Market movers today
Today’s main event is the US labour market report. We expect the NFP number to be 190,000, slightly below the consensus estimate, and we expect the unemployment rate to decline back below the 4% mark to land at 3.9%. We expect unchanged 0.2% m/m average hourly earnings from last time, below the 0.3% consensus estimate. None of the data is likely to change our expectation of another two rate hikes by the FOMC this year.
In the US, we also get US non-manufacturing. We expect a slightly lower reading than last time but still at a very high level in an historical context.
We do not expect the final PMIs in euroland to move the market, as we expect the final estimates to be close to the flash readings. At 11:00 CEST, retail sales data are due out.
We expect UK services to fall to 54.9 from 55.1, not far from consensus of 54.7.
In the Scandi area, we expect the Norwegian unemployment rate to rebound to 2.4% due to seasonality. We also get Norwegian housing market data and our Swedish housing market indicator is also due out this morning.
Selected market news
Yesterday, the Bank of England increased the Bank Rate from 0.50% to 0.75% as expected but the unanimous vote (9-0) was slightly surprising. The BoE thinks very much like the Federal Reserve, as it believes the strong growth and tighter labour market will lead to higher wage growth and hence underlying inflation pressure (Philips curve thinking). We think the Bank of England will continue to hike around once a year and our base case is for the next hike to come in May. For our full take, see Bank of England Review 6 Tight labour market will cause BoE to keep hiking , 2 August.
As expected, FX reserves data released yesterday showed Danmarks Nationalbank made no intervention in the Danish FX market in July.
Depending on what happens today in the stock market, S&P 500 has increased five weeks in a row, which is the longest streak in 2018 , also driven by a strong earnings season, as 85% of the almost 400 companies in the S&P 500 that have reported earnings have exceeded expectations (Apple is the first US company with a market value above USD1,000bn). Still, stocks have become more volatile this year, due partly to the ongoing trade tension between US and China, where it is difficult to see a deal in the near-term. Yesterday, the Commerce Secretary Wilbur Ross said that the US should continue putting pressure on China. Asian stocks are mixed, ending the worst week since March. USD/CNY has risen sharply in a short period and is trading at the highest level since 2017, as China has eased economic policy.
