Analysts at Nomura explained the key events ahead this week when markets return from holidays in the US.
Key Quotes:
“We will receive the first round of key economic indicators for May next week, including the May ISM manufacturing survey and employment report. We expect a robust 205k increase in nonfarm payroll employment (NFP) in May, along with a 0.2% m-o-m increase in average hourly earnings (AHE) and an unchanged unemployment rate at 3.9%. For ISM manufacturing, we expect a modest improvement relative to April as trade concerns may have ebbed somewhat during the month, consistent with regional manufacturing surveys in May.
Elsewhere, we expect a below-trend 0.1% (0.132%) m-o-m increase in core PCE inflation during April based on incoming CPI and PPI data. On a 12-month basis, this would translate into a 1.8% (1.830%) increase, down from 1.9% in March. Incoming data this week were largely in line with our expectations. New home sales decreased during the month but maintained a solid pace this year. Some of the recent stability in new home sales may be related to consumers moving to “lock in” current mortgage rates before they increase further.
Existing home sales were also weak in April as inventory constraints continue to disrupt that segment of the housing market. The preliminary report on durable goods orders in April indicates a pickup in industrial activity, consistent with other incoming data on Q2. However, risk remains that businesses will respond negatively to material escalation in trade tensions. Further, the recent softening in future capital expenditures index in the Philly Fed survey in April along with a continued deceleration in growth of core capital goods orders, portends this risk.”
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