Key Events This Week: Everything All At Once

The next 5 days will be extremely busy: Trump in the UK, Xi in Russia, the US jobs report on Friday, the ECB on Thursday. Of course, with markets buffeted by renewed fears over a global trade war and growing fears of a recession, it's hard to see that as being anything but front and center this week according to DB's Craig Nicol.

Meanwhile, President Trump travels to Europe while a potential speech by Vice-President Pence is also likely to be closely watched. In addition to that, we have an ECB meeting and Fed research event to look forward to, while data releases include the global PMIs and US employment report. UK politics should also be a factor as the Conservative Party leadership contest gathers steam.

Given developments this morning in addition to the US-China tariffs that go into effect tomorrow, it's hard to look past trade headlines as being the main driver in markets once again. President Trump is due to travel to Europe starting with the UK on Monday where a meeting with PM May at some point is expected. Beyond that, Trump is scheduled to meet Irish PM Varadkar on Wednesday and French President Macron on Thursday. Another event to watch is US Vice-President Pence making a (according to CNBC 'hawkish') potential speech on US-China relations on Tuesday, which is the  30th anniversary of the Tiananmen Square incident.

Not to be outdone, UK politics should also get a turn in the spotlight with UK PM May due to step down as the Conservative Party leader on Friday. The deadline for nominations is the week after, however, expect newsflow to ramp up meaningfully as contenders step forward. See our UK economists latest views here. There's also the prospect of an ECB meeting on Thursday to look forward to. The ECB is expected to focus on preserving the easy policy stance by ensuring the market believes it has credible options to ease the stance further if necessary and protecting the transmission mechanism from impairment. However, the meeting is more likely to be about signals than actions. Deutsche Bank believes that beyond a c.20bp discount of TLTRO3, the focus will be on forward guidance, not tiering.

As for data, the final May PMI revisions and then the May employment report in the US are the big highlights. We'll get the manufacturing PMIs around the globe on Monday with the Caixin PMI for China the early test (it beat expectations of a drop to 50.0, staying unchanged at 50.2) before the ISM manufacturing reading is due in the US. The consensus expects a 0.2pt increase to 53.0; however, our US economists have highlighted that in the current business cycle, the new exports orders components has led the  headline by 5 months, and that the recent sharp downtrend in new export orders does not bode well for the headline manufacturing ISM, which is arguably the most market-moving sentiment survey. Following that, the services and  composite PMIs will be due on Wednesday along with the ISM non-manufacturing in the US.

As for payrolls on Friday, the consensus is for a 190k reading for May which follows a 263k reading in April. The unemployment rate is expected to hold at 3.6%, while earnings are expected to rise +0.3% mom, keeping the annual rate at +3.2% yoy. Other data worth flagging the week includes final April durable and capital goods orders in the US on Tuesday, May ADP in the US on Wednesday, final Q1 GDP revisions for the Euro Area on Thursday, and April industrial production reports for Germany and France on Friday.

In terms of Fedspeak, the big event is the Fed research conference on "Monetary Policy Strategy, Tools, and Communications Practices" on Tuesday and Wednesday. Chair Powell is due to make opening remarks, with Kaplan, Clarida, Rosengren, Brainard and Evans all due to participate. Our US economists note that this review is wide ranging, touching on topics such as the concept of maximum employment, tools for providing stimulus if the fed funds rate falls back to zero, and what changes, if any, they should make to their current 2% inflation targeting framework. As such, it has the potential to re-orient elements of how the Fed conducts monetary policy with knock-on effects to markets and the real economy. However, as Chair Powell and his colleagues have cautioned, the result of this review is more likely to produce “evolution rather than revolution”.

Other Fed speakers next week include Daly, Quarles, Barkin and Bullard on Monday, Williams on Tuesday, Bowman and Bostic on Wednesday, Kaplan and Williams on Thursday and Daly on Friday. Over at the BoE we're due to hear from Ramsden on Wednesday and Carney on Thursday while the BoJ's Kuroda is due to speak on Thursday.

Finally, other potentially important things to watch next week include the RBA policy decision on Tuesday and China's Xi Jinping making a two-day state visit to Russia from Wednesday.

