ON DECK FOR FRIDAY, OCTOBER 10
KEY POINTS:
- Global markets playing defence
- Canadian jobs preview
- PM Carney to make cost of living announcement
- US UofM sentiment due
- BLS commits to month-end CPI regardless of shutdown
- Unconfirmed list of 5 Fed Chair candidates
- Yen merely wobbled on political risk
- BCRP walked a fine line amid political instability
- NOK softens on weaker CPI
Markets are playing a bit of defence this morning with sovereign bonds broadly bid across major markets as benchmarks rally by up to a small handful of basis points. Stocks are little changed across US and Canadian futures and European cash markets after a sell off across key Asian bourses such as 1%+ drops in Tokyo and Hong Kong. A combination of overnight developments and cautious positioning into next week’s US earnings season with a focus on financials may be the culprits for the cautious tone. Canadian bond markets shut early at 1:30pmET ahead of Thanksgiving. There is no (official) early close for equities or others.
CANADIAN JOBS PREVIEW
Canadian jobs will be the main event across our footprint markets this morning (8:30amET). It’s the last job report before the BoC’s next decision on October 29th. Consensus is highly incomplete for some reason with only 9 entries to Bloomberg’s survey and missing entries from several major shops. See my weekly for a fuller preview.
Estimates are all over the map for a noisy household survey that has a 95% confidence interval of +/-57k around estimated monthly changes in employment. The highest is a gain of 20k with the lowest being a loss of 50k (Scotia) and a median estimate that is basically flat (5k). Four estimates are negatives and five are positives but only two of those five are meaningfully positive.
Here are summary points from my fuller preview:
- Hiring momentum has been lost with over 100k losses over the prior two months which carries information in the trend.
- Statcan’s panel rotation methodology across regions and industries rotates out the first of six-months of the sample and rotates in one new month each iteration. This creates what has long been felt to be some correlated sampling persistence in the hiring trend from month to month by repeatedly being weighted toward developments in the same local industries and regions.
- SA factors may be slowly drifting back toward historical averages with less skewness to the conditions of the pandemic. That would mean shaving a meaningful amount from seasonally adjusted jobs.
- September is usually a down-month for seasonally unadjusted employment. Paired with the prospect of mean reversion in the SA factors could drive a weak SA figure. There may even be downside to my estimate with chart 1 showing scenarios for different NSA changes and SA factors within the sample of reasonable possibilities.
- ‘Indeed’ job postings are trending below the long-run average. Small business are signalling less hiring appetite and more plans for letting workers go in the CFIB’s survey. S&P PMIs indicate downside to employment in both the services and manufacturing sectors.
- The Canada Post strike is not a factor. It arrived after the September LFS reference week which is the week that includes the 15th day of each month.
- Last, forget revisions in Canada’s case. Barring errors, Canada does not revise jobs on a monthly basis. It generally does so once a year at the beginning of the year when SA factors are revisited and then once every five years when new population counts are available in the Census as it did this past January.
PM CARNEY TO MAKE COST-OF-LIVING ANNOUNCEMENT
Also, last evening, the PM Carney's office sent out a notice about a 9amET press conference to "make an announcement on new measures to bring down costs for Canadians" alongside FinMin Champagne. When they have previously made such announcements it has been to deliver the tax cut to lower-income brackets, to eliminate or reduce the GST on first-time home buyers' around price thresholds, and to axe the consumer portion of the carbon tax. Those were all billed as "bringing down costs for Canadians."
Expect a lot of this between now and November 4th. The federal government's typical playbook is to announce most things before the budget in order to lessen surprises on game day. There are lots of teasers and advance releases coming over the next three weeks.
LIGHT US DATA
UofM consumer sentiment for October arrives this morning (10amET). It has been trending lower this year. Watch measures of inflation expectations notwithstanding my usual points about how unreliable they are.
BLS COMMITS TO MONTH-END US CPI
The BLS is reportedly calling back staff to work on the September CPI release because Q3 data is necessary to set cost of living assumptions for payments next year. They have committed to releasing the report by month-end. It was previously scheduled for next Tuesday but clearly that wasn’t going to happen given the shutdown. There is no guidance on nonfarm payrolls likely because the COLA requirement for CPI makes it unique.
FED-FIVE LIST
CNBC indicated that the list of five finalists for Fed Chair includes Governor Waller, former Governor Warsh, White House official Kevin Hassett, Governor Bowman and BlackRock CIO Rieder. I would think that the more qualified candidates with economist credentials who are more likely to be viewed as more independent of the administration would be Waller and Warsh. The report indicated that the Chair would first be nominated as a Governor. It’s unclear that the process led by Treasury Secretary Bessent matters given earlier reports that Trump’s personal list was narrower than five.
