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Key Events This Week: All Eyes On Friday

Courtesy of ZeroHedge. View original post here.

It may be a holiday-shortened week in the US, but there is still a lot of market-moving data over the next 5 days with payrolls report and FOMC minutes to look forward as well as a number of manufacturing sector reports around the world.  Politics shouldn’t be too far from the spotlight either with Germany’s domestic political situation over the weekend in focus, while tariff deadlines between the US and China/ROW also come to the fore.

All traders will be on deck for Friday, July 6th when not only get June payrolls, but growing trade wars culminate as the US is set to launch 25% tariffs on $34 billion of Chinese imports, provoking instant retaliation.

According to DB’s Craig Nicol, politics could be the biggest test for markets next week starting with Germany this weekend. News of the migration deal at the EU summit last week has been welcomed in early comments from CSU leaders however the collapse of weekend talks and Seehofer’s resignation offer, which then morphed into yet another ultimatum, has left Merkel’s fate hanging on an announcement potentially any second.

Meanwhile there are several critical trade-related dates next week. Sunday marked the deadline for the US Treasury Department to release its report outlining investment restrictions on Chinese investments in certain US industries. Sunday was also the day that Canada’s retaliatory tariffs on US steel and aluminium kicked in. But it is Friday that all eyes will be on when the US is scheduled to impose tariffs on $34bn of Chinese goods. So expect trade-related headlines to continue.

On the data front, we’ll have to wait until Friday for the most significant release of the week with the June employment report due out in the US. At the time of writing, the consensus is for a 198k nonfarm payrolls reading. As a reminder May printed at a stronger than expected 223k. Average hourly earnings is expected to come in at a solid +0.3% mom which, if true, would push the annual rate up one-tenth to +2.8% yoy and back to the January highs. The unemployment rate is expected to hold at 3.8% and average weekly hours also stay unchanged at 34.5hrs.

In terms of other US data next week, we’ll get confirmation of the final June PMIs (manufacturing on Monday and services/composite on Thursday) as well as the ISM manufacturing reading for June on Monday (small decline to 58.0 expected).

As a reminder, US markets will close early on Tuesday and then all day on Wednesday for Independence Day.

* * *

Away from the data the FOMC meeting minutes on Thursday evening should be one to watch with the market likely looking for confirmation of the more hawkish tilt that we got from the meeting statement, dot plots and Fed Chair Powell’s press conference. Recent Fedspeak has been focused on trade war developments so it’ll perhaps be interesting to see how much acknowledgment this gets, if any. In Europe the main highlight will likely be the final June PMI revisions on Monday (manufacturing) and Wednesday (services and composite). This will include a first look at the data for the periphery and UK. The 55.0 flash manufacturing and services prints are both expected to hold for the Eurozone.  Other potentially market sensitive data in Europe next week includes Germany’s industrial production report for May on Friday (+0.2% mom expected).

In Asia the main focus will likely be tomorrow’s official PMIs in China as well as the Caixin releases on Monday and Wednesday.

Finally, other things worth watching include European Council President Donald Tusk and European Commission President Jean-Claude Juncker addressing the European Parliament on Tuesday, BoJ policy board member Harada speaking on Wednesday along with the BoE’s Woods and Saporta, and finally BoE Governor Carney speaking on Thursday along with Bundesbank President Weidmann.

A full breakdown of the week’s events on a day by day basis from DB:

  • Monday: Its a busy start to the week on Monday with a first look at June manufacturing PMIs for China (overnight), Spain, Italy and the UK along with final June manufacturing PMI reads for Japan, France, Germany, the Eurozone and the  US. The Q2 Tankan Survey is also out in Japan while in the US the June ISM manufacturing will also be closely watched in the afternoon. Other data due out includes May PPI and the unemployment rate reading for the Euro area.
  • Tuesday: Tuesday is a fairly light day for data with the only the May YTD budget balance in France, June construction PMI in the UK and May retail sales data for the Eurozone due in the morning. In the US we will get May factory orders and also final reads for May durable goods and consumer goods orders. Later in the evening June vehicle sales data will be released. Aside from the data, the ECB’s Peter Praet will speak at a Romanian Central Bank conference in Bucharest while the European Council President Donald Tusk and European Commission President Jean-Claude Juncker will address the European Parliament.
  • Wednesday: On Wednesday we will get a first look at June services and composite PMIs for Japan and China (overnight), Spain, Italy and the UK along with final June services and composite PMI reads due for France, Germany and the Eurozone. There is nothing of note in the US with markets closed for Independence Day. Away from the data the BoE’s Sam Woods and Vicky Saporta will be speaking at different times at a seminar in London on building a resilient U.K. financial sector. The BoJ’s Harada will be also speaking at an event in the early morning.
  • Thursday: The main focus on Thursday will likely be the release of the FOMC meeting minutes for the June 13th policy meeting. In terms of data, the only release of note in Europe is May factory orders data in Germany. In the US it’s a little busier with final June services and composite PMIs due along with the June ISM non-manufacturing, and June ADP employment change reading. The latest weekly initial jobless claims data will also be due. Away from that, BoE Governor Mark Carney is due to speak at an event in Newcastle while the ECB’s Mersch and Nowotny along with Bundesbank President Jens Weidmann will also be speaking at different times at the Central Bank of Austria’s annual conference. The  BoJ’s Masai will also speak at an event.
  • Friday: The big highlight of the week comes on Friday in the form of the June employment report in the US, including of course the latest payrolls and average hourly earnings data. Away from that, overnight May household spending, labor cash earnings and real cash earnings data will be released in Japan. Post that we will get May industrial production in Germany along with the May trade balance and current account balance in France and Q1 unit labor costs in the UK. Aside from the data, the ECB’s Nouy and the EU’s Dombrovskis will be speaking at Central Bank of Austria’s annual conference. Friday also marks the day that the US is scheduled to impose tariffs on $34bn of Chinese goods.

