Market movers today
We expect a solid August US jobs report , which is the key event today. We do not expect the report to impact Fed policy, which is set to deliver two more hikes this year.
Final euro area Q2 GDP figures are out. We do not expect a revision from the 0.4% q/q, but the component breakdown will be interesting and likely show that domestic demand has been the main growth driver. After weak factory orders released yesterday, German industrial production for July could also surprise on the downside.
Selected market news
We expect a solid US August jobs report today The US labour market and domestic economy is doing well, despite trade war related disruption. We estimate average hourly earnings rose 0.2% m/m, which would leave the annual growth rate unchanged at 2.7% y/y. We think non-farm payroll rose 200,000, making up for some of the disappointment in July when payrolls came in at 157,000. The unemployment rate was likely unchanged at 3.9%. The report is very unlikely to change the Fed’s plan to deliver two more hikes this year.
On the US economy and messy indicators. We’ve seen very strong manufacturing and services ISMs this week, which indicate a strong US economy. As a caveat with regards to payrolls, the ADP was on the weak side and August payrolls have a seasonal component whereby they tend to surprise on the downside. Then again the ADP linkage to payrolls has been compromised severely in recent years.
The Riksbank delayed its first rate hike in seven years once again univocal by stating that October is out of scope. We now expect it to raise interest rates for in December. The Governor of the Riksbank Stefan Ingves made it clear that hikes would come in increments of 25 bps. He recalled that whilst serving as a deputy governor in the Riksbank in the 90 s that they had made changes of 5 and 10 bps. He quipped that it had made for a lot of work and little economic impact. Our thinking on the Riksbank meeting can be found in Reading the Markets Sweden .
The weekend heralds the other major event for Sweden, namely the general election on Sunday. We expect a minority government outcome led by Ulf Kristersson and the Moderates. Expect results on how well different parties fared late on Sunday. We may very well see a messy political situation in the first few weeks following the election.
