While markets are still digesting the outcome from the Trump-Xi meeting, attention will quickly turn to a number of potentially interesting events for markets including the OPEC/OPEC+ meeting, the November jobs report in the US, the global November PMIs and Fed Chair Powell's speech before Congress (which some claim has been pushed back from Wednesday to Thursday as the market will be closed on Wednesday to commemorate the death of George H.W. Bush).
With stocks soaring this morning on the favorable "truce" outcome from this weekend's Trump-Xi dinner and to a lesser extent, the consensus G-20 communique signed in Buenos Aires, the next big event for markets next week is likely to be the OPEC/OPEC+ meeting on Thursday and Friday in Vienna. It's possible that we get some early hints as to what to expect out of the G20 over the next couple days, however the big question facing the market is whether a consensus can be formed between Saudi Arabia, Russia and the US, especially with US President Trump recently raising the pressure level on Saudi Arabia to keep prices low through raising production- a strategy which has seemingly worked with WTI over 30% lower in the last two months.
As for the big data highlight, in light of what appears to be a noticeable shift in tone at the Fed to a more dovish leaning, particularly after Powell's speech this week, and also coming off the back of a slight hiccup in the latest PCE data, expect there to be plenty of focus on the November employment report on Friday. Consensus is for a 205k reading following a stronger-than-expected 250k reading in October. For earnings, the consensus is currently pegged at a +0.3% mom average hourly earnings reading, which would be enough to nudge up the annual rate to +3.2% yoy. The unemployment rate is expected to hold steady at 3.7% with hours also expected to be unchanged at 34.5 hours.
Powell was scheduled to testify on Wednesday to a congressional Joint Economic Committee. But the hearing is expected to be postponed to Thursday because major exchanges will be closed on Wednesday in honor of former U.S. President George H.W. Bush, who died on Friday at the age of 94. Last week, Powell backed the Fed's gradual tightening but said its policy rate was "just below" a range of estimates of the so-called neutral level that neither stimulates nor cools growth. In response, stocks shot up and largely recovered November's earlier losses.
Deutsche Bank would highlight Powell's speech as a focal point for the week however in light of his dovish comments on November 28th, it would probably be a surprise to see the Fed Chair diverge from his recent views. With that in mind, the market will likely look for reaffirmation that there is a rising risk of a Fed pause as early as the first half of 2019.
As for the other important data points next week, the final global November PMIs should also be closely watched. We'll get the manufacturing numbers on Monday and services and composite data on Wednesday. For the Euro Area, no change in the flash readings of either the manufacturing (51.5) or services (53.1) is expected. The Italy data is likely to be a focal point however in light of the composite falling to 49.3 in October. Meanwhile, other data worth flagging in the US next week includes the November ISM manufacturing report on Monday along with November vehicle sales, November ADP, Q3 nonfarm productivity and unit labour costs, and November ISM non-manufacturing all on Tuesday, October trade balance, claims and final October durable and capital goods orders data on Thursday, and the preliminary December University of Michigan consumer sentiment report, and October wholesale inventories data on Friday. In Europe the other significant data releases fall on Friday with October industrial productions reports due in Germany and France , along with the final Q3 Euro Area GDP print.
With regards to the remaining Fedspeak next week, on Monday we're due to hear from Kaplan, Williams, Brainard and Quarles, while on Thursday we'll hear from Bostic before Brainard speaks again on Friday. Over at the ECB Guindos is due to speak on Thursday, while BoE speakers next week include Haldane on Monday, and Carney and Vlieghe on Tuesday.
Other things worth noting next week include Euro Area Finance Ministers meeting on Monday in Brussels to discuss Eurozone reforms, the deadline for funding to end for some US federal agencies on Friday and Germany's ruling CDU party electing a new Chair to succeed Merkel on Friday.