Key events by day, courtesy of Deutsche Bank:

  • Monday: The data highlight will likely be the final May manufacturing PMIs due in Japan, China, Europe and the US. We'll also get the May ISM manufacturing in the US along with April construction spending and May vehicles sales data. Away from that the Fed's Daly, Barkin and Bullard are due to speak, while President Trump travels to the UK where he is expected to meet with UK PM May (continuing through to Wednesday).
  • Tuesday: In terms of data, in Europe the May CPI report for the Euro Area is due along with the April unemployment rate, while in the US we'll get final April durable goods, capital goods and factory orders data. Meanwhile the Fed's Powell, Williams and Brainard are due to speak, the former making opening remarks at a Fed research conference.
  • Wednesday: The remaining final May PMIs will be due in Japan, China, Europe and the US along with April PPI and retail sales for the Euro Area, and the May ISM nonmanufacturing and ADP employment print in the US. Away from that the BoE's Ramsden is due to speak in the morning, followed by the Fed's Clarida, Bowman and Bostic. The Fed's Beige Book is also due to be released. Elsewhere, China's Xi Jinping makes a two-day state visit to Russia while President Trump meets Ireland PM Varadkar.
  • Thursday: The ECB policy meeting will likely be the main focus of the day, while data releases in Europe include April factory orders in Germany and final Q1 GDP revisions for the Euro Area. In the US we're due to get final Q1 readings for nonfarm productivity and unit labour costs, jobless claims and the April trade balance. The Fed's Kaplan and Williams are also due to speak, while the BoJ's Kuroda and BoE's Carney are also scheduled to make comments. President Trump is expected to meet France President Macron.
  • Friday: The May employment report in the US will be the main data focus. Also due are April industrial production prints in Germany and France, April trade balance in Germany and April wholesale inventories and consumer credit in the US. The May foreign reserves reading for China is also expected at some stage. Meanwhile, UK PM May is due to step down as leader of the Conservative Party.

Finally, in Goldman's preview of key US events, the bank notes that the key economic data releases this week are ISM manufacturing on Monday, ISM non-manufacturing on Wednesday, and the employment report on Friday. The Chicago Fed will host a conference on the Fed’s framework review on Tuesday and Wednesday. Chair Powell will speak on Tuesday, and Vice Chair Clarida will give remarks on Wednesday.

Monday, June 3

  • 09:10 AM Fed Vice Chair for Supervision Quarles (FOMC voter) speaks: Fed Vice Chair for Supervision Randal Quarles will talk about the Libor transition at an Alternative Reference Rates Committee (AACC) Roundtable. Prepared text is expected.
  • 09:45 AM Markit Flash US manufacturing PMI, May final (consensus 50.6, last 50.6)
  • 10:00 AM ISM manufacturing index, May (GS 51.8, consensus 53.0, last 52.8): Our manufacturing survey tracker — which is scaled to the ISM index — edged up by 0.3pt to 53.7, reflecting mixed manufacturing surveys in May. Generally speaking, the early-month manufacturing surveys outperformed (particularly Empire and Philly) and may not have fully reflected the impact of the trade war escalation. That adds downside risk to our ISM forecast relative to our survey tracker, and we thus expect the ISM manufacturing index to decline by 1.0pt to 51.8 in May.
  • 10:00 AM Construction spending, April (GS +0.3%, consensus +0.4%, last -0.9%): We estimate construction spending rebounded to +0.3% in April following the previous month’s decline, with scope for a decline in private residential construction but gains in public and private nonresidential construction.
  • 12:40 PM Richmond Fed President Barkin (FOMC non-voter) speaks: Richmond Fed President Thomas Barkin will speak on “Challenges to Women’s Labor Force Participation” to the Charlotte Economics Club.
  • 1:25 PM St. Louis Fed President Bullard (FOMC voter) speaks: St. Louis Fed President James Bullard will speak to the Union League Club of Chicago. Prepared text and Q&A are expected.
  • 5:00 PM Lightweight Motor Vehicle Sales (GS 16.9m, consensus 16.9m, last 16.4m)

Tuesday, June 4

  • 08:30 AM New York Fed President Williams (FOMC voter) speaks: New York Fed President John Williams will deliver opening remarks at an annual conference on governance and culture reform in the financial services industry hosted at the New York Fed. Prepared text is expected.
  • 09:55 AM Fed Chair Powell (FOMC voter) speaks: Fed Chair Jerome Powell will discuss monetary policy strategy, tools, and communication practices at the Fed’s framework review conference in Chicago. Prepared text is expected.
  • 10:00 AM Factory Orders, April (GS -0.7%, consensus -1.0%, last +1.9%): Durable goods orders, April final (last -2.1%); Durable goods orders ex-transportation, April final (last flat); Core capital goods orders, April final (last -0.9%); Core capital goods shipments, April final (last flat): We estimate factory orders decreased by 0.7% in April following a 1.9% increase in March. Durable goods orders decreased in the April advance report, driven primarily by a drop in aircraft orders.
  • 03:45 PM Fed Governor Brainard (FOMC voter) speaks: Fed Governor Lael Brainard will moderate a panel at the Chicago Fed conference titled “What Does Full Employment Look Like for Your Community or Constituency?”

