June 6, 2023

US NFP report a key test for economy’s strength

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The economy’s strength faces a key test this week when July’s monthly US NFP report is released.

U.S. jobs report is significant for market sentiment in the next two months to give cues for the Fed’s next moves.

After data on Thursday showing that the U.S. economy is on the cusp of a recession, this Friday’s US NFP report for July will be even more highly anticipated than usual.

The US monthly employment report will show whether the recent barrage of Fed rate hikes has impacted the labour market. The Fed hiked rates by 0.75% on Wednesday, the second hike in a row of that size.

Jobs reports from New Zealand and Canada also should show that central banks still have more room to raise interest rates.

Investors will also continue to digest a slew of earnings results with dozens of companies set to report in the coming week. Last week, better-than-expected earnings reports from giant companies showed their resilience to survive an economic downturn and boosted the stock market.

U.S. stocks added to their recent rally on Friday, with all three major indexes gaining for the month and the week.

Several Fed officials are set to speak this week. Investors will closely watch their comments for indications that a smaller rate hike may be on the cards in September after recent data points to economic weakness.

Meanwhile, the Bank of England is expected to accelerate the pace of rate hikes by 0.5% on Thursday. BoE steps up efforts to curb inflation with a new hike of interests, which would be its largest since 1995.

Economic events to watch apart from US NFP

The first week of August sees a typically busy economic calendar and is data-heavy.

The U.S. will release data on JOLTS job openings on Tuesday. While job openings have been easing recently, they will probably remain at elevated levels. Elsewhere, the Reserve Bank of Australia will probably hike rates by 0.5% at Tuesday’s meeting.

Market watchers will also pay particular attention to the ISM services PMI on Wednesday. Economists expect the index to confirm that the economy is slowing.

Tuesday 2 August

Australia RBA Interest Rate Decision

Canada Manufacturing PMI (Jul)

New Zealand Unemployment Rate (Q2)

Wednesday 3 August

Worldwide Services PMI (Jul)

Euro Area Retail Sales (Jun)

United States ISM non-Manufacturing PMI (Jul)

Thursday 4 August

Australia Balance of Trade (Jun)

UK Interest Rate decision

Canada Balance of Trade (Jun)

United States Balance of Trade (Jun), Jobless Claims (Jul)

Friday 5 August

Australia RBA Statement on Monetary Policy

Germany Industrial Production (Jun)

UK Halifax House Price Index (Jul)

Canada Unemployment Rate (Jul)

United States Non-farm Payrolls (Jul), Unemployment Rate (Jul), Consumer Credit (Jun)

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