Major Events of Last Week
Non-Farm Payrolls reported in largest gain during June since last October although May’s figure was revised lower to just 11,000 from 38,000. Another worrisome feature of the US labor report was that the ‘Unemployment Rate’ rose from 4.7% to 4.9%. However, prominent economists quickly advised that this increase was primarily caused by extra Americans re-entering the job market after acquiring more faith in the true health of the US economy.
Despite the US labor results generally receiving a warm welcome, investors were still unnerved by lukewarm wage growth. Basically, hourly earnings improved only by 0.1% last month compared to the widely expected 0.2% while annual earnings crept upwards from 2.5% to just 2.6%. These disappointing inflationary factors could now incite the Fed to refrain from hiking interest rates at all during 2016. In fact, these new uncertainties endorsed a recent warning of the US Central Bank when it advised that it will need to assess further economic data in order to fully evaluate any adverse impacts generated by the unexpected decision of the United Kingdom to leave the European Union (Brexit).
Specifically, the financial markets were stunned by the Brexit ‘LEAVE’ vote, produced during late June, as it dramatically boosted the possibilities that it could cause a serious economic slowdown in Europe while a stronger US Dollar could slam US exports. The Fed, in fact, identified this major risk in the minutes of the last meeting of the Federal Open Market Committee (FOMC) when it assertively concluded that more evidence is now required in order to properly understand all the potential ramifications of the Brexit. Last Friday’s developments have now intensified these concerns even more as summarized by analysts who stated that, despite a strong June labor report, impetus in the US labor market is definitely waning as a direct result of US employment reaching almost full capacity.
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What to Expect This Week
Canada will commence proceedings by presenting its ‘Housing Starts’ for June on Monday. Economists are looking for a result above 189,000 units in order to confirm that this vital sector is beginning to gain impetus.
No major global economic events or data releases are scheduled for Tuesday.
On Wednesday, Italy will disclose key inflationary data which should verify that its ‘Consumer Price Index’ (CPI) will hover about its 0.1% mark once again. Later, the Eurozone will reveal its ‘Industrial Production’ for June which will take on more significance this time around following the recent surprising Brexit result. This indicator must surpass its prior 1.1% in order to supply confidence that the region’s economy is weathering the Brexit storm. The Bank of Canada (BoC) will then announce its latest interest rate decision and monetary policies. Although a ‘no change’ verdict is widely anticipated, investors will still be keen to learn if the BoC intends to introduce any new stimulus measures within the imminent future in order to counter mounting geopolitical pressures.
The USA will publish its ‘Jobless Claims’ on Thursday for the previous week ending 10th June. This statistic should validate that the number of Americans filing first-time applications for unemployment benefits continues to reside within its long-standing range of 250k to 290k.
On Friday, The USA will issue its CPI, ‘Retail Sales’ (RS) and ‘Industrial Production’ (IP) for June. CPI should extend its recent gains by beating May’s 0.2%. RS must outstrip its previous print of 0.5% in order to confirm that consumer confidence is still healthy and on the rise. Analysts are hoping that IP can register a recovery by rebounding from its prior worrisome outcome of -0.4%. Such an improvement is required in order to demonstrate that the US manufacturing sector is beginning to emerge from an extensive quagmire.
