ON DECK FOR FRIDAY, MARCH 21
KEY POINTS:
- Markets have already forgotten about the ECB
- Will CDN jobs rebound?
- The UK lockdown hit wasn’t quite as bad as feared
- US core producer price inflation is already accelerating
- US UMich consumer sentiment on tap
INTERNATIONAL
What’s the good news? Well, the clocks go forward Sunday in this part of the 'hood (two weeks later in Europe), so you’ll get an extra hour of daylight in the evening. The bad news? The clocks go forward Sunday, so you’ll ‘lose’ an hour of sleep and the markets are not looking so hot to end the week. Let’s hope Canada’s jobs tally can provide a lift to sentiment this morning! In the US watch for further inflation signals.
- The USD is broadly stronger and the DXY has reversed yesterday’s weakening with CAD outperforming most other crosses.
- Sovereign curves are steepening again and led by US Ts, gilts and Canadian yields that are all 5–8bps cheaper toward the longer end. Yesterday’s modest reaction to the ECB has been either entirely or largely unwound across most EGBs. See yesterday’s note for why the ECB underwhelmed.
- Stocks are a little softer on balance with Nasdaq futures leading the sharpest decline.
UK macro data reflected lockdowns in January but on balance was not as bad as feared. Overnight releases posted a 1.5% m/m drop in industrial output led by manufacturing, a 3.5% decline in services, an unexpected 0.9% rise in construction output and a wider trade deficit. Monthly GDP shrank by 2.9% which was better than the consensus estimate of -4.9% as all but three out of 31 economists thought the number would be worse.
CANADA
Well what a fine way to end the week with the Canadian jobs lottery!
I take zero comfort in the fact that my early guesstimate for +75k in today’s jobs report for February (8:30amET) is exactly where consensus landed. I think there is more upside than downside based upon what little we can track into it, but the much stronger numbers are likely later. The point is about the direction after Canada lost 213k jobs in January due to COVID-19 restrictions particularly in Ontario and Quebec. The slightly trimmed range of estimates for today is about +25k to +200k. The 95% confidence interval on the Labour Force Survey’s jobs estimate is +/- 57,600, so statistically speaking our guesses won’t face a statistically significant hit/miss unless we’re getting down toward no change or a drop or above around 130k.
Canada has far fewer advance signals on jobs than the US, but here’s what we can point toward, as previously written in the week ahead article:
- Ontario/Quebec relaxed some restrictions between LFS reference periods which in this case is the difference between the week of February 15th–19th and January 11th–15th.
- The BoC’s new high frequency provincial stringency indices that measure restrictions confirm this easing into the February reference week (chart 1).
- Mobility readings picked up by more than the improvement in the stringency indices in the biggest cities of Toronto, Montreal and Vancouver (charts 2–4). The measures had generally gotten back toward last Fall’s levels before second wave clampdowns.
- Google searches for employment insurance program info were flat to slightly lower (ie: no increase in cuts). See chart 5.
- Small business hiring plans over the next 3–4 months improved a bit (chart 6).
- The Ivey employment subindex sharply rebounded in February from below-50 readings that signalled employment losses to +54 for the hiring index in February (ie: renewed growth in hiring, but unweighted). See chart 7.
UNITED STATES
US releases will be light and focused on producer prices during February (8:30amET) and the University of Michigan’s consumer sentiment reading for March (10amET).
Core producer prices are expected to accelerate by the fastest pace since early 2019 and not just due to base effects as the prior month had registered a 1.2% m/m jump for the fastest rise in many years. Chart 8 shows the sharp recent acceleration in producer prices excluding food and energy which generally confirms guidance in surveys like the ISM reports that indicate rising price pressures across supply chains.
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