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The Jackson Hole Summit over the weekend provided little monetary policy clarity, with Fed members continuing to digest recent volatility and macro-economic events. Although China continues to play on investors’ minds, the Fed will be turning their attention this week towards key jobs data that will be released on Friday.
“This is the most important test a central banker has faced in the past several decades.” -Jim Glassman, JP Morgan Chase.
China officials confirmed over the weekend that local government debt would be capped at 16 trillion yuan. This had a relatively subdued effect on the Shanghai Composite, with the index closing 0.82% lower on Monday. Beijing has recently implemented a number of measures to stabilize the equity market in light of ballooning debt levels.
On the economic front, construction spending, Chicago PMI, productivity, factory orders, the Fed’s Beige Book, and the trade balance will be announced earlier in the week. Jobs data, which includes non-farm payrolls, the unemployment rate, and hourly earnings are expected to be released before market open on Friday.
Dow futures are pointing to a rocky start on Monday, with investors still concerned about the implications that China could have on global economic growth. Interest rate uncertainty could also pressure markets, with the Jackson Hole Summit providing little or no clues as to how the Fed will react at the September meeting.
The Chicago PMI was released early in the session. Coming in at 54.4, the figure was below initial estimates of 54.7.
Construction spending for July will be released on Tuesday, with the market pricing in a rise of 0.5% from the previous period. The ISM Index, which is a manufacturing metric, is expected to come in slightly lower at 52.6. Auto and truck sales will round out the economic releases.
Economists are anticipating a rise in productivity in Q2, with a 2.7% figure touted. This would be a 1.4% increase from the previous period. Other important releases include factory orders and the Fed’s Beige Book.
The trade balance deficit is expected to get better in July, with the market pricing in a -$43.1 billion figure. ISM Services, which measure the health of the U.S. service sector, will also be announced during the morning session, with economists looking for 58.4. Other less important releases include initial claims, continuing claims and Challenger Job Cuts.
Friday is jobs day, with all attention on important non-farm payrolls data. The market is pricing in 217,000 in August. This would be a 2,000 rise from July. The unemployment rate is expected to fall to 5.2%, with hourly earnings and average workweek forecast to remain flat.
A wave of economic data will be released during the week, with the Fed expected to analyze key employment data ahead of the upcoming September meeting.