9 Sept. NFP disappoints, leaving US$ midly lower. German CPI, ECB Meeting, US CPI (all Thursday) in focus this week By Jim Langlands

 The Non-Farm payroll report showed employment growth of 130K in August, below the expectation of 162k, while the prior month’s figure was revised down from 164k to 159k. The headline unemployment rate was unchanged at 3.7%, matching expectations, with the participation rate edging up to 64.2%. On the brighter side, the average hourly earnings rose 0.4% mm, above expectation of 0.3% mm and limited the damage from the below-par NFP reading. Also on Friday, as noted above, Fed Chair Jerome Powell was speaking late in the day and reiterated his message that the Fed will continue to act “as appropriate” to sustain the economic expansion in the US economy. He added that it was his expectation the US and world economies would continue to grow moderately and would avoid any recession, while also noting that there are troubling signs in the financial markets, notably the inversion of the Treasury yield curve, which historically has pointed to a recession.

The US$ remained mostly range bound against the majors although the commodity currencies made some mild gains, underpinned by the 0.5% China RRR cut earlier in the day and due to commence from Sept 16. Over the weekend the Chinese August trade data was released and came in weaker than expectations, placing a little downward pressure on the Aud$ in early Monday trade. The overal trade surplus was $34.4 bio, below the expected $43.00 bio, wtih exports down by 1%, and to the US they fell 16% yy after a 6.5% fall in July, while imports fell 5.6%, and from the US were down more than 20% yy in August, showing that the trade negotiations are taking a heavy toll.

Aside from the NFP, other major data released on Friday saw the Eurozone Q2 GDP growth finalised at 0.2% qq, unrevised, down from Q1’s 0.4% qq. It had limited effect on the market as traders were more focused on the NFP figures.

The coming week will be a busy one, with the main event likely to be the ECB Meeting on Thursday at which an aggressive move to easier conditions have been flagged by various board members, particularly the Governor of the Bank of Finland, Ollie Rehn. It will also be Mario Draghi’s penultimate Press Conference before Christine Lagarde takes the helm in November. I imagine he will be his usual dovish self and the Euro may find it hard to make much headway leading into the meeting.

Monday’s focus will be on the Japan Q2 GDP (exp 0.5%qq, 2.1%yy), the UK Manufacturing/Industrial Production data and the EU Sentix Investor Confidence Survey (exp -8.3). There will also be another Brexit vote – which looks like going nowhere fast given the compltete political mess that the UK is in. Tuesday will see the China CPI/PPI (CPI; exp 0.5% mm, 1.9% yy (PPI; 0.9% yy) and UK Unemployment while Wednesday will be thin, with just the US PPI for August on the agenda (exp 0.1%, 1.7%yy). Thursday, ahead of the ECB Meeting, will look to the German CPI for guidance (CPI; exp 0.5% mm, 1.7% yy (HICP; exp 0.4% mm, 1.1% yy), while the US will have the August CPI (CPI; exp 0.1% mm, 1.8% yy (Ex F/E; exp 0.2% mm, 2.3% yy). Finally, Friday will see a thin calendar, and with China on holiday there is little else to come from Asia (NZ Business PMI) or from Europe (EU Trade Balance for July). The main event will be the US Retail Sales for August (exp 0.3%mm), Business Inventories (exp 0.1%mm – July) and the Michigan Consumer Sentiment Index for September (exp 94.0). Have a good week.

Economic data highlights will include:

Mon: NZ Q2 Mfg Sales, Japan Q2 GDP, Trade Balance, Eco Watchers Survey, Current Account, Australian Home Loans, German Trade Balance, UK Manufacturing/Industrial Production, Trade Balance, Goods Trade Balance, NIESR GDP Estimate, GDP, EU Sentix Investor Confidence Survey, US Consumer Credit Change, UK Brexit Vote – again

Tue: NZ Credit Card Spending, Electronic Card Retail Sales, Australian NAB Business Confidence/Conditions, China CPI, PPI, New Loans, UK Unemployment, US NFIB Business Optimism Index, API weekly Crude Oil Stock Inventory

Wed: NZ Visitor Arrivals, Australian WBC Consumer Confidence, US PPI, Wholesale Inventories EIA weekly crude oil stock change

Thur: NZ Food Price Index, Japan PPI, Tertiary Industry Index, Australian Consumer Inflation Expectation, Investment Lending for Homes, China Foreign Direct Investment, German CPI, EU Industrial Production, ECB Interest Rate Decision/Press Conference, US CPI, Jobless Claims, Monthly Budget Statement

Fri: NZ Business PMI, China Mid-Autumn Festival Holiday, Eurogroup Meeting, EU Trade Balance, US Retail Sales, Import Export Index, Michigan Consumer Sentiment Index, Business Inventories

Market moves, in brief:                  

FX: DXY 98.41 (+0.03%)

Bonds: US10Y; 1.564% (-0.11%), German 10Y; -0.633% (-6.91%), UK 10Y; +0.432% (-18.9%), Australian 10Y; +1.100% (+12.18%), NZ 10Y; 1.155% (+7.94 %), China 10Y; 3.039% (-1.20%)

Stock Indices: DJI; +0.26%, S+P; +0.09%, NASDAQ; -0.17%, EUStoxx50; +0.30%, FTSE100; +0.15%, Shanghai Composite; +0.46%,

Metals: Gold $1506 oz (-0.75%), Silver $18.17 oz (2.5%), Copper $2.6305 lb (-0.44%), Iron Ore $89.44 per tonne (NYMEX) (-1.41%),

Oil: WTI $56.60 pb (+0.84%)