A look at the day ahead from Sujata Rao.
It’s been an eventful central banking week. Australia stuck with plans to unwind stimulus from September, Brazilian and Czech interest rates rose and the Bank of England flagged the threshold where it will start reducing its balance sheet.
Now it’s payrolls Friday in the United States and forecasts are for 880,00 jobs added last month. A higher number will give credence to the Fed policymakers calling for stimulus tapering to start by year-end.
Thursday data showing a sharp decline in weekly jobless and layoffs at 21-year lows show the labour market is healing. That lifted Wall Street as well as Treasury yields but COVID, with new U.S. cases at a six-month high, could be the fly in the ointment.
(GRAPHIC – Jobs and COVID-19: https://graphics.reuters.com/USA-FED/COVID/movanmymdpa/chart.png)
Globally too the Delta COVID variant is dampening sentiment, with cases surging in Asia and Australia extending lockdowns. World stocks have eked out a 1% gain this week but are marking time on Friday before the payrolls, while U.S. as well as European equity futures are flatlining.
The dollar index has drifted to a one-week high on the payroll expectations and following hawkish comments from Fed policymakers earlier in the week. U.S. 10-year borrowing costs, at 1.2450%, are at a four-day high and inflation-adjusted 10-year yields have dragged themselves up to the highest in a week.
On the companies’ front, it’s looking cheerful — German insurer Allianz posted a 46% jump in Q2 profit and upped its full-year outlook as pandemic pressures ease. And on the banks/M&A front, a better-than-expected Q2 from Italy’s Monte de Paschi and an improving loan loss picture could encourage Unicredit which is in talks to buy the Tuscan lender.
Key developments that should provide more direction to markets on Friday:
– German industrial output fell again in June, suggesting slowing recovery
-British house prices in July rose after falling in June, mortgage lender Halifax said
-BOE deputy governor Broadbent speaks
-Emerging markets: Romania central bank
-US non-farm payrolls 1230 GMT
-US earnings: Fluor, Goodyear Dominion resources
-European earnings: Allianz, ING, Vonovia, Maersk
(Reporting by Sujata Rao)
