Market movers today
Norway’s unemployment rate for July, published by the NAV (Norwegian Labour and Welfare Organisation), which reflects registered unemployment will be published this morning. While the data release rarely triggers significant market move (contrary to the less important LFS release), Norges Bank follows the number closely. We also prefer the NAV number, as it has painted a more reliable picture of the labour market over the past years. Given the recent weakness in data, markets will look for confirmation that mainland growth remains above trend. We expect the non-seasonally adjusted unemployment rate to move higher to 2.3%, which in seasonally adjusted terms would constitute a modest drop and support the case for a rate hike by Norges Bank in September.
June retail sales data from the Eurozone and Italy are due out today. Despite the economic slowdown across Europe, retail growth has been steady and positive, albeit not inspiring enough to boost economic expansion.
Today’s release of US labour market data for July will be the icing on the cake of this data-intensive week. As markets were left perplexed by the Fed’s hawkish stance earlier this week, focus will now be on macro data from the US in order to assess the Fed’s future actions. Thus, today’s data on change in non-farm payrolls and average hourly earnings could cause another notable move in the markets. We are likely to see a smaller amount of jobs added in July, even lower than the one-year average of 193,000 versus the June figure of 224,000.
University of Michigan consumer sentiment index for July will be out late afternoon, possibly confirming that consumer attitudes and expectations are still holding up well on brisk economic growth in the US.
Selected market news
Asian stock markets fell more than 2%, US stock futures plunged and the JPY rallied on a significant risk sell off, as US President Trump made another surprise move in the trade war yesterday by putting 10% tariffs on another USD300bn worth of Chinese exports. The tariffs go into effect on 1 September 2019. Interestingly, he also tweeted that the US looks forward to further trade talks and to continue the positive dialogue with China on a comprehensive trade deal. It is very unlikely that China sees it the same way. First, it seems likely it will halt purchases of agricultural goods, which apparently was agreed during the talks in Shanghai. Secondly, China has stressed frequently that the dialogue has to be sincere and with mutual respect and that the maximum pressure strategy will get the US nowhere. We thus expect to see some form of retaliation from China. It is increasingly likely that this trade conflict will drag on for a long time and possibly well into next year.
Brent oil fell 7% and the WTI futures plunged almost 8% yesterday after US ISM manufacturing PMI dropped to a three-year low and Trump introduced new tariffs. The sharp intraday plunge was the largest in more than four years, fuelled also by the news that oil supply is set to expand in 2020, led by expanding production in the US.
