MNI: US Payrolls Preview: Risks Of Upside Unemployment Surprise
Oct-02 18:29
Executive Summary
- Nonfarm payrolls growth is expected to have firmed marginally to 150k in September although some analysts also look for upward revisions to August.
- There is a strong cluster of estimates around 150k but with a wider than recent range of views beyond that.
- The unemployment rate can again have a major role in the market reaction. Consensus sees 4.2% for a second month and whilst claims have proved resilient, we see a real risk that it tilts the other side of 4.25%.
- Powell has looked to temper expectations of a second 50bp cut but the market still prices 35bp of cuts for the Nov 6-7 FOMC with core PCE inflation recently tracking a little below 2% annualized.
- A scenario with the u/e rate firmly rounding to 4.3% and payrolls growth of circa 100k could be sufficient for a material step towards pricing in 50bp but the elections on Nov 5 remain a key unknown.
- Note that there is no expected strike impact with this month’s data but there could be significant disruption for the October report on Nov 1, just a few days ahead of the Nov FOMC.
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CANADA: RBC Look For 150bp Of Cuts By Mid-2025
Sep-02 18:14
- RBC expect another 25bp cut to 4.25% after cutting in both June and July.
- “Comments from Governor Macklem will likely again err on the dovish side, continuing to emphasize a softening economic backdrop that makes it more likely that inflation will keep trending lower.”
- “CPI prints, although still important to the BoC’s consideration, are backward-looking and lag the economic backdrop that has continued to soften.”
- “Governor Macklem reinforced after the last rate cut in July that the central bank is convinced inflation will continue to drift lower even if “there could be setbacks along the way,” but July CPI data also surprised on the downside.”
- “Moving forward, the hurdle for more BoC rate cuts from what are still-elevated levels is low.” RBC assume another 150bp of cuts (including the expected September reduction) by mid-2025.
SECURITY: Israel Must Control Gaza's Philadephi Corridor, Netanyahu
Sep-02 17:56
Israeli Prime Minister Benjamin Netanyahu is delivering a rare press conference in response to the death of killed six hostages in Gaza. LIVESTREAM
- Netanyahu says: "Israel will not stand silently doing nothing facing this massacre. Hamas will pay a very heavy price..."
- Netanyahu: "We have set four goals: To eliminate Hamas; to bring back all of our hostages; to make sure Gaza no longer poses a threat over Israel; and to allow the people of Israel to return safely to the north."
- Netanyahu says that three of the four goals run through the Philadelphi Corridor: "It is the conduit of oxygen in armament for Hamas."
- Netanyahu uses a map to demonstrate the Philadephi Corridor's centrality to Israel's security, saying that when Israel pulled out of Gaza in the past, "there was no obstacle" preventing a "massive infusion of weapons and means of warfare" supplied by Iran via the Egyptian border with Gaza.
- Netanyahu says: "We must have control over the Philadelphi Corridor, Hamas insists for exactly this reason that we won't be there," adding later "We won't leave Philadelphi even for 42 days."
- Netanyahu's comments further imperil ongoing Gaza ceasefire negotiations, which largely hinge on a demilitarisation of the Philadelphi Corridor, in accordance with Phase 1 of the proposal outlined by US President Joe Biden on May 31.
- Netanyahu claims that Israel agreed with the 'final bridging proposal' put forward by the US on August 16, "but Hamas refused to the first one and then to the second one."
CANADA: National See Increasingly Dovish BoC Bias Intact
Sep-02 17:47
- National expect the BoC to cut its overnight rate target another 25bps on Wednesday.
- “The only data point that had the potential to derail a cut—the July CPI report—offered encouraging news on the core inflation front, allowing policymakers to ease without controversy.”
- “With 2% inflation in sight and slack clearly accumulated in the economy, the Bank’s increasingly dovish bias will remain intact. That’s most likely to manifest as a restatement of earlier guidance that it’s “reasonable to expect further cuts” so long as inflation continues to moderate.”
- “Expectations for easing at the final two meetings of the year should therefore endure, and markets will probably want to discount the outside chance of larger cuts especially if the BoC places more emphasis on risks of inflation undershooting over the projection horizon.”
