Investors are eagerly awaiting the monthly labor market report from Washington. Should employment growth weaken unexpectedly, this would practically guarantee further easing of interest rates. Analysts forecast an average growth of 160,000 new jobs in August (excluding the agricultural sector). In the two previous months, 164,000 new jobs were created in July and 193,000 in June. If employment growth does not deviate significantly from the consensus, the US Federal Reserve is likely to maintain its course of loosening the key interest rate again by a quarter of a percentage point on 18 September. Meanwhile, the ISM Purchasing Managers Survey in the US services sector sent a positive signal. With an unexpectedly strong rise from 53.7 points in the previous month to 56.4 points in August, the indicator pointed to an increased dynamism in the sector. Furthermore, US industry collected more orders than expected in July. Orders rose by +1.4% compared to the previous month. Economists had expected a plus of +1.0%. On Wall Street, the data was received positively, and the Dow Jones Industrial and the broader S&P 500 both rose by around +1.3%. The stock markets in Asia followed the positive trend and recorded moderate daily gains. A speech by the Chairman of the US Federal Reserve this evening in Zurich should also be followed with interest.
Brexit – Johnson wants to vote on new elections again
Britain's Prime Minister Boris Johnson wants to hold another vote on new elections in parliament next Monday. Parliament rejected his first motion for new elections on Wednesday. Opposition leader Jeremy Corbyn of the Labour Party wants to approve a new election only after the law against the no deal has come into force. Brussels has meanwhile announced that the EU Commission could agree to a renewed postponement of the Brexit if the British government could give a good reason.
Sweden's Riksbank confirms intention to raise interest rates
Although the Swedish central bank left the interest rate level unchanged as expected, in contrast to many other central banks it maintained its intention to raise the key interest rate (currently -0.25%) soon. The key interest rate is to be raised by the end of this year or the beginning of next year, according to Stockholm, whereupon the Swedish krona gained significantly against the euro and the US dollar. However, the central bank limited that future interest rate hikes could be more moderate and slower than previously expected due to the bleak global economic outlook. In addition, the krona would probably appreciate against the euro if the European Central Bank (ECB) were to relax its monetary policy as expected, which in turn would be negative for Sweden's export economy.
German industry – no light yet visible at the end of the tunnel
In view of the continuing smoldering international trade conflict and the cautious outlook, there are no signs of a fundamental improvement for German industry in the coming months, the Federal Ministry of Economics commented on the figures published yesterday for incoming orders in industry. In July, for example, the German industrial sector recorded the strongest decline in orders in six months due to lower demand from overseas. New orders declined by -2.7% compared to the previous month and by -5.6% compared to the same period last year. In particular, orders from the rest of the world, such as the US or China, fell by -6.7% month-on-month. As a result, the weakness of new orders is having a negative impact on industrial production and thus on the growth of the economy as a whole.
|08:00||GE||Industrial Production (y/y)||-5.2%|
|11:00||EZ||GDP Q2 (q/q)||+0.2%|
|14:30||US||Private Sector Payrolls||148,000|
|14:30||US||Average hourly earnings (m/m)||+0.3%|
|14:30||US||Average hourly earnings (y/y)||+3.2%|
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Source: LGT Bank (Switzerland) Ltd.
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