AUSTRALIAN DIARY: Everything you need to know about the massive week ahead

Lock it in, Eddie.

That’s going to be the most accessible thought to traders and investors as Australia’s new week begins after the massive increase in US non-farm payrolls for October announced on Friday night.

The gain of 271,000 jobs crushed market expectations of 180,000. 271,000 is the largest increase since December 2014 and among the top four monthly increases over the past two years.

The surge also looks like it might be a lot higher than some Fed officials thought. On Friday, during Asian trading, James Bullard president of the Federal Reserve Bank of St. Louis said that growth in jobs of 100,000 to 120,000 was “adequate for the economy”, but could be misread as a slowdown. No chance of that now with this massive print.

That’s certainly the message traders took on Friday.

Sure US stocks have focussed on the positives from a strong economy, with mild gains in the Dow and Nasdaq and the tiniest of falls in the S&P 500. But the US dollar surged, knocking all the major currencies at least 1% lower. The Euro looks on its way back from 2015’s 1.05 lows, USDJPY is back above 123 and the Aussie found some support above 70 cents, but is looking vulnerable again.

Likewise for US and Australian interest rate markets. The 2-year note in the US traded at a new five-and-a-half year high of 0.9580% before rallying back to 0.85%. That’s driven the Australian 2-year bond up to 1.91% after testing the 6-month downtrend line a point or two higher.

That’s the important point for traders both here and around the globe. Even though the RBA, ECB, BOE and others have a bias to ease, US rates rising puts pressure on the front end of global yield curves, and ultimately, the entire curve, which in turn can had pressure to stock valuations.

Something to think about anyway as we kick off another big week.

Another thing traders will be thinking about is the weekend release of Chinese trade data for October that showed exports fell 6.9% against the 3% the pundits predicted, while imports fell an incredible 18.8% against the 16% expected year-on-year dip. That’s driven the trade surplus to $61.64 billion and highlights that not only is Chinese growth slowing but client economies are slowing as well.

A Fed hike, and Chinese and emerging market slowdowns might just equal a perfect market storm.

Looking to this week’s data and events, Australia gets ANZ job ads Monday and the latest update of the NAB’s monthly business survey on Tuesday.

In Friday’s What to Watch this week release, the NAB reiterated that business conditions have been improving and that given the interest the RBA has shown in the survey the release “provides a timely update on the tempo of the economy and its transition towards the non-mining sector.”

Traders will be watching closely too because AiGroup surveys for manufacturing and services released last week did point to some softening in these sectors.

Home loan data is also out Tuesday and will be watched closely for signs that APRA and the RBA’s efforts continue to gain traction and slow lending.

Wednesday is Westpac-Melbourne Institute consumer sentiment day with the release of the November survey. Westpac says “the biggest point of interest will be how sentiment reacts to the decision by the major banks to raise their standard variable mortgage rates by an average of 17bps.” Indeed. But RBA governor Glenn Stevens said last week that he’s not worried about those out-of-cycle rate rises and the impact on consumers. But a surprise is still possible.

Thursday is the big one though for Australian markets with the release of October labour force data. The latest Reuters poll shows the market expects growth of 15,000 and an unemployment rate of 6.2%.

After last month’s unexpected fall in employment the NAB said Friday that “despite the issues that the statistician has had with its labour force survey, its monthly volatility and problems with seasonal adjustment, this release remains right near the top far as local market sensitive indicators are concerned.”

Australian dollar and interest rate traders will be watching closely.

Friday, it’s all quiet on the data front.

Offshore there is a raft of important Chinese data to keep traders on their toes. The weekend trade release showed an alarming acceleration in the fall of exports and imports, driving the surplus to a new record high. But that also points to more economic weakness.

So, PPI and CPI to be released Tuesday will be important while retail sales, industrial production and urban investment on Wednesday are probably up there with German and EU GDP, and US retail sales as the key global events for the week.

Turning to Europe and week kicks of with German trade data. Exports are expected to bounce back after last month’s fall, pundits reckon, but Euro traders will be watching closely. Tuesday is inflation hearings in the UK and industrial production in France and Italy.

Wednesday UK labour force data is out and ECB president Mario Draghi is delivering a speech. Traders will be wondering if he’ll be serving up more promises of QE or more obfuscation.

Thursday sees German and French CPI, EI industrial production and then to end the week on a high, or not, Germany and the EU release GDP data for the third quarter on Friday night.

With US non-farms out, the data drops in importance, but with plenty of Fed speeches and key second tier data, it’s still a major week.

Boston Fed president Eric Rosengren speaks on Monday night and then Tuesday we get import and export price indexes along with wholesale inventories. Mortgage applications are out Wednesday.

Get the popcorn ready for Thursday night, Australian time, with speeches from no less than four Fed heads, with James Bullard, Jeff Lacker, Charles Evans and Bill Dudley all up. The JOLTS survey is also out.

Friday night is the big one though with the release of US retail sales and PPI. The Fed’s Loretta Mester also speaks.

So another big week beckons.

Here’s the NAB’s excellent calender of all the key events and data.

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