Friday preview: Non-farm payrolls, UK services PMI, Smith & Nephew, TP ICAP
Friday completes a busy week with some key macroeconomic data in the form of a UK services sector survey and US non-farm payrolls, with results in London from the likes of Smith & Nephew and TP Icap.
Also in macro action there will be China’s remaining purchasing managers' index data for October and Canada's labour market data more closely followed due to the greater focus on these numbers from the Bank of Canada.
Coming a day after President Donald Trump unveils his full tax plans and nomination for new Federal Reserve chief, and as he departs on an 11-day trip to Asia, the global headline news is likely to be the employment report in the US, including the latest monthly payroll number, unemployment rate, average wages and labour force participation rate for October.
The previous month, non-farm payrolls fell 33,000 with the effects of Hurricanes Irma and Harvey knocking employment down sharply in Florida and by a similar but smaller amount in Texas.
With the majority of workers displaced by the storm or prevented from working back at work in October, the monthly increase in payrolls is expected to increase by an unusually massive outturn of 312,000.
The range of economist estimates for this non-farm print was very wide, noted Kathleen Brooks at City Index, with a lowest estimate of 120k and highest of 400k.
"Thus, we would view all predictions with a pinch of salt this month, and Friday’s reading could trigger a whipsaw market reaction when the data comes out."
She added that the dollar index has faltered at the 95.00 mark in the lead up to this NFP report, "suggesting that this month’s NFP data has the potential to give the dollar some much needed direction, as the long as the number isn’t considered sullied by the hurricane adjustments".
Brooks pointed out that the most closely correlated asset class with NFPs were USD/JPY and GBP/USD, with stocks and Treasury yields have no significant correlation of note.
HSBC was expecting this month's release to shed some light on whether the sharp 0.5% rise in average hourly earnings in September was partly distorted by the hurricanes.
Average earnings are expected to rise 0.2% month-on-month and 2.6% year-on-year, according to the consensus, down from 2.9% in September, while the unemployment rate is forecast to remain at 4.2%, as per the consensus, though HSBC was one of several predicting a rise to 4.3%.
The UK services PMI is expected to be comfortably in growth territory above 50, but is forecast to slip further behind its long-run average for October.
Services PMI has traded in a narrow range between 53.2 and 53.8 since May, in September ticking up from 53.2 to 53.6.
"However, most other indicators in the survey, including the forward-looking 'future business' index, fell back, while input prices accelerated," HSBC said. "Given concerns about future business and rising prices, we expect a modest fall in services activity in October."
RBC Capital Markets said another slight moderation of growth for the services sector leaves just the manufacturing PMI at a historically elevated level as the country begins the fourth quarter after an upside surprise in Q3, where growth was 0.4% on the quarter.
In company news, Smith & Nephew releases a third quarter statement with revenue numbers only, with a company compiled consensus forecast for the quarter of $1.16bn.
Rvial Johnson & Johnson reported a 30 basis point impact on global medical tech sales from the impact of hurricanes on surgery in the quarter, alongside slower US hospital admissions in down and surgical procedures down about 2.5%.
Broker Numis therefore anticipated a softer US surgical market backdrop for the quarter for S&N, "although we may receive an indication as to whether to expect a rebound into the traditionally stronger Q4 from delayed surgeries".
Points of interest were suggested as whether the company will see a benefit in its wound care business from disruption at Convatec and any update in terms of CEO succession following the recent announcement of Olivier Bohuon’s retirement by the end of 2018.
Deutsche Bank lowered its EPS estimates for 2017-19 by 1% due to the impacts of hurricanes in the US and said it expected investors to focus on the extent of improvements in hips, knees, arthroscopic technology and wound care.
TP Icap also reports a third quarter trading update, with comparative numbers from last year not having been published before.
Analysts at Barclays observed that the FX benefit has started to unwind compared to last year and that July to September has seen low levels of market volatility.
Therefore they projected 2.5% headline revenue growth to £418m versus +12% headline growth in the first half and +3% at constant FX.
House broker Numis estimated Q3 revenues will be "largely unchanged" year on year on a pro-forma constant currency basis, slightly slower than the 3% achieved in the first half but in line with the 1% revenue growth it is currently forecasting for 2017.
"Furthermore, now that we have passed the anniversary of the GBP weakness post-Brexit we expect total income growth (incl. FX) to have slowed on a pro-forma basis from the 12% achieved in H117 to low single digits. "
Friday 03 November
INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Balance of Trade (US) (13:30)
Factory Orders (US) (15:00)
ISM Non-Manufacturing (US) (15:00)
Non-Farm Payrolls (US) (13:30)
PMI Composite (US) (14:45)
PMI Services (US) (14:45)
Unemployment Rate (US) (13:30)
UK ECONOMIC ANNOUNCEMENTS
Halifax House Price Index (08:30)
PMI Services (09:30)
TRADING ANNOUNCEMENTS
Smith & Nephew, TP Icap
SPECIAL DIVIDEND PAYMENT DATE
F&C UK High Income Trust , River and Mercantile Group
AGMS
Frontera Resources Corporation (DI), Gunsynd
FINAL DIVIDEND PAYMENT DATE
Murgitroyd Group
INTERIM DIVIDEND PAYMENT DATE
Andrews Sykes Group, Arena Events Group , BBA Aviation, Bodycote, Cello Group, CRH, F&C Private Equity Trust, Fisher (James) & Sons, ICG Enterprise Trust, Johnson Service Group, Judges Scientific, M. P. Evans Group, OneSavings Bank, Rightmove, SIG, Taylor Wimpey, Unite Group, Weir Group
QUARTERLY PAYMENT DATE
F & C UK High Income Trust