Ok, well it’s Sunday which means, barring Trump wandering into a nuclear war in the next several hours, tomorrow will be Monday.
This week they’ll be a lot of talk about hurricanes – and not just from Trump, who will almost invariably denigrate Puerto Ricans some more for what the President perceives as the island’s unwillingness to help itself following Hurricane Maria. We’ll get September payrolls on Friday and it will reflect both Harvey and Irma. Here’s Goldman:
We estimate nonfarm payrolls rose 50k in September, a slowdown from 156k increase in August, reflecting a large drag from Hurricanes Harvey and Irma. FEMA major disaster declarations for these storms covered over 10% of the US population, and over 6.5 million Floridians were without power in the middle of the payroll survey week. We estimate the unemployment rate rose a tenth to 4.5%, reflecting temporary hurricane effects. Finally, we expect average hourly earnings to increase 0.4% month over month and 2.7% year over year, reflecting positive calendar effects.
Barclays thinks you might want to just ignore the damn thing altogether:
We forecast nonfarm payrolls to have increased 75k (consensus: 70k) and expect average hourly earnings to rise by 0.3% m/m and 2.6% y/y, while average weekly hours remain unchanged at 34.4. This month’s data will reflect the effect of the hurricanes that hit the US and will provide little information about the underlying state of the job market.
And here’s BofAML:
Our US economists think nonfarm payroll (Fri) should come in at a subdued 80,000, as Hurricane Irma hit right at the start of the survey week. Otherwise, incoming data remains supportive of job gains.
You get the idea. More important will be whether the “Trump trade” revival continues apace. Traders will be watching the dollar and Treasurys for signs that the greenback rally has legs and for any hint the recent bond selloff has the potential to spin out of control and morph into the kind of rapid rise DM yields that could spill over into risk assets (i.e. a tantrum). Positioning is still “bigly” long in the 10Y:
As a reminder, September marked the first monthly gain since February for the dollar:
In the same vein, investors will be keen to see if the rotation from growth to value continues…
….and whether the small-cap rally is for real.
Yellen speaks on Wednesday and as Barclays notes, “she’s unlikely to provide further support to the USD, as markets remain reluctant to price a full December Fed hike.” We’ll also get Kaplan, Powell, and Dudley.
Not much is expected from the RBA, but given the market’s propensity to trade on any hint of policy divergence (no matter how seemingly inconsequential) you don’t want to write it off completely. “We and the broader consensus expect no change in the cash rate, although we will be looking for an incrementally more positive tone,” Goldman says, adding that “given its recent communications and the improvement in data, we think the RBA will likely gradually shift towards a hawkish stance over the coming months as domestic data continues to firm and inflation and wage pressures rise.” Commodity prices could prove more consequential for the Aussie.
The euro will be in focus after hundreds (literally) of injuries were reported on Sunday as Spanish police attempted to forcibly stop the Catalan independence referendum. Here’s Bloomberg’s Ben Purvis:
EUR/USD’s slide in early Asian trading has been very muted and the shift is perhaps as much to do with the greenback side of the equation as anything happening in Barcelona. Dollar bulls may be more focused on the increase in U.S. bond yields at the end of last week that came amid news that Kevin Warsh is among those Donald Trump has interviewed for the role of Fed chair. The images coming out of Spain are dramatic and the response by Mariano Rajoy’s government could well give fuel to the secessionist push in Catalonia, but it’s unlikely to derail the economic recovery of the broader euro area. The region has survived civil disturbances and existential concerns before. The path of EUR/USD is more likely to depend on more mundane matters like inflation and the potential divergence between the ECB and the Fed.
On the data front in Europe we’ll get PMIs. “The Flash releases of the French, German and Euro area PMIs were unexpectedly strong, causing us to revise up our judgmental estimate of Q3 growth from +0.5% qoq to +0.6% qoq,” Goldman reminds you.
Of course lurking in the background is the Trump wildcard. Over the weekend, he was more unhinged than usual (and that’s saying something). These two tweets from Sunday could prove to be especially provocative:
Here’s the full calendar from BofAML: