 6
- 07:30 AM New York Fed President Dudley (FOMC voter) speaks: New York Federal Reserve President Dudley will participate in a discussion on last year’s hurricanes’ impact on the local economy in St. Thomas, US Virgin Islands. Audience Q&A is expected.
- 10:00 AM Factory orders, January (GS -0.9%, consensus -1.2%, last +1.7%); Durable goods orders, January final (last -3.70%); Durable goods orders ex-transportation, January final (last -0.3%); Core capital goods orders, January final (last -0.2%); Core capital goods shipments, January final (last +0.1%): We estimate factory orders fell 0.9% in January following 1.7% increases in November and December. Core measures for durable goods were fairly weak in January, with a small pullback in core capital goods orders and a 0.1% increase in core capital goods shipments.
- 07:00 PM Federal Reserve Governor Brainard (FOMC voter) speaks: Federal Reserve Board Governor Lael Brainard will give a speech on the outlook for monetary policy and the economy at the Money Marketeers forum in New York. Audience Q&A is expected.
- 08:30 PM Dallas Fed President Kaplan (FOMC non-voter) speaks: Dallas Federal Reserve President Robert Kaplan will participate in a moderated Q&A at the CERAWeek event in Houston. Audience Q&A is expected.
Wednesday, March 7
- 08:00 AM Atlanta Fed President Bostic (FOMC voter) speaks: Atlanta Federal Reserve President Raphael Bostic will give a speech in Fort Lauderdale, FL. Audience Q&A is expected.
- 08:15 AM ADP employment report, February (GS +220k, consensus +195k, last +234k): We expect a 220k increase in ADP payroll employment in February. While we believe the ADP employment report holds limited value for forecasting the BLS's nonfarm payrolls report, we find that large ADP surprises vs. consensus forecasts are directionally correlated with nonfarm payroll surprises.
- 08:20 AM New York Fed President Dudley (FOMC voter) speaks: New York Federal Reserve President William Dudley will give a presentation on the economic situation in Puerto Rico at an event in San Juan. Audience Q&A is expected.
- 08:30 AM Nonfarm productivity (qoq saar), Q4 final (GS -0.1%, consensus -0.1%, last -0.1%): Unit labor costs, Q4 final (GS +2.0%, consensus +2.0%, last +2.0%): We estimate non-farm productivity will remain at -0.1% in the second vintage, below the +0.75% trend achieved on average during this expansion. Similarly, we expect Q4 unit labor costs – compensation per hour divided by output per hour – to remain at +2.0% (qoq saar).
- 08:30 AM Trade balance, January (GS -$55.1bn, consensus -$55.0bn, last -$53.1bn): We expect the trade balance to widen by $2.0bn to -$55.1bn in January. The Advance Economic Indicators report last week showed the trade deficit in goods increased to its widest level since 2008.
- 02:00 PM Beige Book, March FOMC meeting period: The Fed’s Beige Book is a summary of regional anecdotes from the 12 Federal Reserve districts. The January Beige Book noted that economic activity continued to expand across all districts. Labor market conditions were widely characterized as “tight” in most districts, an apparent downgrade from the widespread labor market tightness reported in the previous three Beige Books. In the March Beige Book, we look for additional anecdotes about the state of consumption, price inflation, and wage growth.
- 03:00 PM Consumer credit, January (consensus +$19.0bn, last +$18.4bn)
Thursday, March 8
- 08:30 AM Initial jobless claims, week ended March 3 (GS 225k, consensus 220k, last 210k); Continuing jobless claims, week ended February 24 (consensus 1,919k, last 1,931k): We estimate initial jobless claims moved back up 15k to 225k in the week ended March 3, after a sizeable decline in the prior week. The trend in initial claims appears to be falling, and we look for another low reading. Continuing claims—the number of persons receiving benefits through standard programs—rebounded by 57k in the prior week.
- Friday, March 9
- 08:30 AM Nonfarm payroll employment, February (GS +210k, consensus +205k, last +200k); Private payroll employment, February (GS +200k, consensus +195k, last +196k); Average hourly earnings (mom), February (GS +0.3%, consensus +0.3%, last +0.3%); Average hourly earnings (yoy), February (GS +2.8%, consensus +2.8%, last +2.9%); Unemployment rate, February (GS 4.0%, consensus 4.0%, last 4.1%): We estimate nonfarm payrolls rose 210k in February, compared to a consensus forecast of +205k. Our forecast reflects warmer weather and unseasonably light snow in the month of February. Following a fourth 4.1% reading in a row, we estimate the unemployment rate edged lower to 4.0% in February as the underlying job growth trend likely remained strong; labor market perceptions improved, and initial claims continued to decline. For average hourly earnings, we estimate a +0.3% month-over-month gain (with risks tilted to the downside) and +2.8% from a year ago, reflecting favorable calendar effects.
- 10:00 AM Wholesale inventories, January final (consensus +0.7%, last +0.7%)
- 12:45 PM Chicago Fed President Evans (FOMC non-voter) speaks: Chicago Federal Reserve President Evans will give a speech on economic conditions and monetary policy at an event titled “The Fed’s Return to Normalcy” at the Manhattan Institute in New York.
Source: BofA, DB, Goldman