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Trading Radar: Nonfarm Payrolls Highlight a Holiday-Shortened Week

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Economics, earnings reports, and market events for the week ahead.

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Last week we saw a rare occurrence: US GDP contracted at a 2.9% quarterly annualized rate. That's only the third time we've seen a contraction of that magnitude when the country was not in a recession. The data shows the source of the shift was the unfortunate confluence of extreme weather during the quarter and a historic buildup of inventories in the two preceding quarters. Statisticians and economists are still trying to figure out how to calculate new medical spending, however, and it was a partial drag in the first quarter.

But let's move onto more relevant things, like what's going on next week when the third quarter opens.

Friday will be a US market holiday for July 4th. As such, the government payrolls data will be released on Thursday morning rather than Friday. Expect implied volatility in bonds -- which, like equity volatility, is currently near forever lows -- to increase. The three economic reports that usually draw the most volatility for interest rates are nonfarm payrolls, FOMC rate decisions, and retail sales, in that order.

At the beginning of this week the consensus estimate for nonfarm payrolls was 198,000. Today it's 212,000. Of the 31 estimates submitted to Bloomberg since Monday, only four were below 200K, and three of those were 190K, the lowest estimate offered. The majority of estimates were centered between 197K and 229K. Payrolls have averaged 198.25K over the last 12 months. Consumer confidence for June remains high, even though tensions have increased in the Middle East and average gasoline prices have edged up by at least 12 cents. Same-store sales were also strong for the month. This signals that the economy added more payrolls in June and the rate of discouraged workers fell.

Leading up to Thursday's payroll data is the private survey from ADP. The survey, which uses a larger sample size than the nonfarm payrolls data, has had an increasingly improved record for forecasting the direction of the government survey. Its results, to be released next Wednesday morning at 8:15 a.m. EDT, are expected to show net gains of 205,000.

There are three highlights on the global calendar next week: The release of China's large-manufacturing PMI, the ECB rate decision, and the release of the eurozone consumer price index for June. It is unlikely that the ECB will take any actions on Thursday after taking the historic step earlier in June to set a negative deposit rate and increase liquidity in Europe. The bank is most likely waiting until the bank Asset Quality Review (AQR) concludes in mid-October before taking any additional major steps. Preliminary June CPI data for Germany and Spain released today showed a stabilization in prices, which should be confirmed by the official data on Monday morning.

Earlier this week the private small-manufacturer PMI for China moved above 50 for the first time this year. Barring a serious shortfall in the official survey released Monday night, this should be positive for Chinese risk assets.

Only two major US companies are scheduled to report earnings in the upcoming holiday-shortened week. They are Constellation Brands (NYSE:STZ) and Greenbrier (NYSE:GBX)


Monday, June 30

US Economics (Time Zone: EST)
 
09:00 ISM Milwaukee, June, prior 63.49
09:45 Chicago Purchasing Manager Index, June, exp. 63, prior 65.5
10:00 Pending Home Sales MoM, May, exp. 1.3%, prior 0.4%
10:30 Dallas Fed, Jun, exp 9.0, prior 8.0
11:00 Fed to purchase $850m-$1.1b bonds in 22-30 year range
11:30 Treasury to sell $25b 3-month bills and $23b 6-month bills
3:00 New York Fed to issue QE schedule for July
 
Fedspeak:
 
1:10pm Williams to speak in Sun Valley, Idaho
 
Global Economics (Time Zone: GMT)

01:00 AUD HIA New Home Sales (MAY)
01:00 NZD NBNZ Business Confidence (JUN)
06:00 JPY Housing Starts (MAY)
06:00 JPY Construction Orders (MAY)
08:30 GBP Mortgage Approvals (MAY)
09:00 EUR Euro-Zone CPI Estimate (JUN)
12:30 CAD GDP (APR)
 
Earnings
 
No major reports scheduled

Tuesday, July 1

US Economics (Time Zone: EST)
 
09:45 US Manufacturing PMI, June F, exp. 57.6, prior 57.5
10:00 ISM Manufacturing, June, exp. 55.8, prior 55.4
10:00 Construction Spending MoM, May, exp. 0.5%, prior 0.2%
5:00 Vehicle Sales, June, exp 16.30M, prior 16.70M
11:00 Treasury to sell 4-week bills

Global Economics (Time Zone: GMT)

JPY Tankan Manufacturing Index (2Q)
01:00 CNY Manufacturing PMI (JUN)
01:35 JPY Manufacturing PMI (JUN F)
01:45 CNY HSBC China Manufacturing PMI (JUN F)
04:30 AUD Reserve Bank of Australia Rate Decision
07:45 EUR Italy Manufacturing PMI (JUN)
07:50 EUR France Manufacturing PMI (JUN F)
07:55 EUR Germany Manufacturing PMI (JUN F)
07:55 EUR Germany Unemployment Rate (JUN)
08:00 EUR Italy Unemployment Rate (MAY P)
08:00 EUR Euro-Zone Manufacturing PMI (JUN F)
08:30 GBP UK PMI Manufacturing (JUN)
09:00 EUR Euro-Zone Unemployment Rate (MAY)

Earnings

No major earnings

Wednesday, July 2

US Economics (Time Zone: EST)

08:15 ADP Employment Change, June, exp. 205k, prior 179k
10:00 Factory Orders, May, exp. -0.3%, prior 0.7%
 
Fedspeak:
 
11:00am Yellen to speak in Washington

Global Economics (Time Zone: GMT)

01:30 AUD Trade Balance (MAY)
08:30 GBP Construction PMI (JUN)

Earnings

Before:
Constellation Brands (STZ)
Greenbrier (GBX)

Thursday, July 3

US Economics (Time Zone: EST)

Futures close at 1:00pm ET, equity trading at 1:15pm and cash trading of bonds at 2:00pm today
 
08:30 Trade Balance, May, exp. -$45b, prior -$47.2b
08:30 Change in Nonfarm Payrolls, June, exp. 210k, prior 217k
08:30 Initial Jobless Claims, June 28, exp. 312k, prior 312k
10:00 ISM Non-Manufacturing Composite, June, exp. 56.0, prior 56.3
 
Global Economics (Time Zone: GMT)

01:30 AUD Retail Sales (MAY)
01:30 AUD Building Approvals (MAY)
01:35 JPY Japan Services PMI (JUN)
01:45 CNY HSBC China Services PMI (JUN)
07:45 EUR Italy Services PMI (JUN)
07:50 EUR France Services PMI (JUN F)
07:55 EUR Germany Services PMI (JUN F)
08:00 EUR Euro-Zone Services PMI (JUN F)
08:30 GBP UK Services PMI (JUN)
09:00 EUR Euro-Zone Retail Sales (MAY)
11:45 EUR ECB Rate Decision

Earnings

No major reports scheduled

Friday, July 4

US Economics (Time Zone: EST)

US markets closed for holiday

Global Economics (Time Zone: GMT)

06:00 EUR Germany Factory Orders (MAY)
07:30 EUR Germany Construction PMI (JUN)
08:10 EUR Germany Retail PMI (JUN)
08:10 EUR Euro-Zone Retail PMI (JUN)
08:10 EUR France Retail PMI (JUN)
08:10 EUR Italy Retail PMI (JUN)

Earnings

No major reports

Twitter: @MichaelSedacca

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