UPCOMING EVENTS:
- Tuesday: China Caixin Manufacturing PMI, Canada Manufacturing
PMI. - Wednesday: Switzerland Manufacturing PMI, US ISM Manufacturing
PMI, US Job Openings, FOMC Minutes. - Thursday: China Caixin Services PMI, US Challenger Job Cuts,
US ADP, US Jobless Claims, Canada Services PMI. - Friday: Eurozone CPI, Canada Labour Market report, US NFP,
US ISM Services PMI.
Wednesday
The US ISM Manufacturing PMI is expected
at 47.1 vs. 46.7 prior. The last
report saw the index falling further into
contraction in November and the general commentary was pretty grim. The negative
data continued in December with the US S&P
Global Manufacturing PMI missing
expectations and reaffirming the drag on the economy from the Manufacturing
sector.
US ISM Manufacturing PMI
The US Job Openings are expected at 8.850M
vs. 8.733M prior. The last
report saw Job Openings falling much more
than expected with the weakest reading since March 2021. The labour market continues
to soften via less jobs availability rather than more layoffs, which
coupled with the falling inflation rate, supports the soft-landing narrative. Such
episodes occur right before a recession though, so time will tell if the
“most crowded trade on Wall Street” was indeed the right one all along.
US Job Openings
Thursday
The US ADP is expected to show 113K jobs
added in December compared to 103K in November. The last
report missed expectations and, of course,
we got a beat across the board in the NFP report a couple of days later. Although
this release is pretty useless to forecast the NFP number, it can be
market-moving and maybe give some broad insight into the US labour market.
US ADP
The US Jobless Claims continue to be one
of the most important releases every week as it’s a timelier indicator on the
state of the US labour market. Initial Claims keep on hovering around cycle
lows, which shows us that layoffs have not picked up notably yet, but
Continuing Claims have been rising at a fast pace and that’s indicative of
people finding it harder to get another job after being laid off. This week
the consensus sees Initial Claims at 215K vs. 218K prior,
while Continuing Claims are expected at 1882K vs. 1875K prior.
US Jobless Claims
Friday
The Eurozone Headline CPI Y/Y is expected
at 3.0% vs. 2.4% prior,
while the Core Y/Y measure is seen at 3.5% vs. 3.6% prior. The market is
pricing in around 160 bps worth of rate cuts in 2024 with the first 25 bps cut
coming in April. The ECB members have been pushing back against the aggressive
market pricing and the consensus among the officials is that they want to
wait for Q1 data before deciding if a rate cut in Q2 will indeed be warranted.
Looking at the M/M inflation readings, the ECB can already call it “mission
accomplished” and we could see the Y/Y inflation rates falling below 2% already
in Q2 2024.
Eurozone Core CPI YoY
The Canadian Labour Market report is
expected to show 12K jobs added in December vs. 24.9K in November
and the Unemployment Rate to rise further to 5.9% vs. 5.8% prior. This
report is unlikely to influence the January BoC decision as the central
bank might want to see more data in Q1 before deciding on the next move,
especially after the last hotter than expected inflation
report. If you want to know more about the
2024 outlook for Canada, you can read Adam’s articles on the BoC
and the Canadian
Dollar.
Canada Unemployment Rate
The
US NFP is expected to show163K jobs added in December compared to 199K in November and the Unemployment Rate to tick higher to 3.8% vs.
3.7% prior. The Average Hourly Earnings are seen cooling further with the Y/Y
measure expected at 3.9% vs. 4.0% prior and the M/M reading at 0.3% vs. 0.4%
prior. The major central banks have ended their tightening cycles, so the
markets’ reaction function has changed from “strong data equals more rate
hikes” to “strong data equals less rate cuts”.
US Unemployment Rate
The US ISM Services PMI is expected at
52.6 vs. 52.7 prior. The November
report beat forecasts as the US Services sector continues to remain
resilient given its lower sensitivity to rate hikes. This tendency was
reaffirmed further with the release of the December
S&P Global Services PMI were the data
beat expectations closing the year with the fastest growth since last
July.
US ISM Services PMI