Courtesy of Deutsche Bank's Craig Nicol, here is a summary of key events in the week ahead:
- Monday: The main data highlight on Monday are the final November manufacturing PMIs in China, Japan, Europe and the US. Away from that we'll also get October construction spending, the November ISM manufacturing report and November vehicle sales data in the US. Meanwhile, BoE Chief Economist Haldane and the Fed's Brainard, Quarles, Kaplan and Williams are also due to speak. Euro Area Finance Minsters are also set to discuss Eurozone reforms in Brussels, while NATO foreign ministers meet for a three-day summit.
- Tuesday: It's a quiet day for data on Tuesday with the UK's November BRC like-for-like sales, France's October YTD budget balance and Euro Area's October PPI data the only releases scheduled. Away from that, the BoE's Carney attends a hearing of the Treasury Committee on the UK's Brexit Withdrawal Agreements, while fellow BoE official Vlieghe is also due to speak.
- Wednesday: The focus turns back to the remaining PMIs on Wednesday with final November services and composite prints due in China, Japan, Europe and the US. Away from that, we'll also get Euro Area October retail sales along with final Q3 nonfarm productivity and unit labour costs and the November ISM nonmanufacturing report in the US. The Fed's Beige Book is also due to be released while Fed Chair Powell testifies before the Joint Economic Committee.
- Thursday: With no releases of note in Asia on Thursday, the focus in Europe will be on Germany's October factory orders data. In the US we're due to get the latest weekly initial jobless and continuing claims readings, November challenger job cuts, October factory orders and the final October durable and capital goods orders data. The ECB's Guindos will also speak in the morning before the Fed's Bostic speaks in the early evening. Oil ministers from OPEC/OPEC+ are set to meet in Vienna for a two-day summit to discuss the group’s 2019 output strategy.
- Friday: It's a busy end to the week for data on Friday with the November employment report in the US the big highlight. Prior to that we'll get Japan's October labour cash earnings data. In Europe the main highlight is the final Q3 GDP revisions for the Euro Area, along with October industrial production prints in Germany and France. Germany's Q3 labour costs, France's October trade balance and November house price data in the UK will also be a focus. Finally, in the US, we'll also get October consumer credit data, the preliminary December University of Michigan survey and final October wholesale inventories and wholesale trade sales data. China's November foreign reserves data will also be released sometime during the day. Elsewhere, the Fed's Brainard is due to speak in the evening. Germany’s ruling CDU party will also elect a new chair to succeed Angela Merkel. Friday also marks the deadline for funding to cease for some US federal agencies.
Finally, Goldman highlights the key US events, together with consensus estimates, noting that he key economic releases this week are the ISM manufacturing report on Monday, the ISM non-manufacturing report on Wednesday, and the employment report on Friday. There are several scheduled speaking engagements by Fed officials this week, including Chairman Powell’s testimony before the congressional Joint Economic Committee on Wednesday, an interview with Vice Chairman Clarida on Monday, a speech by Vice Chairman for Supervision Quarles on Monday and Wednesday, and a press briefing by New York Fed President Williams on Tuesday.
Monday, December 3
- 06:30 AM Fed Vice Chairman Clarida (FOMC voter) speaks; Fed Vice Chairman Richard Clarida will be interviewed on Bloomberg TV and Radio.
- 08:00 AM Vice Chairman for Supervision Quarles (FOMC voter) speaks; Fed Vice Chairman for Supervision Randal Quarles will discuss the outlook for the US economy, inflation, and monetary policy, at the Council on Foreign Relations in New York.
- 09:15 AM New York Fed President Williams (FOMC voter) speaks; New York Fed President John Williams will give welcome remarks at the Evolving Structure of the U.S. Treasury Market conference at the Federal Reserve Bank of New York.
- 09:45 AM Markit Flash US manufacturing PMI, November final (consensus 55.4, last 55.4)
- 10:00 AM Construction spending, October (GS +0.4%, consensus +0.4%, last +0.0%); We estimate construction spending rose by 0.4% in October from a flat reading in September, primarily due to a rebound in housing starts in October.