Wednesday, June 5

  • 08:15 AM ADP employment report, May (GS +170k, consensus +188k, last +275k): We expect a 170k gain in ADP payroll employment, reflecting an increase in jobless claims and lower oil prices which may weigh on the ADP measure. While we believe the ADP employment report holds limited value for forecasting the BLS nonfarm payrolls report, we find that large ADP surprises vs. consensus forecasts are directionally correlated with nonfarm payroll surprises.
  • 09:45 AM Fed Vice Chair Clarida (FOMC voter) speaks: Fed Vice Chair Richard Clarida will give welcoming remarks on the second day of the Fed’s framework review conference in Chicago.
  • 09:45 AM Markit Flash US services PMI, May final (consensus 50.9, last 50.9)
  • 10:00 AM ISM non-manufacturing index, May (GS 55.0, consensus 55.5, last 55.5): Our non-manufacturing survey tracker declined by 2.1pt to 54.7 in May, following weaker regional service sector surveys. We expect the ISM non-manufacturing index to decline by 0.5pt to 55.0 in the May report.
  • 10:00 AM Fed Governor Bowman (FOMC voter) speaks: Fed Governor Michelle Bowman will testify at a nomination hearing before the Senate Banking Committee. Bowman has been renominated to serve a full 14-year term. Prepared text is expected.
  • 11:50 AM Atlanta Fed President Bostic (FOMC non-voter) speaks: Atlanta Fed President Raphael Bostic will speak on a panel hosted by the Atlanta Regional Housing Forum in Atlanta.
  • 02:00 PM Beige Book, June FOMC meeting period: The Fed’s Beige Book is a summary of regional economic anecdotes from the 12 Federal Reserve districts. The April/May Beige Book reported growth at an overall slight-to-moderate pace across all Districts. Contacts reported a slightly positive outlook, but trade tensions continued to weigh on the manufacturing outlook, even before the recent escalation in trade tensions with China and Mexico. In the June Beige Book, we look for additional anecdotes related to trade, as well as anecdotes on growth, labor markets, price inflation, and the recent tightening in financial conditions.

Thursday, June 6

  • 08:30 AM Nonfarm productivity, Q4 final (GS +3.4%, consensus +3.5%, last +3.6%): Unit labor costs, Q4 final (GS -1.0%, consensus -0.9%, last -0.9%): We estimate nonfarm productivity increased by 3.4% (qoq ar) in Q1, and we estimate growth in Q1 unit labor costs – compensation per hour divided by output per hour – decreased by 1.0% (qoq ar).
  • 08:30 AM Initial jobless claims, week ended June 1 (GS 220k, consensus 215k, last 215k); Continuing jobless claims, week ended May 25 (consensus 1,660, last 1,657k): We estimate jobless claims increased by 5k to 220k in the week ended June 1, after increasing by 3k in the prior week. There is a scheduled auto plant shutdown.
  • 08:30AM Trade balance, April (GS -$50.3bn, consensus -$50.6bn, last -$50.0bn): We estimate the trade deficit edged up to $50.3bn in April, reflecting a slightly larger trade in goods deficit.
  • 08:40 AM Dallas Fed President Kaplan (FOMC non-voter) speaks: Dallas Fed President Robert Kaplan will speak at Boston College. Prepared text and audience and media Q&A are expected.
  • 1:00 PM New York Fed President Williams (FOMC voter) speaks: New York Fed President John Williams will discuss international economics at the Council on Foreign Relations in New York. Prepared text and audience Q&A are expected.

Friday, June 7

  • 12:00 AM San Francisco Fed President Daly (FOMC non-voter) speaks; San Francisco Fed President Mary Daly will speak at the Singapore Management University. Audience Q&A is expected.
  • 08:30 AM Nonfarm payroll employment, May (GS +195k, consensus +185k, last +263k); Private payroll employment, May (GS +185k, consensus +174k, last 236k); Average hourly earnings (mom), May (GS +0.2%, consensus +0.3%, last +0.2%); Average hourly earnings (yoy), May (GS +3.1%, consensus +3.2%, last +3.2%); Unemployment rate, May (GS 3.6%, consensus 3.6%, last 3.6%): We estimate nonfarm payrolls increased 195k in May. Our forecast reflects low overall jobless claims and a possible boost from Census hiring, and we note that the payroll month largely preceded the trade war escalation and stock market sell-off. We expect the unemployment rate to remain at 3.6%. Finally, we estimate average hourly earnings increased 0.2% month-over-month and 3.1% year-over-year, reflecting neutral calendar effects but some scope for a rebound in the supervisory category.

Source: BofA, DB, Goldman