During the upcoming trading week, the release of the Non-farm payrolls job report headlines the economic docket, with this month’s job report one of the most closely anticipated of the year so far.
This week US Private Sector jobs report, Factory Orders, ISM Services, EIA weekly crude data and Personal Spending. The USA infrastructure bill will also be huge in determining market sentiment.
We also see the release of the eurozone Retail Sales CPI and Manufacturing numbers from the eurozone economy. The Release of the RBA and RBNZ rate decisions will also be closely watched by market participants.
Non-farm Payrolls Report
The sheer magnitude of this week’s job report from the US economy should not be underestimated this week, as it is likely to determine the direction of financials market going into the next FOMC policy meeting.
A 500,000-headline number is being forecasted this week, which if it comes to pass will nearly double the hugely disappointing jobs number from September. Overall, I expect another weak job number due to weakening growth and rising COVID-19 infections in the US economy.
Last month the US economy added 235K jobs in August of 2021, the lowest in 7 months and well below forecasts of 750K as a surge in COVID-19 infections may have discouraged companies from hiring and workers from actively looking for a job.
Watch out for a huge reaction in the US dollar if we see a big deviation away from the headline number. Stocks are likely to push higher if a weak number comes due to the pledge of more stimulus from the FED into 2022.
US Infrastructure Bill
The US infrastructure bill is going to be a big focus for financial markets this week, and one which could determine the direction for financial markets for the month of October and potentially even Q4.
It should not be underestimated the historic nature of the $3.5 trillion bill, which is the largest such bill the United States government has ever announced. Whether the bill passes this week remains to be seen as President Biden has given a new deadline of October 31st for the bill to pass.
Looking at the potential market reaction, if the bill is passed with the full $3.5 trillion, we should see stocks rallying alongside gold and the US dollar selling off. On the flip side, expect more stock selling if the bill is delayed or dramatically reduced in its size. I suspect it won’t happen this week, but news could still rock the markets as negations continue.
Reserve Bank of Australia Rate Decision
The Reserve Bank of Australia is widely expected to keep interest rated unchanged this week as the COVID-19 pandemic continues to cause widespread lockdowns across Australia.
Australia’s economy is also closely linked to China, so traders should be aware that a slowing Chinese economy is probably going to weigh on Australia’s economic growth and demand for its commodities.
Last month the RBA kept the cash rate unchanged at a record low of 0.1% during its September meeting, as widely expected, while confirming plans to trim the purchase of government bonds to A$4 billion a week and determining to do it until at least mid-February 2022.
Foe the economic outlook, the central bank said GDP is expected to fall materially in Q3, with the jobless rate to move higher in the coming months. Expect more of the same this week.