- 10:00 AM ISM manufacturing index, November (GS 57.3, consensus 57.5, last 57.7); Regional manufacturing surveys were mixed on net in November, and our manufacturing survey tracker correspondingly rose by 0.4pt to 58.2 in November. We expect the ISM manufacturing index to decline 0.4pt to 57.3.
- 10:30 AM Fed Governor Brainard (FOMC voter) speaks; Fed Governor Lael Brainard will give the keynote address at the Evolving Structure of the U.S. Treasury Market conference at the Federal Reserve Bank of New York.
- 01:00 PM Dallas Fed President Kaplan (FOMC non-voter) speaks; Dallas Fed President Kaplan will speak at a community forum hosted by the Dallas Fed. Media and audience Q&A is expected.
Tuesday, December 4
- 10:00 AM New York Fed President Williams (FOMC voter) speaks; New York Fed President John Williams will hold a press briefing at the New York Fed. Media Q&A is expected.
Wednesday, December 5
- National Day of mourning to honor former President George H.W. Bush. NYSE closed. SIFMA recommends bond markets close. The federal government will also be closed, and it is possible that a number of the following events will be rescheduled.
- 08:15 AM Fed Chairman Powell Testimony to Joint Economic Committee of Congress Released; Fed Chairman Jerome Powell's testimony to the Joint Economic Committee of Congress will be released at 8:15 AM, for a hearing that begins at 10:15 AM.
- 08:15 AM ADP employment report, November (GS +180k, consensus +195k, last +227k); We expect a 180k gain in ADP payroll employment, reflecting a likely drag from inputs such as claims and lower oil prices used in the ADP model. While we believe the ADP employment report holds limited value for forecasting the BLS nonfarm payrolls report, we find that large ADP surprises vs. consensus forecasts are directionally correlated with nonfarm payroll surprises.
- 08:30 AM Nonfarm productivity (qoq saar), Q3 final (GS +2.2%, consensus +2.3%, last +2.2%); Unit labor costs, Q3 final (GS +1.1%, consensus +1.0%, last +1.2%); We estimate non-farm productivity rose 2.2% (qoq ar) in Q3, in line with the prior print, and above the +0.75% trend achieved on average during this expansion. We expect unit labor costs to be revised down 0.1pp to +1.1%.
- 09:45 AM Markit Flash US services PMI, November final (consensus 54.4, last 54.4);
- 10:00 AM ISM non-manufacturing index, November (GS 58.5, consensus 59.1, last 60.3); Our non-manufacturing survey tracker decreased by 0.2pt to 56.5 in November, following mixed regional service sector surveys. The tracker remains 3.8pt below the October reading of the ISM non-manufacturing index, and indicates that there may be some “catch-down,” though likely to levels still consistent with a firm pace of expansion in business activity. Weak stock market performance and lower oil prices are also likely to weigh on the index. We expect the ISM non-manufacturing index to move down by 1.8pt to 58.5 in the November report.
- 02:00 PM Beige Book, November FOMC meeting period; The Fed’s Beige Book is a summary of regional economic anecdotes from the 12 Federal Reserve districts. The October Beige Book reported growth at a modest to moderate pace across the country and noted a positive outlook for near-term growth. Contacts continued to report uncertainty over the trade environment. Labor markets were again described as tight throughout the country. Wage growth was overall modest to moderate, and price increases were also modest to moderate across regions, though most Districts reported increased price pressures. In the November Beige book, we look for additional anecdotes related to growth, labor markets, wage growth, price inflation, and trade policy uncertainty.
- 05:15 PM Vice Chairman for Supervision Quarles (FOMC voter) speaks; Fed Vice Chairman for Supervision Randal Quarles will speak at Stanford. Text and audience Q&A are expected.
