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World Week Ahead: US jobs data up next

Monday 29th August 2016

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The latest US jobs data will form a key focus this week as Federal Reserve policy makers seem determined to continue to remind investors that a September interest rate increase is possible. 

There’s the ADP employment report on Wednesday, followed by weekly jobless claims on Thursday and the government’s August payroll statistics on Friday.

“If we get a really strong employment report, 200,000 plus, with a much higher wage growth, then they would find it very difficult to resist a hike, probably in September, but definitely by December,” Mohamed El-Erian, Allianz SE’s chief economic adviser, told Bloomberg. “But that depends on getting such an employment report.”

Friday’s Labor Department report is expected to show that US employers added about 180,000 jobs in August, while the unemployment rate fell to a three-month low of 4.8 percent, and worker pay rose, according to a Bloomberg survey.

“Following two extraordinarily sound labour market reports, we are looking for slightly weaker data in August, yet this does not change the picture of the US economy further approaching full employment,” Commerzbank economist Christoph Balz told Reuters.

"The report is unlikely to be sufficient to persuade sceptics [in the Fed] that interest rates should be hiked as soon as in September,” Balz noted. “Signals from the manufacturing ISM [due on Thursday] are also more likely to support a cautious stance.”

Comments by Fed Chair Janet Yellen at the annual Jackson Hole meeting of top central bankers last Friday were first interpreted by investors as meaning that the odds for an increase at the next two-day policy meeting, which starts on September 20, were low.

“In light of the continued solid performance of the labour market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months,” Yellen said.

Wall Street initially rose on Friday but moved lower when Fed Vice Chairman Stanley Fischer told CNBC that Yellen’s comments were consistent with a possible September increase, as well as potentially two rate hikes this year. US Treasuries also fell, while the greenback rose.

“When Fischer spoke and suggested September was more live than what investors had taken from Yellen comments, that did of course lead to a little bit of concern that the move would be sooner than what investors were overall anticipating,” investment strategist Kate Warne at Edward Jones in St Louis, told Reuters.

By the end of the day on Friday, the Dow Jones Industrial Average fell 0.3 percent, the Standard & Poor’s 500 Index slipped 0.2 percent. The Nasdaq Composite Index eked out a 0.1 percent again.

For the week Wall Street posted losses. The Dow slid 0.9 percent, the S&P 500 retreated 0.7 percent, while the Nasdaq fell 0.4 percent.

This week Fed officials slated to speak—and share their take on potential rate hikes—include Boston Fed President Eric Rosengren, Minneapolis Fed’s Neel Kashkari and Chicago Fed’s Charles Evans, on Wednesday, as well as Richmond Fed’s Jeffrey Lacker on Friday.

Aside from the jobs data, reports due in the coming days include personal income and outlays, and Dallas Fed manufacturing survey, due today; S&P Case-Shiller home price index, and consumer confidence, due Tuesday; Chicago PMI, and pending home sales index, due Wednesday; productivity and costs, and PMI and ISM manufacturing indices, due Thursday; as well as international trade, and factory orders, due Friday. 

In Europe the Stoxx 600 Index gained 0.5 percent on Friday, bringing its gain for the week to  1.1 percent.

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