Here's your quick guide to Friday's jobs report

• Elena Holodny and Akin Oyedele

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Get ready for jobs day.

On Friday at 8:30 a.m. ET, the Bureau of Labor Statistics will release the January jobs report.

Via Bloomberg, here's what Wall Street is expecting:

• Nonfarm payrolls:+190,000
• Unemployment rate: 5.0%
• Average hourly earnings month-on-month: 0.3%
• Average hourly earnings year-on-year: 2.2%
• Average weekly hours worked: 34.5

Last month, the US labor market was on fire as the economy added 292,000 jobs. But after the rocky month for stocks, less-than-stellar corporate profits, and continued lower oil prices, many economists aren't expecting a repeat slam dunk in January.

"While the pace of employment gains remains about the level needed to absorb slack in the labor market, January is expected to be the weakest month since last September, which incidentally preceded the Fed's decision to forgo hiking rates," wrote TD Securities' David Tulk."As domestic momentum slows, we expect the pace of job growth to reflect some of the strains emerging in the economy."

"Labor market indicators were weaker in January, with declines in the employment components of both the ISM manufacturing and non-manufacturing surveys and rising jobless claims," wrote Goldman Sachs' John Hatzius.

Notably, as Business Insider's Akin Oyedele observed, although Goldman Sachs usually outlines reasons why a jobs report could be strong, neutral, or weak, their latest preview did not include anything on why the report might be great — which further suggests that analysts aren't feeling so great about Friday's report.

Keep your eyes on manufacturing

Economists are worried about one part of the jobs report in particular: manufacturing.

"Incoming data continue to suggest that the manufacturing sector remains hampered by weakening demand due to lower oil prices and the stronger dollar while the rest of the economy is resilient," writes a Nomura's Lewis Alexander. 

"As such, we expect manufacturing payrolls to recede by 5k jobs and the bulk of the job gains to come from the service providing sector."

He outlined some of the recent ugly data with respect to manufacturing:

"Employment indicators from manufacturing surveys have been negative. The national ISM manufacturing employment index declined further in January to 45.9 from 48.0, implying employment contracted at a faster pace in January compared to December. The Chicago PMI employment indicator improved but remained below 50 at 48.9 in January. The number of employees index from the Empire State survey remained at depressed levels, while the comparable index from the Philly Fed survey turned slightly negative after positive readings in the prior two months."

It wouldn't be a proper economics report without the weather

One other factor that could affect the report is the weather, argues Alexander. Specifically the fact that it it finally got cold in January after the unusually long-lasting warm weather in late 2015.

"We find that the unseasonably warm weather in the past several months likely had a positive, albeit transitory, impact on economic activity in late 2015. Our analysis suggests that we should see some reversal in activity in weather-sensitive industries, as weather has returned closer to traditional norms. As such, we see downside risk to job growth in the construction sector and other weather sensitive-sectors," he wrote.

And on a somewhat related note, since the holidays finally ended, some of the sectors picked up speed in November and December may have returned to a more modest pace of hiring.

In particular, Goldman Sachs' John Hatzius pointed to the possibility of a decline in couriers and messengers' employment (i.e. package delivery workers) of about 10-20k.

Seasonal quirk or something bigger?

But most importantly, economists will be looking to see whether the January jobs report is a sign Q4 slowdown is starting to show in the labor market or if this report might just be a seasonal quirk that will be revised up later.

"When the economy is at a turning point, the labor market always responds last, as employers turn to layoffs as a last resort during hard times. This Friday, markets will be watching closely for clues that we’ve successfully dodged yet another possible slowdown," mused Glassdoor's chief economist Andrew Chamberlain.

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The market doesn't think the Fed will raise rates again until 2017

• Myles Udland
 
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The market doesn't think the Fed will raise rates until 2017. 

After the Federal Reserve raised interest rates in December for the first time in nine years the big question was: "When's the next one?"

The most aggressive forecasts for the Fed in 2016 called for four rate hikes, which most assumed would occur in March, June, September, and December — or the four Fed meetings accompanied by a press conference.

Of course, much of the "Fedspeak" we hear around the path of policy emphasizes that the Fed will remain data-dependent and that there is no set course for rate hikes. 

