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Trading  | October 30, 2017

With a full slate of central bank meetings, data (including payrolls Friday) and earnings next week there’s a little bit for everyone. On Thursday, according to Politico, we will also know who the next Fed Chair is as well as get a first look at a version of the House tax bill in the US, perhaps on Wednesday.

In terms of the scheduled events, front and center we’ve got the Bank of Japan (Tuesday), Fed (Wednesday) and Bank of England (Thursday) policy meetings all due in a three day window. Only the BoE is expected to change policy though with a 25bp hike to 0.5% the consensus on the street.

In terms of the Fed, while there is no Yellen press conference scheduled we may get clues in the statement as to whether the Fed is on track to raise rates in December.

Over at the BoJ, Governor Kuroda will make a scheduled press conference post the meeting so keep an eye on that.

With regards to the economic data next week, Monday’s just reported September PCE report in the US was closely watched with a modest +0.1% mom core reading expected (it printed at 0.1%, in line with expectations), while attention will also fall on Germany’s flash CPI report for October. We’ll get the wider Euro area report on Tuesday where the consensus is for no change in the +1.1% yoy core reading. In the US we also get ADP, ISM, and trade balance. We also have FOMC rate decision and Fed speakers in the schedule. 

In the Eurozone, we wait for unemployment, GDP, CPI, PMI and ECB speakers. In the UK, main focus is on BoE rate decision but we also have PMIs

Scattered throughout the week will be the final October PMIs, while we end the week with a bit of a bang on Friday with the October employment report in the US and that ever important nonfarm payrolls print. Current market expectations is for a bounceback 310k reading following that -33k slide in September. A +0.2% mom average hourly earnings reading is also expected.

Earnings wise next week we’ve got 136 S&P 500 companies scheduled including Apple on Thursday while 58 Stoxx 600 companies are due.

The full breakdown charted below, courtesy of BofA

DB’s Jim Reid has a day by day summary of key events:

  • Monday: A big day for inflation readings with the September PCE and personal spending reports in the US and flash October CPI report in Germany being the highlights. October confidence indicators for the Euro area and September money and credit aggregates data in the UK will also be worth watching, while the October Dallas Fed manufacturing activity reading in the US will also be out this afternoon. Late tonight we get industrial production and jobless rate data in Japan. Politics wise, Germany Chancellor Angela Merkel is due to meet leaders of the Free Democrats and Greens in the latest round of exploratory talks on forming a government.
  • Tuesday: The most significant overnight event is the BoJ monetary policy meeting along with the release of the Bank’s quarterly outlook report. Governor Kuroda’s press conference is due to follow shortly after. Meanwhile notable data includes the October PMIs in China, the flash October CPI print for the Euro area and France, advance Q3 GDP report for the Euro area and consumer confidence for the UK for October. In the US the Q3 employment cost index, October Chicago PMI, October consumer confidence and August S&P/Case-Shiller house price index is amongst the data due. The ECB’s Visco and Padoan are also due to speak while UK Brexit Secretary David Davis is questioned by the House of Lords EU Committee about the state of Brexit talks. BP and BNP Paribas are amongst the companies reporting results.
  • Wednesday: Front and centre on Wednesday evening will be the FOMC meeting although it’s worth noting that there is no scheduled Yellen press conference after. Along with the meeting we’ll also get some important data releases in the US including the ADP employment change report for October, ISM manufacturing print for October and October vehicle sales. Prior to this, in Asia the Caixin manufacturing PMI in China and Nikkei manufacturing PMI in Japan are due, while in the UK October house price data and the manufacturing PMI for October will be out. Away from that, UK Trade Secretary Liam Fox testifies before a parliamentary panel on plans for post-Brexit trade while BoJ Deputy Governor Nakaso is due to speak. In the US, the initial version of the tax plans should be released for further debates. Facebook and Tesla are amongst the notable earnings reports.
  • Thursday: Another central bank meeting should hog the spotlight with the BoE meeting outcome due around lunchtime. BoE Governor Carney will follow while the Bank’s latest inflation report will also be released alongside. Datawise we’ll receive the final October PMI revisions in Europe along with the October unemployment print in Germany and initial jobless claims and Q3 nonfarm productivity and until labour costs in the US. The Fed’s Bostic is also due to speak along with the IMF’s Lagarde. Apple and Credit Suisse are amongst the notable corporate reporters.
  • Friday: A busy end to the week for data. The highlight will likely be this afternoon with the October employment report in the US including the latest monthly nonfarm payrolls print. China’s remaining Caixin PMIs for October, the UK’s remaining October PMIs and the ISM non-manufacturing, final durable and capital goods orders for September, factory orders for September and the final PMIs in the US round out the data. The Fed’s Kashkari will also speak in the afternoon and the ECB’s Coeure in the evening. President Trump is also due to depart on his 11-day trip to Asia.

