March 9, 2018
Strong U.S. job growth forecast; unemployment rate seen at 4 percent
U.S. job growth likely rose at a brisk clip in February and probably pushed down the unemployment rate to a more than 17-year low of 4.0 percent, but wage gains are expected to have slowed after three straight months of strong increases. The closely watched employment report from the Labour Department on Friday is expected to underscore the economy’s strength and bolster expectations that the Federal Reserve will raise its interest rate forecasts for 2018. U.S. financial markets have almost priced in an interest rate increase at the Fed’s March 20-21 policy meeting. The Fed is currently anticipating three rate hikes this year. “A stronger jobs report with another healthy crop of wage gains increases chances that the Fed may add a fourth rate hike before year’s end,” said Beth Ann Bovino, U.S. chief economist at S&P Global Ratings in New York. Nonfarm payrolls probably increased by 200,000 jobs last month amid unseasonably mild weather, according to a Reuters survey of economists, after a similar gain in January. That would be above the monthly average of 181,000 jobs in 2017 and the about 100,000 jobs per month needed to keep up with growth in the working-age population. Average hourly earnings are forecast rising 0.2 percent in February. Average hourly earnings rebounded strongly after a surprise drop in October, rising 0.3 percent in November. That was followed by increases of 0.4 percent in December and 0.3 percent in January.
ECB Outlook Is Said to See Solid Growth Similar to December View
The European Central Bank’s new forecasts will show growth and inflation similar to the picture of solid economic momentum seen three months ago, according to euro-area officials familiar with the matter. The prediction for 2018’s expansion has been raised by 0.2 percentage point, the people said, asking not to be identified because the information is confidential. They said the adjustments to the projections are largely due to rounding and also result in a slightly more pessimistic view of inflation next year. The numbers aren’t final until they are revealed by ECB President Mario Draghi at a press conference in Frankfurt at 2:30 p.m. An ECB spokesman declined to comment. The ECB’s forecasts in December saw gross domestic product rising 2.3 percent in 2018, before cooling somewhat in subsequent years. Inflation at the time was predicted to pick up very gradually from an average of 1.4 percent this year. The minor tweaks to the numbers mean the Governing Council has little reason to deviate from its plan to move only very gradually toward unwinding stimulus. Economists predict a first change in guidance on asset purchases and interest rates in June, and say bond buying will come to a halt by the end of the year. While the outlook for the economy hasn’t changed much, a key risk the ECB identified in January has materialized in the form of U.S. President Donald Trump’s intention to impose trade tariffs. No ECB policy maker has publicly commented on the proposed measures, which were announced during the central bank’s one-week quiet period before Thursday’s policy announcement.
Bond Trading Tumbles in India as Banks Stare at $3 Billion Loss
Traders in India are having a hard time selling bonds. That’s because state-run banks, the biggest holders of sovereign debt, are in no mood to buy after a seven-month carnage inflicted losses worth billions of rupees on their books. Such lack of participation has caused the average trading volume on the Reserve Bank of India’s platform to nearly halve to 280.4 billion rupees ($4.3 billion) since Jan. 1, from the same period last year. “The return of state-owned banks is critical, especially for the next fiscal year’s borrowing program to go through,” said Lakshmi Iyer, chief investment officer for debt at Kotak Mahindra Asset Management Co. in Mumbai, which oversees close to the equivalent of $19 billion. “We need demand levers in the market.” Government banks are staring at a potential mark-to-market loss of 200 billion rupees ($3 billion) in the March quarter, three times more than in the period to December, according to a Credit Suisse Group AG report this week.