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.
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.
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.
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.
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.
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.
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”.
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.