But now the market seems to have pushed out their expectations for a rate hike because of the recent volatility we've seen in global markets since the December move and lackluster economic data in the US. 

Credit Suisse

Kansas City Fed president Esther George earlier this week said, "To a great extent, the recent bout of volatility is not all that unexpected, nor necessarily worrisome, given that the Fed’s low interest rate and bond-buying policies focused on boosting asset prices as a means of stimulating the real economy."

George added that, "As asset prices adjust to the shift in monetary policy, it is to be expected that the pricing of risk will realign to this different rate environment."

This is pretty hawkish talk and suggests that George — who is a voting member of the FOMC — doesn't want to let the market "bully" the Fed into changing course when their view on the economy would otherwise dictate a rate hike. 

But taking the Fed's recent reluctance to move in the face of heightened volatility and the economy's overall sluggish fourth quarter and start to the year, the market is taking the other side of the Fed.

Aggressively. 

SEE ALSO: The recent stock market volatility is 'not all that unexpected, nor necessarily worrisome'

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Citigroup to hire ex-Goldman MD as Japan investment banking head

Citigroup Inc will hire Yusuke Asai, a former managing director at Goldman Sachs Group Inc, as its head of investment banking in Japan.

PHOTO: REUTERS

FEB 5, 20163:06 PM

[TOKYO] Citigroup Inc will hire Yusuke Asai, a former managing director at Goldman Sachs Group Inc, as its head of investment banking in Japan.

Mr Asai, who worked as an investment banker for Goldman Sachs from 2000 to 2013, will also become deputy president at Citigroup Global Markets Japan Inc in April, according to an internal memo obtained by Bloomberg. Mika Nemoto, a Tokyo-based spokeswoman, confirmed the contents of the document.

Mr Asai is the US bank's most senior hire in Japan since it sold its local retail banking and card businesses late last year. At Goldman Sachs, he was a senior banker in the financial institutions group, working on mergers advice and equity and debt financing. He has been chief executive officer at Reinsurance Group of America Inc.'s Japan unit since 2013.

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Sumitomo warns on commodity prices as writedowns mount

FEB 5, 20162:44 PM

[TOKYO] Sumitomo Corp warned it doesn't expect commodity prices to recover over the next two years, after the Japanese trading house swung to a net loss in the third quarter and cut its full-year profit target by more than half due to mounting impairments.

Net income is estimated at 100 billion yen (S$1.2 billion) for the year through March, below its October forecast of 230 billion yen, the Tokyo-based company said in a statement. Sumitomo last month withdrew its profit target after announcing a 77 billion yen writedown on its Madagascan nickel project. The company said Friday that full-year impairments would likely rise to 170 billion yen.

Sumitomo joins a swathe of commodity companies in posting writedowns due to faltering Chinese demand, sliding raw materials prices and the global oil glut. Sumitomo Metal Mining Co, the Japanese smelter that shares the trade house's name, slashed its full-year net income forecast on Friday by 93 per cent to 5 billion yen after posting a charge of 68.9 billion yen on its Sierra Gorda copper mine in Chile, a project in which Sumitomo Corp is a partner.

Sumitomo Corp chief financial officer Hiroyuki Inohara told a briefing in Tokyo that third-quarter impairments totaled 111.6 billion yen, including charges against Sierra Gorda, its South African iron ore business and Madagascan nickel. Further writedowns in the fourth quarter are likely on Australian coal, Brazilian iron ore and its North American pipe business, he said.

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"We don't expect resources prices to recover in 2016 or 2017," said Mr Inohara. "The outlook is getting more uncertain," he said, citing the slowdown in China and flows of capital from emerging markets. Still, the company remains committed to its resources businesses due to the mid to long-term outlook for demand, he added.

Sumitomo Corp is one of Japan's top five general trading houses, known as sogo shosha, that have invested heavily in the energy and metals that fuel Japan's industrial machine. It had anticipated profit would recover by expanding its non-resources businesses, after last year saw a big charge against a US oil project and its first annual loss since 1999.

The company reported a third-quarter net loss of 68 billion yen, from a profit of 28.1 billion yen a year ago, according to its statement, as sales over the nine months fell 9 per cent. Its shares in Tokyo close 4.5 per cent higher, while Sumitomo Metal Mining rose 5.7 per cent.

