Welcome to our economic recap, where we navigate through crucial economic events scheduled for the coming days. The focus remains primarily on key indicators such as PMI data, employment statistics, and central bank decisions. The PMI readings, especially those from Germany and France, will shed light on the persisting challenges in the manufacturing sector. At the same time, the US Nonfarm Payrolls will offer insights into the robustness of the American jobs market.
Additionally, the FOMC minutes will provide a clearer picture of the Federal Reserve's divergence of views and its future course of action.
🇺🇸 June’s ISM Manufacturing PMI
The underperformance in manufacturing continues as evidenced by the latest flash PMI readings. Germany saw its lowest activity since the initial Covid-19 lockdowns in March 2020, with a PMI at 41. France also struggled but fared slightly better at 45.5. China's sluggish demand coupled with supply chain disruptions adds to the global economic slowdown narrative. In contrast, despite economic fragility, Italy and Spain outperformed Germany and France, potentially preventing a third consecutive quarter of negative growth in the Eurozone.
The release of this information is scheduled for Monday, July 3, at 17:00 GMT+3. Assets tied to these economies, particularly manufacturing and supply chains, as well as the Euro and European stock markets, may be affected by this announcement.
🇪🇺 Services PMI (Jun)
On Wednesday, at 11:00 GMT+3, the Services PMI data for June will be released. Despite the significant slowdown in manufacturing activity, the services sector has shown resilience. However, certain areas, such as France, have reported weakness, with its PMI dropping sharply from 52.5 to 48. Other parts of the euro area have maintained generally positive activity.
As we move into the holiday season, the services sector could potentially stimulate economic growth in Italy and Spain, possibly helping to avoid a third quarter of economic slowdown. Positive readings are also anticipated from the UK and the US. These results could impact regional markets, particularly those tied closely to the services sector.
🇺🇸 Federal Open Market Committee (FOMC) Minutes
The Federal Open Market Committee (FOMC) minutes, set for release on Wednesday, July 5, at 21:00 GMT+3, point to a divergence among Fed officials on future policy. Despite strong data, the Fed committed to a pause in June, causing a stir. The meeting highlighted an unexpected readiness among several members to raise rates twice more this year, countering market expectations of only one more hike.
The release should offer insight into the comfort level of dovish members with these potential rate hikes. With the Federal Reserve possibly prioritizing inflation control over unemployment levels, interest-rate sensitive assets could be significantly impacted.
🇺🇸 June’s ISM Services PMI
On Thursday, July 6, at 17:00 GMT+3, the Institute for Supply Management (ISM) will release the Non-Manufacturing PMI data for June. This report, indicative of the health of the US service sector — a key GDP contributor — provides insights into the country's general economic conditions. The non-manufacturing PMI data can predict growth, inflation trends, and the overall economic trajectory. Given the substantial role of the service sector, the release may significantly impact financial markets, including the Dow Jones, Nasdaq, and SPX500 indices, as well as the US Dollar Index.
🇺🇸 June’s Nonfarm Payrolls
The US Nonfarm Payrolls for June are scheduled for release on Friday at 15:30 GMT+3. The resilience of the US jobs market has consistently surpassed expectations, complicating the Federal Reserve's mission to bring inflation back to target. The May report showed an impressive 339k jobs added, with April revised up to 294k, marking the 14th month of forecasts being comfortably outpaced.
While the Fed paused rate hikes in June, its commitment to an additional 50 basis points increase by year's end has markets on edge, pushing short-term yields higher. Forecasts for June are anticipating a number below 300k, at 213k, despite a slight uptick in unemployment from 3.4% to 3.7% and a steady participation rate of 62.6%.
Given the strong job vacancies data, the Fed was compelled to revise its year-end unemployment forecast down from 4.5% to 4.1%. The upcoming release could impact the labor market dynamics significantly, depending on participation rates and job vacancies.
That's it for this week! 👋
