Weekly Market Outlook (05-09 August)

Upcoming Events:

• Monday: China Caixin Services PMI, Eurozone PPI, US ISM Services PMI, Fed SLOOS.
• Tuesday: Average cash income in Japan, RBA monetary policy decision, Swiss unemployment rate and retail sales, Eurozone retail sales, Canada services PMI.
• WednesdayNew Zealand Labour Market Report, Bank of Canada Meeting Minutes.
• Thursday:Bank of Japan Opinion Summary, US Jobless Claims.
• FridayChina Consumer Price Index, Canada Labor Market Report.

Monday

The Institute for Supply Management’s U.S. services PMI is expected to come in at 51.0 versus 48.8 previously. The survey has not provided any clear indication recently as it has been hovering since 2022. The latest S&P Global U.S. services PMI rose to a 28-month high. The good news in the report was that “the rate of increase in average prices charged for goods and services has slowed further, Decline to a level consistent with the Fed’s 2% target“.”

The bad news was that “manufacturers and service providers reported it.” Increased uncertainty over the election, discouraging investment and hiringIn terms of inflation, the July survey saw input costs rise at an accelerating rate, linked to higher costs of raw materials, freight and labour. These higher costs could lead to higher selling prices if they persist or decline. Causes pressure on margins“.”

Tuesday

Japan’s average annualized cash income is expected to come in at 2.3%, compared to 1.9% previously. As a reminder, the Bank of Japan raised interest rates by 15 basis points at its last meeting and Further interest rate hikes could follow if data supports such a move, central bank governor Ueda said.The economic indicators they focus on are: wages, inflation, service prices, and the GDP gap.

The Reserve Bank of Australia is expected to keep interest rates unchanged at 4.35%. The RBA has maintained its hawkish tone due to steady inflation, and at times the market has priced in a high probability of a rate hike. Last Australian Consumer Price Index Q2 These expectations were dashed when we saw failures across the board and the market (of course) began to see opportunities for rate cuts.with the possibility of easing monetary policy by 32 basis points by the end of the year (the increase on Friday was due to the weak US non-farm payrolls report).

Wednesday

New Zealand’s unemployment rate is forecast to rise to 4.7% from 4.3% previously with QoQ job growth of -0.3% vs. -0.2% previously. The Labour Cost Index is forecast to come in at 3.5% YoY vs. 3.8% previously, while the QoQ gauge is forecast at 0.8% vs. 0.8% previously. The job market in New Zealand has been steadily declining. This remains one of the main reasons why the market is still pricing in a rate cut much earlier than the RBNZ has forecast.

Thursday

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. This release in particular will be crucial as it comes in a market that is very nervous after weak US jobs data on Friday.

Initial claims remain within the 200K to 260K range that has been established since 2022, although they have been rising toward the upper end of the range recently. On the other hand, continuing claims have been steadily rising and we saw another cycle high last week.

Initial claims this week are expected to come in at 250k vs 249k previously, while there is no consensus on continuing claims at the time of writing although the previous release saw an increase to 1,877k vs 1,844k previously.

Friday

Canada’s labour market report is expected to show 25,000 jobs added in July versus -1.4K previously and the unemployment rate to remain unchanged at 6.4%. As a reminder, the Bank of Canada cut interest rates to 4.50% at its last meeting and She pointed to more interest rate cuts in the future.The market expects monetary policy to be eased by 80 basis points by the end of the year.