Earlier this week, JX Holdings Inc., Japan's largest oil refiner, said it expects a US$2 billion impairment on its copper and energy businesses, while last month the world's biggest miner, BHP Billiton Ltd., announced aUS $4.9 billion charge against its US shale unit.

Mitsubishi Corp, Japan's top trading company, left its full-year profit target unchanged, although it said the value of its commodity assets is under review, while No 2 trader Mitsui & Co cut its forecast by 21 per cent. Marubeni Corp, the last of the sogo shosha to report earnings, maintained its net income forecast on Friday and saw its shares jump after it promised higher dividends.

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South Korea central bank: Uncertainty high over China, Japan, North Korea

South Korea's central bank said on Friday it would increase its vigilance in monitoring global markets through the coming five day holiday period from Saturday, citing heightened uncertainty. 

PHOTO: REUTERS

FEB 5, 20162:03 PM

[SEOUL] South Korea's central bank said on Friday it would increase its vigilance in monitoring global markets through the coming five day holiday period from Saturday, citing heightened uncertainty.

In a statement, the Bank of Korea cited factors including uncertainty over risk in the Chinese economy, the effects of the Bank of Japan's adoption of a negative interest rate, weak oil prices and North Korea's planned rocket launch.

It said it was ready to hold a meeting of senior officials on Feb 10, the last day of the Lunar New Year festival, to review the developments during the holiday.

South Korean markets will be closed from Feb 8 and resume trading on Feb 11.

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China foreign reserves head for record drop on yuan defense

China's foreign-exchange reserves, already at a three-year low, are poised to post a second consecutive record monthly drop as policy makers intervene to support the yuan. 

PHOTO: REUTERS

FEB 5, 20161:33 PM

[BEIJING] China's foreign-exchange reserves, already at a three-year low, are poised to post a second consecutive record monthly drop as policy makers intervene to support the yuan.

The central bank will say Sunday that the currency hoard fell by US$118 billion to US$3.2 trillion in January, according to economists' estimates in a Bloomberg survey. That would exceed a record US$108 billion decline in December, which brought last year's total draw-down to more than half a trillion dollars and capped the first annual decrease in the reserves since 1992.

Policy makers are burning through billions of dollars to hold up a weakening currency amid flagging growth and US$1 trillion in capital outflows last year. The yuan sank to a five- year low last month as the People's Bank of China set the reference rate at an unexpectedly weak level, a signal that it's more tolerant of depreciation as growth slows.

"China is facing a significant capital outflow problem," said Krishna Memani, who helps oversee US$217 billion as chief investment officer at Oppenheimer Funds Inc. in New York. "It's an astounding reduction in their capital account position. This is an issue they've been aware of, and they have to find a way of managing it. The economy itself cannot turn this around."

The draw-down has accelerated since the central bank's surprise devaluation of the currency in August. Reserves tumbled US$94 billion that month, a record at the time. Another cut to the yuan's reference rate last month spurred a stock sell-off that has helped push the Shanghai Composite Index down 21 per cent this year and into a bear market.

Beijing's foreign-exchange reserves surged almost 200-fold from US$21.2 billion in 1993 to a peak of almost $4 trillion in 2014. Even after falling 17 per cent since then, the reserves remain the world's largest and are almost triple the level held by No. 2 Japan.

Jian Chang, chief China economist at Barclays Plc in Hong Kong, forecasts a drop of US$140 billion, one of the biggest projected decreases in the survey of economists. Commerzbank AG's Zhou Hao and two others estimate an $80 billion reduction, the smallest in the poll.

"China has enforced many measures to limit capital outflows and plug the leaks in its capital account, which may have reduced the reserves drawdown," Mr Chang wrote in a report this week. "Nonetheless, we think the bias remains for capital to flow out of the country and in turn for a weaker yuan," he said.

China's top economic planner said this week that the growth objective for this year is for an expansion in the range of 6.5 per cent to 7 per cent. The 6.9 per cent expansion in 2015 was the slowest in 25 years. Economists forecast 6.5 per cent growth this year.

