US: Most important events in the week ahead – Nordea Markets
According to analysts at Nordea Markets, next week’s calendar of key figures from the US is full of events that could change the market narrative on the Fed.
“The ISM manufacturing index is out on Thursday and the consensus expects a drop to 58 from 59.3 last month. If we exclude the Richmond Fed figure from our regional survey model (as we usually do), we get a value of 57.5 for next week. If we include the Richmond survey details, the ISM index could drop as far as the 55.5-56 range (ouch!). If the ISM index drops 3-4 points, it will be the second-worst monthly drop since the beginning of 2009 (in January 2014, the ISM index dropped 4.2 points).”
“On the other hand, we continue to expect the wage growth component of the US job report on Friday to edge up slowly but surely, as wages are a lagging component in the business cycle. You would usually expect at least a partial pass-through to consumer prices after a while once wage growth accelerates – at least if the growth environment doesn’t turn sour (in which case profit margins may be squeezed instead). These underlying wage trends make it harder for the Fed to help marketscompared to for example in 2015-16.”