The Week ahead- US non-farm payrolls, RBA and Bank of Canada, China trade and GameStop result.
US non-farm payrolls (Nov)- 08/12-
The October jobs report marked the first time this year that the headline figure fell below market expectations, signalling a slight slowdown in the resilient US economy. With job growth easing to 150k and the unemployment rate inching up to 3.9%, it suggests a moderation that aligns with the preferences of the US central bank. Weakening indicators like the ADP report and softer ISM services survey indicate a shift in market sentiment, now contemplating not further rate hikes but rather the timing of potential rate cuts. The Federal Reserve faces the challenge of sustaining the “higher for longer” rates stance, supported by elevated JOLTS job openings and consistent weekly jobless claims around 210k. While expectations for November suggest the addition of 200k jobs, the holiday season’s customary hiring surge might delay any signs of strain in the US labour market until 2024.
RBA rate decision- 05/12-
In November, the Reserve Bank of Australia (RBA) opted to deviate from its counterparts, raising rates by 25bps to 4.35% after maintaining them at 4.10% for five months. The adjustment in guidance from considering “further monetary tightening may be required” to questioning “whether monetary tightening may be required” hinted at a potential endpoint for hikes, prompting a notable drop in the Australian dollar. Despite global signs of slowing inflation, the RBA sought to align its rate policy with peers, perhaps driven by concerns about domestic inflationary pressures. While China’s economic indicators show modest improvement due to incremental stimulus measures, Australia’s economic resilience is evident with an unexpected rise in headline CPI and Q2 GDP exceeding forecasts at 0.4%. The upcoming policy review is not anticipated to bring changes, but former RBA staff members speculate on a potential additional rate hike should wage growth persist.
China trade (Nov)- 07/12-
The recent release of Chinese Q3 GDP figures indicates a modest uptick in economic activity, suggesting an improvement in the foundational elements of the Chinese economy. While October trade statistics support this notion by reflecting a slight improvement, they do not negate the ongoing challenge of subdued domestic demand persisting for the past six months. In a positive development for the Chinese economy, October import data marked a departure from 10 consecutive negative months, rising by 3%, hinting at a potential return of domestic demand and surpassing expectations of a 5% decline. However, a more significant concern arises from a larger-than-expected drop in exports, declining by –6.4 % for the sixth consecutive month, indicating persistent weakness in global demand, with no imminent signs of improvement.
Bank of Canada rate decision- 06/12-
No adjustments are anticipated in monetary policy, as the central bank is expected to maintain the current interest rates at 5%. Over the last three months, the economy has shown no signs of growth. In the October jobs report, there was an increase of 17.5k jobs, all of which were part-time positions. However, full-time employment witnessed its first decline in job growth since May, with a decrease of -3.3k jobs. Additionally, the unemployment rate climbed from 5.5% to 5.7%, reaching its highest level since January 2021. Notably, there is a diminishing trend in inflationary pressures, with core CPI on the median slipping from 3.9% to 3.6% in October.
GameStop Q3 24- 06/12-
GameStop shares have experienced a gradual decline over the past six months since reaching a seven-month high in June. The positive momentum during the summer followed the gaming company’s unexpected quarterly profit announcement at the end of the previous year, supported by a $4.5 million boost from the sale of certain digital assets. While cost-cutting measures and divestment from non-core markets have shown success, some unfavourable decisions, such as a partnership with the failed crypto exchange FTX and involvement in the NFT market downturn, have hindered progress. GameStop returned to a loss of 14 cents per share in Q1, amounting to $50.5 million, with net sales falling short at $1.24 billion. In Q2, there was a slight improvement from the previous year, with revenues reaching $1.16 billion, and losses narrowing to 0.03 cents per share. Recent share price surges occurred as option traders purchased a significant number of inexpensive call options with strike prices of $20 and above, anticipating favourable Q3 results. Expectations for Q3 include unchanged revenues at $1.18 billion, with anticipated losses of 0.08 cents per share.