All Eyes on NFP

As the busiest week of the current earnings season came to a close on Friday, stocks ended lower, pressured by signs of weakness from the very mega cap companies that, over the past year, boosted the market to new highs.

 

Here are the key market moving factors for the week:

 

The US

• The upcoming jobs report will be pivotal for the Fed in deciding whether the economy is headed toward hitting its substantial progress goal. Now that the Fed has finally had their first deep dive into discussing tapering asset purchases,
• Wall Street will closely focus on labor market progress in the coming meetings. The July jobs report is expected to show 925,000 jobs were created, an improvement from the prior month gain of 850,000.
• Tapering at the earliest seems like it could be in September, but that still means interest rate hikes are a long way off. Unless risk aversion becomes the dominant theme, the dollar could remain vulnerable in the short-term.

The UK

• The Bank of England meeting on Thursday is the standout event, although the meeting almost certainly comes too early to make any significant judgement on paring back monetary support. While the recent surge in the Delta variant has eased, the risk of cases rising again is still significant.

EUROPE

• The data this week is unlikely to have done much to change the ECBs view on what is needed to achieve its new, more aggressive, inflation target. Hawks at the central bank may make a little more noise going forward, with German inflation now running above 3%. But I don’t expect this will change much at this stage.
• The key releases next week will be PMIs on Monday and Wednesday, with German factory orders on Thursday, also noteworthy.

AUSTRALIA & NEW ZEALAND

• Australian stock markets were trading sideways over the past week with Delta-variant cases increasing in Sydney resulting in a harsher lockdown and a 4-week extension. The week is dominated by the RBA rate decision on Tuesday, with no change expected. The threat to growth and employment from the NSW COVID situation will ensure the RBA remains very dovish. Other data includes PMIs, Home Loans, Retail Sales and the Trade Balance, but global risk sentiment and the RBA will dominate.
• New Zealand’s Employment Change and Labor Costs data on Wednesday could send NZD/USD sharply higher if it comes in above expectations. The RBNZ has an itchy trigger finger and has said as much. Higher prints will make an RBNZ hike almost certain at its next meeting and be very supportive of the currency.

JAPAN

• Japanese stocks continued gyrating on swings in risk sentiment internationally, reflecting the heavy presence of retail fast money in the Japan market. We expect this volatility to continue as the only major data releases are Tokyo CPI and Household Spending.
• Japan expanded its COVID-19 states of emergencies to more prefectures on Friday, and that appeared to be weighing on the Nikkei. An escalation of the COVID situation, especially if it threatens the Olympics, could be a strong headwind for Japan stocks this week.

CHINA

• Market sentiment has been dominated by the China government’s crackdown on the tech sector and now the education sector with Mainland and Hong Kong exchanges, as well as US-listed China companies taking a bath last week. Concerns are also rising in the corporate credit sector with Chinese corporate dollar-denominated debt falling heavily last week.
• Despite assurances from China that its moves were “targeted” and not part of a broader agenda, financial markets are taking this with a grain of salt and sentiment will start this week walking a tightrope. China equities will continue to underperform until the regulatory discount reaches equilibrium with lower prices.

Market Overview:

Gold

• Gold was down on Monday morning in Asia, as the dollar hovered near a one-month low. The health of the U.S. labor market is also on investors’ minds as they await the country’s latest job report.

Oil

• Oil prices fell on Monday on worries over China’s economy after a survey showed growth in factory activity slipped sharply in the world’s second-largest oil consumer, with concerns compounded by a rise in oil output from OPEC producers.
• Brent crude oil futures slid by 76 cents, or 1%, to $74.65 a barrel by 0455 GMT while U.S. West Texas Intermediate (WTI) crude futures dropped 69 cents, or 0.9%, to $73.26 a barrel after slipping to a session low of $72.87.

Below are the major market moving events for the week:

All times are listed in EDT

Monday

3:55: Germany – Manufacturing PMI: expected to remain flat at 65.5.

4:30: UK – Manufacturing PMI: forecast to stay unchanged as well, at 60.4.

10:00: US – ISM Manufacturing PMI: predicted to edge a bit higher, to 60.9 from 60.6.

Tuesday

00:30: Australia – RBA Interest Rate Decision: the central bank is forecast to hold at 0.10%.

18:45: New Zealand – Employment Change: expected to tick higher, to 0.7% from 0.6% QoQ.

21:30: Australia – Retail Sales: anticipated to plunge to -1.8 from 0.4%.

Wednesday

4:30: UK – Services PMI: to remain flat at 57.8.

8:15: US – ADP Nonfarm Employment Change: foreseen to rise to 700K from 692K.

10:00: US – ISM Non-Manufacturing PMI: predicted to edge up to 60.4 from 60.1.

10:30: US – Crude Oil Inventories: last week’s print showed a drawdown of -4.089M Bbls.

Thursday

4:30: UK – Construction PMI: likely to rise to 63.8 from 63.3.

7:00: UK – BoE Interest Rate Decision: forecast to remain at 0.10%.

8:30: US – Initial Jobless Claims: predicted to fall to 380K from 400K.

Friday

8:30: US – Nonfarm Payrolls: forecast to rise to 900K from 850K.

8:30: US – Unemployment Rate: to dip to 5.7% from 5.9%.

8:30: Canada – Employment Change: expected to drop to 150.0K from 230.7K.

10:00: Canada – Ivey PMI: previously printed at 71.9.

Based on the above factors and the events lined up for the week, the analyst at RvR Ventures suggests you to Trade responsibly; invest only as much as you can lose. All the profits and losses due to the above data are your own personal responsibility. Kindly practice money management & risk mitigation while trading.

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