Take Five: Jobs, crackdowns and a fork

(Reuters) –

FILE PHOTO: People line up outside a newly reopened career center for in-person appointments in Louisville, U.S., April 15, 2021. REUTERS/Amira Karaoud/File Photo

1/ OUT OF SURPRISES?

Is this year’s sharp U.S. growth rebound losing momentum? A raft of economic data due in the world’s biggest economy will provide clues.

U.S. non-farm payrolls on Aug. 6 will offer a snapshot of July hiring. Economists polled by Reuters forecast the economy added 926,000 jobs in July after June’s forecast-beating 850,000 in June. Before the payrolls, the ISM manufacturing report and Purchasing Managers’ Index (PMI) surveys will be released.

The strength of U.S. economic numbers has at least partly driven stock market gains. But forecast-beating data might become the exception rather than the rule.

Have a look at Citi’s U.S. Economic Surprise Index, which measures the degree to which the data is beating or missing economists’ forecasts. It stands at 3.2 — a far cry from July 2020’s record high of 271.

-WRAPUP 4-U.S. economy returns to pre-pandemic level; labour market healing

Graphic: No surprise there:

2/CHINA CRACKDOWN

Regulators’ crackdowns have frightened investors away from Chinese stocks. As the leash tightens on tech titans, the aggressive moves might well signal the end of internet firms’ “barbarian growth”.

Authorities have rushed to calm market nerves with soothing editorials and promises to take things steadier in future. That’s put a floor under stocks and the yuan.

What investors will want to see now is how serious China’s economic growth slowdown really is. If PMI surveys in the coming week point to moderating manufacturing growth and flatlining services, that could be the next test for markets.

-FACTBOX-From education to bitcoin, China’s season of regulatory crackdown

Graphic: BATs vs FAANGs:

3/ STERLING GROWTH

The Bank of England is set to keep stimulus running at full speed when it meets on Thursday, despite some dissent within its board over the size of its bond-buying programme amid rising inflation and improving economic growth.

Thanks to a speedy COVID-19 vaccination rollout and an economy adapting well to lockdown and subsequent reopening, the International Monetary Fund expects Britain’s 2021 growth to hit a stellar 7%.

It’s all rosier than a few months ago and sterling has rallied as Britain’s reopening remains on track.

What to watch for at the BOE meeting? Its view on the economy of course, but after two policymakers broke ranks recently to suggest an early end to its nearly 900 billion pound ($1.2 trillion) bond-buying scheme, it will be interesting to gauge whether that view is garnering more support.

-BoE set to keep full-speed stimulus despite split over inflation risk

-IMF lifts UK growth forecast for 2021, cautious about longer term

Graphic:FX and vaccinations:

4/EUROPE’S INFLATION FRONTLINE

There’s a unique flavour to each earnings season and unlike recent quarters, this one isn’t about lockdowns or tax cuts but all about inflation, and how companies deal with it.

Europe’s consumer staples sector is on the frontline of concerns about how raw materials, shipping and labour costs might hit margins. Mentions of inflation rose more than 400% year-on-year during STOXX 600 firms’ Q2 earnings calls, BofA analysts note. Materials, financials and consumer firms were most prominent.

Many such as Unilever, Reckitt or Nestle have bemoaned feeling the pinch. Other inflation-sensitive heavyweights may follow suit in the coming week, as Nivea maker Beiersdorf, fashion retailer Zalando and automotive supplier Continental report.

A huge week for banks too, with HSBC, Societe Generale, Standard Chartered, Commerzbank, Intesa Sanpaolo and Credit Agricole all due to report.

-UPDATE 4-Inflation worries overshadow Unilever’s strong first half, hit shares

Graphic: Inflation in earnings calls:

5/ ETHER WAKES UPAfter piggybacking on booming bitcoin to hit a record of almost $4,400 in May, the second-biggest cryptocurrency ether fell to earth with a bump, slumping by nearly half.

Now ether faces a change to its underlying protocol, potentially slashing its supply. The shift, known as EIP-1559 and due for Thursday, aims to stabilise the fees users of the ethereum network pay. Near-term, that could support prices – and may also make the token more easily used in mainstream finance. But perhaps the move was already priced in during ether’s stellar rally earlier in the year? Crypto fans may want to watch this space.

-More crypto outflows last week, third straight outflow for bitcoin -CoinShares

Graphic: Ethereum Upgrade:

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