The US employment report and ISM manufacturing will wrap up a busy week

Market movers today

• The US employment report and ISM manufacturing will wrap up a busy week. We look for a rise of 250k in total payrolls, a bit higher than consensus of 225k. Jobless claims and other labour market indicators paint a fairly robust picture of the US labour market and we look for a rise of 250-300k per month over the coming quarters. The unemployment rate will also be in focus. We expect it to be unchanged at 6.1% following the decline in June from 6.3%. If unemployment continues to decline at the rate seen over the past two years, it will hit the Fed's estimate of long-term unemployment of 5.4% in Q2 next year. Also keep an eye on hourly earnings growth in the employment report. It has remained subdued around 2% for a long time and is a sign for the Fed that there is still plenty of slack in the labour market.

• We look for the ISM manufacturing index to rise slightly to 56.0 from 55.3. This is in line with consensus and reflects a further slight improvement in US production supported by strong consumer goods demand over the past months.

• US consumer spending and core PCE deflator will also be in focus. We look for a decent rise in personal spending of 0.5% m/m and for a rise of 0.1% m/m in the core PCE deflation (in line with consensus).

• Finally we have final PMI data out of the euro-zone (with more country details) and the UK releases PMI manufacturing.

• In the Scandi markets focus will be on the release of July’s PMI in Sweden and PMI and unemployment in Norway. For more on Scandi markets see page 2.

Selected market news

The release of the Chinese NBS manufacturing PMI was a small positive surprise to us and the market. The index scored 51.7 in July, an increase from 51.0 in June and higher than our forecast of 51.3. The strong release further adds to our view that the Chinese economy now has moved to a phase of moderate recovery and that we should expect a further acceleration of growth in the third quarter. The ongoing recovery of Chinese growth is overall positive for sentiment regarding emerging markets and also demand for commodities, in particular demand for base metals.

In Japan, the manufacturing PMI for July, on the other hand, was a mild disappointment. The index dropped to 50.5 from 50.8 in June, below our expectation of an unchanged index in July. This does not change our overall view that the pace of expansion in the Japanese economy does not warrant further monetary easing from Bank of Japan. However, if further easing should be needed, Bank of Japan stands ready to step in. That was the message from governor Kuroda who spoke this morning and further said that the central bank is only half way in achieving its price target.