Finally, looking at just the US, here are the key events together with consensus expectations…

… and a full breakdown from Goldman:

The key economic releases this week are the personal income and spending report on Monday, ISM manufacturing on Wednesday, and the employment report on Friday. The statement from the October/November FOMC meeting will be released on Wednesday, and there are a few speaking engagements by Fed officials later this week.

Monday, October 30

  • 8:30 AM Personal income, September (GS +0.4%, consensus +0.4%, last +0.2%); Personal spending, September (GS +1.1%, consensus +0.9%, last +0.1%); PCE price index, September (GS +0.39%, consensus +0.4%, last +0.2%); Core PCE price index, September (GS +0.14%, consensus +0.1%, last +0.1%); PCE price index (yoy), September (GS +1.65%, consensus +1.6%, last +1.4%); Core PCE price index (yoy), September (GS +1.34%, consensus +1.3%, last +1.3%): We estimate a 1.1% increase in September personal spending (nominal, mom sa), reflecting a post-hurricane rebound in retail spending and auto sales, as well as a boost from higher gas prices. Based on details in the GDP, PPI, and CPI reports, we estimate that the core PCE price index increased 0.14% month-over-month in September, or +1.34% from a year earlier. Additionally, we expect that the headline PCE price index rose 0.39% in September, or +1.65% from a year earlier. We estimate a 0.4% increase in personal income.
  • 10:30 AM Dallas Fed manufacturing survey, October (consensus 21.3, last 21.3)

Tuesday, October 31

  • 08:30 AM Employment cost index, Q3 (GS +0.7%, consensus +0.7%, last +0.5%): We estimate that growth in the employment cost index (ECI) accelerated to 0.7% in Q3, with the year-over-year pace rising a tenth to +2.5%. Our forecast reflects diminished labor market slack and a boost from expected mean-reversion in the pace of growth in incentive-paid industries, particularly sales and related occupations. Wage growth also firmed in the third quarter, and our wage tracker—which distills signals from several wage measures—rose to 2.8% year-on-year in Q3 from 2.6% in Q2.
  • 09:00 AM S&P/Case-Shiller 20-city home price index, August (GS +0.4%, consensus +0.4%, last +0.3%): We expect the S&P/Case-Shiller 20-city home price index to increase further by 0.4% in August, following a 0.3% increase in the prior month. The measure still appears to be influenced by seasonal adjustment challenges, and we place more weight on the year-over-year increase, which was 5.9% in July.
  • 09:45 AM Chicago PMI, October (GS 62.5, consensus 60.0, last 65.2): We expect the Chicago PMI to moderate 2.7pt to 62.5 following a 6.3pt gain in the prior month. The index is likely to remain at levels consistent with expansion in business activity.
  • 10:00 AM Conference Board consumer confidence, September (GS 119.5, consensus 120.0, last 122.9): We estimate that the Conference Board consumer confidence index pulled back 3.4pt in September following a 5.6pt increase over the previous two months. Our forecast reflects sequential deterioration in higher frequency consumer surveys as well as scope for hurricane related weakness.

Wednesday, November 1

  • 08:15 AM ADP employment report, October (GS +135k, consensus +200k, last +135k): We expect a 135k increase in ADP payroll employment in October, reflecting a large drag from the September nonfarm payroll decline that is an input into ADP’s model. The report is likely to be difficult to interpret as a result, particularly because it could also be affected by the net strength in other financial and economic indicators used in the model.
  • 09:45 AM Markit US Manufacturing PMI, October (consensus 53.1, last 54.5)
  • 10:00 AM Construction spending, September (GS flat, consensus -0.2%, last +0.5%): We expect construction spending to be flat in September following a 0.5% gain in the August report, likely reflecting the impact of recent hurricanes on construction activity.
  • 10:00 AM ISM manufacturing index, October (GS 60.0, consensus 59.6, last 60.8): Regional manufacturing surveys have strengthened on net in October, while other measures of business confidence were more mixed. Overall, our manufacturing survey tracker moved up 0.9pt to 60.5 in October. We expect the ISM manufacturing index to decline 0.8pt to 60.0, following a 4.5pt gain over the last two months, but it will likely remain at levels consistent with a firm pace of expansion in business activity.
  • 02:00 PM FOMC statement, Oct 31-Nov 1 meeting: We expect the FOMC to keep policy unchanged next week and see few substantive changes to the statement. We expect a slightly more upbeat tone on growth that acknowledges the disruptions from the hurricanes but characterizes them as temporary or in the past tense, as we think Fed officials will view the data released over the inter-meeting period as broadly encouraging. Despite the disappointing September CPI report, we do not expect a downgrade of the inflation assessment or outlook, reflecting broadly stable year-over-year inflation and the further decline in the unemployment rate. We also expect the committee will continue to describe the risks to the outlook as “roughly balanced,” but there is a possibility that the statement upgrades the assessment of growth risks to “balanced” and leaves the inflation language unchanged (“closely monitoring”).
  • 5:00 PM Total vehicle sales, October (GS 17.7mn, consensus 17.5mn, last 18.5mn): Domestic vehicle sales, October (GS 13.7mn, consensus 13.7mn, last 14.3mn)