YEN MERELY WOBBLED ON JAPAN’S COALITION COLLAPSE
Japanese markets have so far taken the apparent collapse of an element of the ruling coalition largely in stride. The yen reacted within a narrow range of 152.60–152.90 when the headlines hit. A junior coalition partner—the Komeito party—withdrew support from the Liberal Democratic Party as its newly elected leader Sanae Takaichi is on the path to being confirmed as Japan’s new PM. Komeito was unsatisfied that the LDP was doing enough to regulate political donations. It may not be impossible that negotiations continue into next week notwithstanding Komeito’s stated refusal to do so. The withdrawal of support may complicate Takaichi’s path to becoming PM and future votes on fiscal plans.
BCRP WALKING A FINE LINE AMID POLITICAL INSTABILITY
Peru's central bank held its reference rate at 4.25% as unanimously expected last evening. An impeachment vote unanimously ousted President Dina Boluarte overnight. Markets will be left debating forward guidance amid low inflation, and whether the BCRP’s hold decision was delivered cautiously against the political backdrop of a change in government into the likelihood that a new central bank president will need to be appointed next year.
NOK SOFTENS ON WEAKER CPI
Norway’s krone is among the underperformers to the dollar this morning after core CPI came in a tick beneath expectations at 3% y/y.
DISCLAIMER
This report has been prepared by Scotiabank Economics as a resource for the clients of Scotiabank. Opinions, estimates and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. Neither Scotiabank nor any of its officers, directors, partners, employees or affiliates accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents.
These reports are provided to you for informational purposes only. This report is not, and is not constructed as, an offer to sell or solicitation of any offer to buy any financial instrument, nor shall this report be construed as an opinion as to whether you should enter into any swap or trading strategy involving a swap or any other transaction. The information contained in this report is not intended to be, and does not constitute, a recommendation of a swap or trading strategy involving a swap within the meaning of U.S. Commodity Futures Trading Commission Regulation 23.434 and Appendix A thereto. This material is not intended to be individually tailored to your needs or characteristics and should not be viewed as a “call to action” or suggestion that you enter into a swap or trading strategy involving a swap or any other transaction. Scotiabank may engage in transactions in a manner inconsistent with the views discussed this report and may have positions, or be in the process of acquiring or disposing of positions, referred to in this report.
Scotiabank, its affiliates and any of their respective officers, directors and employees may from time to time take positions in currencies, act as managers, co-managers or underwriters of a public offering or act as principals or agents, deal in, own or act as market makers or advisors, brokers or commercial and/or investment bankers in relation to securities or related derivatives. As a result of these actions, Scotiabank may receive remuneration. All Scotiabank products and services are subject to the terms of applicable agreements and local regulations. Officers, directors and employees of Scotiabank and its affiliates may serve as directors of corporations.
Any securities discussed in this report may not be suitable for all investors. Scotiabank recommends that investors independently evaluate any issuer and security discussed in this report, and consult with any advisors they deem necessary prior to making any investment.
This report and all information, opinions and conclusions contained in it are protected by copyright. This information may not be reproduced without the prior express written consent of Scotiabank.
™ Trademark of The Bank of Nova Scotia. Used under license, where applicable.
Scotiabank, together with “Global Banking and Markets”, is a marketing name for the global corporate and investment banking and capital markets businesses of The Bank of Nova Scotia and certain of its affiliates in the countries where they operate, including; Scotiabank Europe plc; Scotiabank (Ireland) Designated Activity Company; Scotiabank Inverlat S.A., Institución de Banca Múltiple, Grupo Financiero Scotiabank Inverlat, Scotia Inverlat Casa de Bolsa, S.A. de C.V., Grupo Financiero Scotiabank Inverlat, Scotia Inverlat Derivados S.A. de C.V. – all members of the Scotiabank group and authorized users of the Scotiabank mark. The Bank of Nova Scotia is incorporated in Canada with limited liability and is authorised and regulated by the Office of the Superintendent of Financial Institutions Canada. The Bank of Nova Scotia is authorized by the UK Prudential Regulation Authority and is subject to regulation by the UK Financial Conduct Authority and limited regulation by the UK Prudential Regulation Authority. Details about the extent of The Bank of Nova Scotia's regulation by the UK Prudential Regulation Authority are available from us on request. Scotiabank Europe plc is authorized by the UK Prudential Regulation Authority and regulated by the UK Financial Conduct Authority and the UK Prudential Regulation Authority.
Scotiabank Inverlat, S.A., Scotia Inverlat Casa de Bolsa, S.A. de C.V, Grupo Financiero Scotiabank Inverlat, and Scotia Inverlat Derivados, S.A. de C.V., are each authorized and regulated by the Mexican financial authorities.
Not all products and services are offered in all jurisdictions. Services described are available in jurisdictions where permitted by law.