In focus today
In the euro area, we get the first comprehensive picture of Q2 wage growth when the compensation-per-employee measure is released alongside the third estimate of GDP. Wage growth has continued to decline this year, helping to pull down core services inflation and providing a dovish signal for the ECB. The ECB’s June projections expected compensation per employee to slow to 3.2% y/y in Q2.
In Sweden, all eyes are on the August flash inflation release this morning. August inflation is expected to show core inflation at 0.74% year-on-year, CPIF at 1.00% and CPI at 0.59%. All tax cuts and subsidies are now in place, so there are no new effects on CPIF-CT or CPIF-XE-CT in August. The pick-up in inflation momentum seen over the summer is likely to continue, and we expect stronger underlying price pressure to start feeding through to consumer prices during the autumn.
Overnight, China releases August trade data, which will likely show continued strong export performance but also high import growth, not least as components for the AI data centre buildout have lifted imports this year.
For the rest of the week, focus turns to China inflation prints and Norway CPI-ATE on Wednesday, the ECB meeting and US PPI on Thursday, while Friday brings US CPI, the key release ahead of the September FOMC meeting.
Economic and market news
What happened over the weekend
In geopolitics, Brent crude is trading around USD 97/bbl this morning, extending last week’s gains, as renewed US-Iran strikes on commercial shipping around the Strait of Hormuz raise concerns over prolonged disruptions to Middle East energy flows. In the Ukraine war, weekend talks by Witkoff and Kushner in Moscow and Kyiv sought to revive earlier peace proposals, but ended without a breakthrough.
In Japan, Takuji Aida, economic adviser to PM Takaichi and seen as one of the most vocal opponents of BoJ rate hikes, now expects the Bank of Japan to raise rates at its 17-18 September meeting, followed by another hike by January next year. At the same time, Aida warns that a faster tightening pace could weigh on the economy. Markets are close to fully pricing a 25bp move this month, while USD/JPY has fallen sharply to just above 156.
In the US, the August jobs report came in stronger than expected. Nonfarm payrolls rose by 162k (cons: 55k, Danske: 65k), while revisions added 55k. The unemployment rate came in at 4.1% (cons. & Danske: 4.1%), and average hourly earnings was in line at 0.3% m/m SA. Labour force participation rebounded to 61.6% from 61.4% and wage sum growth rose to 4.1% y/y. Job gains were led by leisure and hospitality and public sector jobs. For the Fed, the report was positive as employment growth rebounded alongside labour supply, supporting the growth outlook without necessarily pointing to rising inflation risks.
In the euro area, retail sales fell by 0.6% m/m in July (cons: 0.2%), following a small increase in June. Fuel sales weighed on the headline figure, but sales excluding fuel also declined by 0.6% m/m, returning to levels seen in Q1. The positive growth recorded in July PMIs therefore does not appear to have been driven by private consumption. As consumers remain cautious, companies may find it harder to pass on higher energy costs, which could help explain why these pressures have not spilled over into core inflation.
In commodities, OPEC+ kept oil output policy unchanged for October on Sunday. According to Reuters sources, the group is likely to pause further output increases in Q4 while it reviews 2027 quota baselines. More broadly, however, OPEC+’s ability to steer actual supply and prices remains limited as long as the Iran conflict continues to disrupt flows through the Strait of Hormuz.
In Germany, AfD’s victory in Saxony-Anhalt was broadly in line with expectations, winning 44% but falling short of an outright majority. The result confirms AfD’s momentum, though mainstream parties rule out a coalition and the direct federal impact is limited.
Equities: A strong US labour market report reignited fears of a more hawkish Fed and pushed equities broadly lower on Friday. The S&P 500 fell 0.4%, while the Stoxx 600 edged 0.1% higher. Cyclicals held up relatively well like it should given the growth implications of stronger labour market data. Industrials, semiconductors and materials outperformed. However, rate-sensitive areas such as biotech, software and real estate lagged and ultimately, higher rates trumped stronger growth expectations for most stocks, with roughly 65% of US stocks finishing lower on the day.
Despite Friday’s weakness, this concludes a generally cyclical week. Sector moves have not been dramatic, but the direction has been consistent. Financials, communication and technology have gained around 2% over the past week, while more defensive areas such as energy, consumer staples and healthcare have fallen 0.5-1%. US markets are closed for Labour Day today.
FI and FX: After an intraday low of USD 93 per bbl, the Brent oil futures contract has risen and currently trades around USD 97 per bbl, after the US and Iran exchanged attacks over the weekend. EUR/USD is relatively stable in a 1.1610-1.1620 range, as it quickly reversed the initial decline seen after the stronger US jobs report on Friday. The SEK is on a slightly weaker footing heading into this morning’s CPI, with EUR/SEK rising from a low of 11.08 on Friday to 11.13. EUR/NOK continues to trade sideways just above the 10.80 level. The data calendar is thin today as the US market is closed due to Labor Day. Later this week, focus turns to the ECB meeting on Thursday, where a hike is widely expected, and the US CPI figures on Friday.