Thursday, November 2

  • 08:30 AM Nonfarm productivity (qoq saar), Q3 preliminary (GS +3.2%, consensus +2.5%, last +1.5%); Unit labor costs, Q3 preliminary (GS +0.6%, consensus +0.4%, last +0.2%): We estimate non-farm productivity increased 3.2% in Q3 (qoq ar), well above the 0.75% average achieved during this expansion. We expect unit labor costs – compensation per hour divided by output per hour – to increase 0.6% (qoq saar).
  • 08:30 AM Initial jobless claims, week ended October 28 (GS 230k, consensus 235k, last 233k): Continuing jobless claims, week ended October 21 (consensus 1,897k, last 1,893k): We estimate initial jobless claims fell 3k to 230k in the week ended October 28. Our forecast reflects additional post-hurricane normalization in Florida filings, which have retraced most of their earlier increases. Continuing claims – the number of persons receiving benefits through standard programs – have resumed their downtrend, falling to a new year-to-date low in the week ended October 21.

    08:30 AM Fed Governor Powell (FOMC voter) speaks: Federal Reserve Governor Powell will deliver introductory remarks at the Alternative Reference Rates Committee’s roundtable event in New York. No Q&A is expected.

  • 12:20 PM New York Fed President Dudley (FOMC voter) speaks: New York Fed President William Dudley will give closing remarks at the Alternative Reference Rates Committee’s roundtable event in New York. No Q&A is expected.
  • 06:15 PM Atlanta Fed President Bostic (FOMC non-voter) speaks: Atlanta Federal Reserve President Raphael Bostic will take part in a panel on “The Vital Role of Government Statistics” at the Association for Public Policy Analysis and Management’s 39th Annual Fall Research Conference in Chicago. Audience Q&A is expected.

Friday, November 3

  • 08:30 AM Nonfarm payroll employment, October (GS +325k, consensus +310k, last -33k); Private payroll employment, October (GS +310k, consensus +300k, last -40k); Average hourly earnings (mom), October (GS +0.2%, consensus +0.2%, last +0.5%); Average hourly earnings (yoy), October (GS +2.7%, consensus +2.7%, last +2.9%); Unemployment rate, October (GS 4.2%, consensus 4.2%, last 4.2%): We estimate nonfarm payrolls rebounded 325k in October, following a 33k decline in September and compared to three- and six-month moving averages of 185k and 160k, respectively. Our forecast reflects a 150k boost from workers returning to their jobs after Hurricanes Harvey and Irma, which weighed heavily on September payrolls based on the state-level breakdown. Relatedly, we note that electricity usage in Florida and Texas had returned to normal levels by mid-September, several weeks before the October survey period. We also believe the underlying pace of job growth remains firm, as jobless claims fell to a 44-year low in the survey week and our service-sector employment tracker rose to a 2-year high in October. We estimate the unemployment rate was unchanged at 4.2%, as the two-tenths drop last month was not driven by unusual declines in hurricane-affected areas. Finally, we expect average hourly earnings to increase 0.2% month over month and 2.7% year over year, reflecting neutral calendar effects.
  • 08:30 AM Trade balance, September (GS -$43.5bn, consensus -$43.3bn, last -$42.4bn): We estimate the trade deficit widened by $1.1bn in September. The Advance Economic Indicators report last week showed a wider goods trade deficit, and we also expect a pickup in services imports following lackluster growth in recent months.
  • 09:45 AM Markit US Services PMI, October (consensus 55.3, last 55.9)
  • 10:00 AM ISM non-manufacturing index, October (GS 59.0, consensus 58.5, last 59.8): We expect the ISM non-manufacturing index to move down 0.8pt to 59.0 in the October report, following a 4.5pt gain in September. A post-hurricane rebound in construction, mining, and retail is likely to offset some moderation following a big September boost. Overall, our non-manufacturing survey tracker decreased by 0.3pt to 56.7 in October.
  • 10:00 AM Factory orders, September (GS +1.4%, consensus +1.2%, last +1.2%); Durable goods orders, September final (last +2.2%); Durable goods orders ex transportation, September final (last +0.7%); Core capital goods orders, September final (last +1.3%); Core capital goods shipments, September final (last +0.7%): We estimate factory orders increased 1.4% in September following a 1.2% gain in August. Core measures in the September durable goods report were strong, with solid growth in core capital goods orders and shipments.
  • 12:15 PM Minneapolis Fed President Kashkari (FOMC voter) speaks: Minneapolis Fed President Neel Kashkari will participate in a moderated Q&A session with Women in Housing and Finance in Washington. Audience Q&A is expected.

Source: BofA. DB, Goldman

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