"China is under pressure," Chris Leung, a senior economist at DBS Bank Hong Kong Ltd, wrote in a recent report. "Amid increasing uncertainties and market volatilities, the speed of reserves depletion will likely accelerate in the short term."

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IIF blames market malaise on central bank liquidity drought

By

Anthony Rowleybtworld@sph.com.sg

The global slump in the price of stocks and other financial assets comes from a contraction in central bank liquidity, which is likely to continue and drive markets further down, the Washington-based Institute of International Finance (IIF) warned in a report on Thursday. 

PHOTO: EPA

FEB 5, 20165:50 AM

Tokyo

THE global slump in the price of stocks and other financial assets comes from a contraction in central bank liquidity, which is likely to continue and drive markets further down, the Washington-based Institute of International Finance (IIF) warned in a report on Thursday.

It rejected the idea that China's slowdown and an accompanying slide in emerging-market economic activity are the chief factors behind the wider financial market slump, and suggested that the world was in "a crisis of risk appetite" caused by swings in monetary policy.

The IIF report comes as the Bank of Japan (BOJ) and the European Central Bank, among others, step up liquidity injections - moves which the IIF implies are likely to have limited impact in fending off further contraction in global economic activity.

Adding to the litany of suggested risks on the horizon, the IIF warns that the BOJ's move to impose negative interest rates could set off a round of competitive easing among central banks, even as the danger of "flash crashes" in financial markets grows.

Intensive focus on China's economic slowdown has masked the fact that the main driver of market and economic developments since the 2008 financial crisis has been extraordinary monetary policy, including quantitative easing (QE) and negative interest rates.

This has worked primarily by boosting appetite for risk assets, said the IIF, which counts many of the world's leading banks and private financial institutions among its more than 500 members.

Inflated values for these assets have in turn trickled down to stimulate consumption and investment, underpinning a lacklustre recovery.

The IIF report said: "However, trends over the past 12 to 18 months reflect growing signs of an erosion of risk appetite, fed by the perception of deterioration in fundamentals and growth prospects in many economies. This has sparked a correction in asset values so far in 2016 - and suggests a risk of overshooting on the downside. In short, we may be in a crisis of risk appetite."

In the five years following the global financial crisis in 2009, the world's central banks collectively added an average of some US$400 billion in liquidity to global financial markets every quarter through asset purchases, the IIF noted.

Yet, the wealth effect of this liquidity-driven increase in asset value had been small. The lion's share of gains had accrued to the top 10 per cent of the population, which has a relatively low marginal propensity to spend. As a result, economic recovery since 2009 has been anaemic in the US, the weakest in post-war history."

Liquidity injection from central banks worldwide slowed significantly from 2014; there was, in fact, an outright decline between mid-2014 and mid-2015 as foreign-exchange sales by many emerging-market central banks offset the bulk of BOJ and ECB asset purchases.

This reduction in central bank liquidity injection was a primary impetus for the 2015-2016 moderation and subsequent correction in asset prices.

Given "persistent concern about global growth prospects and diminishing scope for further support from central banks, risks remain elevated, particularly as previous corrections have tended to overshoot on the downside".

Further erosion in asset values "would likely be driven by a growing realisation that fundamentals in the global economy have deteriorated noticeably since the financial crisis".

The single most important negative development in terms of economic fundamentals has been a "clear and persistent slowdown in productivity growth in both mature and emerging market economies", said the IIF.

Seven years of plentiful central bank liquidity and zero interest rates - in fact, about US$5.5 trillion, or a quarter of mature market sovereign bonds now have negative yields - has spawned a difficult challenge for policymakers.

"Further monetary easing - or more competitive easing - would bring progressively smaller benefits while adding to the risk of fostering financial distortion and excess. In addition, the prospect of sustained slow growth will create significant social and political tension, adding to the negative effect of interconnecting geopolitical risk and events."

Meanwhile, slowing potential growth, in turn, makes the record level of debt in mature and emerging market countries even more pernicious. "Poor fundamentals, especially declining corporate earnings and weakened credit quality as well as the debt overhang, will not sustain any meaningful recovery in asset values in the foreseeable future."

All this "could substantially increase market volatility, raising the risk of flash crashes, given already-fragile liquidity conditions in financial markets", the report said. In the meantime, the debt time bomb is ticking.