Weekly Outlook: Federal Reserve's eagle eye on US jobs data

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02 October 2022

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Monday 3 October

– Full-year results from Joules
– Japanese Tankan (or Short-Term Economic Survey of Enterprises in Japan, to use its full name)
– Purchasing managers’ indices (PMIs) for manufacturing industries from Asia, Europe, the UK and US
– US car sales

Tuesday 4 October

– Trading statement from Greggs
– Interest rate decision from the Reserve Bank of Australia
– US factory orders
– US jobs data

Monthly US jobs data will be released throughout the week, starting on 4 October with the job openings and labour turnover survey, followed by the ADP national employment report on the 5; the challenger, gray and Christmas job losses survey on the 6; and the official US non-farm payrolls numbers on Friday.

According to AJ Bell’s investment director Russ Mould, and financial analyst Danni Hewson, the latest US job figures will dominate the attention of the markets as it could influence interest rate rises from the Fed.

Mould and Hewson said: “If unemployment stays low and wage growth stays firm, then the US Federal Reserve is likely to keep raising interest rates and stay the course on its $95bn-a-month Quantitative Tightening programme.

“The Fed has already jacked up interest rates from 0.25% to 3.25%, their highest level since 2008, and markets have begun to price in further increases to 4.5% or even 4.75% by May 2023, with the first cuts coming in early 2024.”

Wednesday 5 October

– First-half results from Vertu Motors
– Trading statement from Topps Tiles
– Interest rate decision from the Reserve Bank of New Zealand
– Tesco half year results

Tesco’s half-year results are due to be released on Wednesday. Shares in the FTSE 100 company have dropped by just over 10% in the past year, with most of that decline coming in the last month. Mould and Hewson attribute the fall to the weakened pound and declining confidence in the global stock markets more generally.

Mould and Hewson said: “In terms of company-specific issues, shareholders may be fretting a little about ongoing competition in the grocery business. According to Kantar Worldpanel Tesco’s market share is a still-market-leading 26.9%, but that is down from 27.3% one year ago as the discounters Aldi and Lidl have continued to gobble up share.

“That price competition is coming at an awkward time because the weaker pound, rising utility bills and higher pay for staff may mean Tesco would like to compensate for those costs with higher prices – while still providing value for its customers. This is a difficult balancing act.

“Analysts and shareholders will therefore study the Tesco statement very carefully for comments on input costs, pricing and margin strategies, as well as looking out for how they may be impacting the reported numbers,” Mould and Hewson added.

According to Hargreaves Lansdown equity research assistant, Charlie Williams, investors will also look for signs of the impact of the cost-of-living crisis on consumer demand.

Williams said: “Sales at Tesco’s supermarkets have showed resilience, particularly in Europe, but as consumers start trading down to cheaper alternatives, we’d like to see what impact this has had on sales at the half year mark.

“Investors will also be interested to hear how the Invest to Save programme is going. The three-year programme aims to save roughly £1bn and could be the silver lining that gives management confidence in keeping a floor under operating profits. The expectation remains optimistic, but next week should reveal the full impact.”

– Purchasing managers’ indices (PMIs) for services industries from Asia, Europe, the UK and USA
– US oil inventories
– OPEC+ meeting
– In the US, quarterly results from Keurig Dr Pepper