Thursday, December 6
- 08:30 AM Initial jobless claims, week ended December 1 (GS 230k, consensus 225k, last 234k); Continuing jobless claims, week ended November 24 (consensus 1,695k, last 1,710k); We estimate jobless claims edged down by 4k to 230k in the week ended December 1, following a 10k increase in the prior week. We expect energy-sector layoffs to boost jobless claims in upcoming reports, and the underlying trend may be picking up at the margin in other sectors as well.
- 10:00 AM Factory Orders, October (GS -1.5%, consensus -2.0%, last +0.7%); Durable goods orders, October final (consensus -2.4%, last -4.4%); Durable goods orders ex-transportation, October final (consensus +0.1%, last +0.1%); Core capital goods orders, October final (last flat); Core capital goods shipments, October final (last +0.3%): We estimate factory orders decreased 1.5% in October following a 0.7% increase in September. Durable goods orders decreased in the October advance report, driven primarily by a decrease in aircraft orders. Core measures were also somewhat soft, with core capital goods shipments increasing 0.3% and core capital goods orders flat.
- 12:15 PM Atlanta Fed President Bostic (FOMC voter) speaks; Atlanta Fed President Raphael Bostic will discuss the national outlook at a conference in Atlanta.
- 06:30 PM New York Fed President Williams (FOMC voter) speaks; New York Fed President John Williams will hold a discussion with former Bank of England Governor Mervyn King at the New York Fed. Media Q&A is expected.
- 06:45 PM Fed Chairman Powell (FOMC voter) speaks; Fed Chairman Jerome Powell will give brief welcome remarks at a housing conference in Washington DC. Prepared text is expected.
Friday, December 7
- 08:30 AM Nonfarm payroll employment, November (GS +185k, consensus +200k, last +250k); Private payroll employment, November (GS +180k, consensus +200k, last +246k); Average hourly earnings (mom), November (GS +0.3%, consensus +0.3%, last +0.2%); Average hourly earnings (yoy), November (GS +3.2%, consensus +3.1%, last +3.1%); Unemployment rate, November (GS 3.7%, consensus 3.7%, last 3.7%): We estimate nonfarm payrolls increased 185k in November (mom sa), compared to its 6-month average pace of +216k. Underlying job growth may have slowed somewhat, given rising jobless claims, mixed employment surveys, and tighter financial conditions. Additionally, we expect unseasonably high snowfall in the Northeast and Midwest to weigh on payrolls in this week’s report. On the positive side, we expect strong retail hiring ahead of the holiday season (despite a continued drag from store closings), and we note some additional scope for rebounding employment levels in states affected by Hurricanes Florence and Michael.
- We expect the unemployment rate to remain at 3.7% in this week’s report, as we believe the pace of job growth remains above the demographic trend, and the participation rate (62.9%) appears somewhat elevated and may retrench. That being said, we believe the risks are skewed towards a higher jobless rate this month, given the 72k increase in continuing claims from survey week to survey week. Finally, we estimate average hourly earnings increased 0.3% month over month and 3.2% year-over-year. This forecast reflects somewhat positive calendar effects, scope for a rebound in supervisory earnings (after sequential weakness in October), and a modest boost from hourly wage hikes at Amazon.
- 10:00 AM Wholesale inventories, October final (consensus +0.7%, last +0.7%)
- 10:00 AM University of Michigan consumer sentiment, December preliminary (GS 97.4, consensus 97.0, last 97.5); We expect the University of Michigan consumer sentiment index to edge down 0.1pt to 97.4. Other indicators of consumer confidence, such as the Conference Board measure, also suggest a small decrease for the index from its November level. The report’s measure of 5- to 10-year inflation expectations stood at 2.6% in November.
- 12:00 PM Fed Governor Brainard (FOMC voter) speaks; Fed Governor Lael Brainard will discuss current financial stability issues at the Peterson Institute in Washington DC.
Source: MS, GS, DB