Weekly Market Outlook (02-06 September)

Upcoming Events:

• Monday: US/Canada Holiday, China Caixin Manufacturing PMI, Swiss Manufacturing PMI.
• Tuesday: Swiss CPI, Swiss Q2 GDP, Canada Manufacturing PMI, US ISM Manufacturing PMI.
• Wednesday:Australian Q2 GDP, China Caixin Services PMI, Eurozone PPI, Bank of Canada Monetary Policy Decision, US Job Openings, Fed Beige Book.
• ThursdayAverage cash income in Japan, Unemployment rate in Switzerland, Retail sales in the Eurozone, US ADP, US unemployment claims, Canada services PMI, US ISM services PMI.
• Friday:Canada Labor Market Report, US Non-Farm Payrolls Report.

Tuesday

Swiss CPI is forecast at 1.2% y/y vs. 1.3% previously, while the monthly measure is forecast at 0.1% vs. -0.2% previously. The market expects the SNB to deliver 52bps of easing by the end of the year with a 67% chance of a 25bp cut at the September meeting (the remaining 33% for a 50bp cut).

Jordan from Swiss National Bank Last week was not a happy one with the strong appreciation of the Swiss Franc, so We could see either a 50bp cut in September or some central bank intervention to calm things down a bit..

The US ISM Manufacturing PMI is expected to come in at 47.8 vs. 46.8 previously. As a reminder, last month, the ISM released its Manufacturing PMI The catalyst that sparked a massive sell-off in risky assets was We also got “fear of growth”.

the The main reason may have been the sub-index of employment. The consumer price index fell to a four-year low ahead of the nonfarm payrolls report, which ultimately led to another wave of selling as it came in weaker than expected across the board.

Later, a lot of data showed in August that Weak data in July may have been negatively impacted by Hurricane Beryl.So this is something that the market will look at for confirmation.

But the S&P Global Manufacturing PMI released two weeks ago wasn’t quite as comforting. The index contracted for the second time in a row, and the commentary was very bleak..

“This soft landing scenario looks less convincing when we look beneath the surface of the headline numbers,” the agency said. Growth has become increasingly dependent on the services sector as manufacturing, which often drives the economic cycle, declines.“

The ratio of orders to inventory in the manufacturing sector has fallen to one of the lowest levels since the global financial crisis. Employment fell in August, marking its first decline in three months.“,

Wednesday

The Bank of Canada is expected to cut interest rates by 25 basis points to 4.25%. The latest CPI report showed further easing in core inflation measures and labour market data was somewhat weak.

Overall, it doesn’t look like the central bank is going to cut rates by 50 basis points, but it can’t be ruled out entirely. Including the September cut, the market is expecting a 75 basis point rate cut by the end of the year.

The number of job openings in the United States is expected to reach 8.100 million jobs, compared to 8.184 million jobs previously. The latest report showed a slight increase, but the strong downward trend that began in 2022 remains in place. Resignation, hiring, and layoff rates remain low as the labor market has begun to slow through a decline in hiring rather than an increase in layoffs.

Thursday

Japan’s average annual cash income is expected to come in at 3.1%, down from 4.5% previously. As a reminder, the economic indicators the Bank of Japan focuses on include: Wages, inflation, service prices and the GDP gap.

Moreover, Bank of Japan Governor Ueda left the door open to raising interest rates, saying that recent market moves will not change their stance if price expectations materialize. He added that short-term interest rates in Japan are still very low, so if the economy is doing well, the Bank of Japan will raise interest rates to levels that are considered neutral for the economy.

US unemployment claims remain one of the most important data to follow each week, as they are a more accurate indicator of the state of the labor market.

Initial claims remain within the 200K to 260K range that has been established since 2022, while continuing claims have been steadily rising. Indicating that layoffs are not accelerating and remain at low levels while hiring is more subdued..

Initial claims this week are expected to come in at 230,000 versus 231,000 previously, while continuing claims are expected to come in at 1,865,000 versus 1,868,000 previously.

The ISM US services PMI is expected to come in at 51.1 versus 51.4 previously. The survey has given no clear indication recently as it has been in a range since 2022 and has been highly unreliable. The market may only focus on the employment sub-index ahead of the US non-farm payrolls report. the next day.

The S&P Global Services Purchasing Managers’ Index showed another uptick in the services sector as third-quarter growth once again diverged between manufacturing and services.

Friday

The Canadian labor market report is expected to show 25.0K jobs added in August vs. -2.8K in July and the unemployment rate rose to 6.5% vs. 6.4% previously. The market is unlikely to pay much attention to this report since we will get the US nonfarm payrolls report at the same time.

The US nonfarm payrolls report is expected to show 165,000 jobs added in August versus 114,000 in July, and the unemployment rate is expected to fall to 4.2% versus 4.3% previously. Average hourly earnings are expected to come in at 3.7% year-over-year versus 3.6% previously, while average monthly earnings are expected to come in at 0.3% versus 0.2% previously.

Last month, the US labor market report came in weaker than expected across the board, sparking another wave of selling in risk assets that began with the ISM manufacturing PMI the day before.

There has been a lot of talk about what might be behind the weaker numbers and it appears that Hurricane Beryl has affected the data..

The Bureau of Labor Statistics said Hurricane Beryl, which hit Texas during the survey week for the July employment report, had “no discernible impact” on the data.

However, the household survey showed that 436,000 people reported being unable to go to work due to bad weather last month, Highest level recorded for JulyThere were 249,000 people on furlough last month.

In fact, the main reason for the rise in the unemployment rate was temporary layoffs. The market will want to know if the July data was negatively affected by temporary factors.

As a reminder, the Fed is very focused on the labor market right now, and this report will decide whether to cut interest rates by 25 basis points or 50 basis points at the next meeting.