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- Expectations for relative Mid-East calm and a US bank holiday imply a seemingly calm start to the week.
- The FOMC Meeting Minutes stand out as investors fear higher rates for longer.
- Jobless claims and forward-looking PMIs promise a turbulent Thursday in markets.
Only three? Yes, this week is lighter on big events – and begins with a US bank holiday on Monday. The Middle East could always provide surprises, but the chances of big developments this week are lower. A senior Israeli minister warned that without the release of hostages before the beginning of Ramadan on March 10, the military would enter Rafah, the last major town at the southern tip of the Gaza Strip. This stated deadline means a lower chance of action now.
That leaves US developments to dominate the scene. Here are the main events for the week:
1) FOMC Meeting Minutes
Wednesday, 19:00 GMT. The Federal Reserve clarified that it intends to leave rates unchanged in March, contrary to market hopes for a cut. Fed Chair Powell downed markets in the latest decision in late January; since then, data has been strong. Bond markets seem to have received the message, but stocks remain elevated. The bank might prefer to reiterate these hawkish messages in the minutes – which are redacted until the last moment to convey a message to investors.
If the tone is hawkish, stocks would slide, Gold would struggle, and the US Dollar would rise. However, such a move would not last too long, as a slow path of rate cuts is already priced. If the bank surprises with a relatively calm or even dovish message, there is room for the US Dollar to fall, Gold to rise, and stocks to surge. In such a case, which is less likely, the move would be sustained, as it would surprise markets.
2) Jobless claims
Thursday, 13:30 GMT. The absence of big events allows this weekly barometer of the labor market to shine. Fed officials would begin slashing rates faster if unemployment rises. The economic calendar points to a minor advance from 212K to 217K. A jump to 230K or above would create worries of a downturn – and hopes for rate cuts. A drop to 200K or below would cause the labor market to remain resilient and depress any hopes for earlier cuts.
3) Flash PMIs
Thursday, 14:45 GMT: S&P Global’s forward-looking surveys may provide some clues about the direction of the US economy. The Manufacturing Purchasing Managers’ Index stood at 50.7 points in January, close to the 50-point threshold separating expansion from contraction. The Services PMI stood at 52.5. If both dip below 50, it would create worries about a recession and hopes for lower rates. If both hold up or rise, it would show resilience.
I expect upbeat figures, with manufacturing potentially catching up with services, as investment in the industry remains robust.
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