Finally, looking at just the US, here is BofA with a visual summary of what to expect:

And here is Goldman with a detailed breakdown together with consensus expectations:

The key economic releases this week are the ISM manufacturing survey on Monday and the employment report on Friday. We expect nonfarm payrolls to rise by 200k and the unemployment rate to edge down to 3.7%. Minutes from the June FOMC meeting will be released on Thursday.

Monday, July 2

  • 09:45 AM Markit Flash US Manufacturing PMI, June final (consensus 54.7, last 54.6)
  • 10:00 AM Construction spending, May (GS +0.7%, consensus +0.5%, last +1.8%): We estimate construction spending increased 0.7% in May, following a fairly large increase in April driven in large part by private multifamily construction. Levels were revised up for March and April, suggesting somewhat firmer momentum going into the second quarter.
  • 10:00 AM ISM manufacturing, June (GS 58.8, consensus 58.5, last 58.7): Manufacturing surveys improved slightly on net in June. Our manufacturing survey tracker—which is scaled to the ISM index — rose by 0.1pt to 60.5, overcoming early month manufacturing survey weakness. Though the NACM index fell slightly, the sales component remains strong, and the Richmond Fed, Empire State, and Dallas Fed surveys improved.

Tuesday, July 3

  • 10:00 AM Factory orders, May (GS -0.2%, consensus flat, last -0.8%): We estimate factory orders declined 0.2% in May following a 0.8% decrease in April. Headline durable goods orders were soft in the May advance report, reflecting broad-based weakness in nondefense goods but a large increase in defense goods orders.
  • 4:00 PM Total vehicle sales, June (GS 17.0mn, consensus 17.0mn, last 16.8mn)

Wednesday, July 4

  • US Independence Day holiday observed. US equity and bond markets are closed.

Thursday, July 5

  • 08:15 AM ADP employment report, June (GS +185k, consensus +190k, last +178k): We estimate a 185k increase in ADP payroll employment in June, reflecting inputs utilized in the ADP model. 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.
  • 08:30 AM Initial jobless claims, week ended June 30 (GS 225k, consensus 225k, last 227k): Continuing jobless claims, week ended June 23 (consensus 1,718k, last 1,705k): We estimate initial jobless claims declined by 2k to 225k in the week ending June 30 following a 9k increase in the prior week. We expect the temporary boost from auto plant shutdowns to continue this week, but the underlying trend level of claims is likely to continue moving down. Consensus expects continuing claims—the number of persons receiving benefits through standard programs—to increase by 13k to 1,718k.
  • 09:45 AM Markit Flash US services PMI, June Final (consensus 56.5, last 56.5)
  • 10:00 AM ISM non-manufacturing, June (GS 58.3, consensus 58.2, last 58.6): We expect the ISM non-manufacturing index to move down 0.3pt to 58.3 in June. On net, our nonmanufacturing survey tracker moved up 1.1pt higher to 58.6, reflecting a general improvement in service-sector surveys, but we expect stock market weakness to weigh on ISM responses.
  • 02:00 PM Minutes from the June 12-13 FOMC meeting: At its June meeting, the FOMC raised the target range for the policy rate by 25bp to 1.75-2%, as widely expected, but the statement and projections were hawkish relative to market expectations. In the post-meeting press conference, Chairman Powell noted the intention to continue raising the federal funds rate and downplayed several dovish arguments as well as trade tensions. The policy implementation changed with the decision to keep the IOER 5bp below the upper bound of the target rate. In the minutes, we will look for further discussion of trade policy and possible future realignments of IOER.

Friday, July 6

  • 8:30 AM Nonfarm payroll employment, June (GS +200k, consensus +195k, last +223k); Private payroll employment, June (GS +195k, consensus +190k, last +218k); Average hourly earnings (mom), June (GS +0.3%, consensus +0.3%, last +0.3%); Average hourly earnings (yoy), June (GS +2.8%, consensus +2.8%, last +2.7%); Unemployment rate, June (GS 3.7%, consensus 3.8%, last 3.8%): We estimate nonfarm payrolls increased 200k in June. Our forecast reflects the continued strength of jobless claims and our services employment tracker reapproaching its cycle high. After a one tenth decline in May, we expect the unemployment rate to fall another tenth to 3.7%, reflecting the further decline in continuing claims over the payroll month. Finally, we expect average hourly earnings to increase 0.3% month over month and 2.8% year over year, reflecting favorable calendar effects.
  • 08:30 AM: Trade balance, May (GS -$43.9bn, consensus -$43.6bn, last -$46.2bn): We estimate the trade deficit decreased by $2.3bn in May to $43.9bn, after falling by more than $18bn over the last two months.

Source: DB, BofA, GS

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