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Economic Calendar - Top 5 Things to Watch This Week

Published 02/06/2019, 08:28 pm
Updated 02/06/2019, 08:49 pm
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Investing.com - While trade developments and their impact on financial markets are likely to remain to the fore this week market participants will also be looking ahead to the latest U.S. jobs report, monetary policy updates from a number of central banks, including the European Central Bank and U.S. President Donald Trump’s state visit to the U.K.

Here’s what you need to know to start your week.

1. Trade war fallout

Trump announced surprise new tariffs on Mexico on Friday and tariffs on $200 billion of Chinese imports rose on Saturday to 25% from 10%. With tensions in the global trade war showing no signs of easing investors fear that the global economy is moving closer to a recession.

Bond markets are flashing a warning with three-month U.S. yields now well above 10-year rates, the so-called curve inversion that's foretold most 20th century U.S. recessions. May was the first month in the red this year for global and U.S. stocks.

The intensifying trade war may have dealt a blow to the Federal Reserve’s hesitance to react to global trade tensions. Financial markets are currently pricing in two quarter percentage point Fed rate cuts before the end of the year.

Fed officials are holding a two-day conference in Chicago this week to discuss how they set monetary policy, but the focus on how best to meet its mandate of stable inflation and full employment is likely to be overshadowed by the near-term demands of battling the impact of the trade war.

2. U.S. nonfarm payrolls

Friday will see the release of the U.S. nonfarm payrolls report for May after a recent batch of mixed economic data. The consensus forecast is for the economy to have added 183,000 jobs and the unemployment rate to have held steady at 3.6%.

Other notable data releases on the economic calendar include the ISM manufacturing PMI and factory orders on Monday, the Fed’s Beige Book on Tuesday, the ADP nonfarm payrolls report on Wednesday and a report on the trade balance on Thursday.

3. Draghi to give boost to economy

European Central Bank President Mario Draghi will give the Euro Zone economy a bit of a boost on Thursday in the form of generous loans to banks so they keep lending to businesses, while also leaving the door wide open to even more stimulus.

The outlook for the euro area economy has darkened. The global trade war is showing no signs of dissipation, Italy is once again in conflict with the European Commission, German industry is continuing to post dismal figures, stocks are tumbling, inflation expectations are falling and the threat of a hard Brexit looms large.

But first-quarter growth came in well above expectations and bank lending continued to move higher, indicating that any revisions to the ECB’s economic projections are likely to remain modest.

"We think that the Governing Council is likely to sound more dovish than these (projections) would warrant," Morgan Stanley said. "In part, this is because the downside risks, rather than economic, are political in nature, ranging from trade policy to domestic politics and geopolitics."

4. Trump’s state visit to U.K.

Trump said Britain should refuse to pay its 39 billion pound European Union divorce bill and “walk away” from Brexit talks if Brussels does not give the U.K. what it wants in an interview with the Sunday Times newspaper ahead of his state visit to Britain starting Monday.

Trump will be hosted by Queen Elizabeth II and will also meet outgoing Prime Minister Theresa May. Widespread protests are planned in the U.K. during his visit.

Trump repeated his backing for those candidates to succeed May who have said Britain must leave on the due date of Oct. 31 with or without a deal.

5. Reserve Bank of Australia to cut rates

Australia is expected to become the second advanced economy to start cutting interest rates this week. The Reserve Bank of Australia is widely expected to cut rates by a quarter of a percentage point to a record low 1.25% after its meeting on Tuesday, which would be its first cut in three years.

“We would be very surprised if the RBA did not kick off its easing process at the meeting on 4 June. Markets are certainly geared up for it, with Bloomberg showing the implied market probability of a cut standing at 87.2% at that meeting,” ING said.

“By August, markets imply more than a 50% probability of a further cut. We concur. By then, the RBA will have received more data on inflation, as well as further labor market information.”

Meanwhile, the Reserve Bank of India is also expected to cut interest rates at its meeting on Thursday, lowering the repurchase rate to 5.75% from 6%.

--Reuters contributed to this report

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