Macroeconomics: The Day Ahead for 23 October

There is a slightly busier though largely second division run of statistics, but the run of trade and geopolitical news and developments overnight relegates that schedule to the sidelines for markets. As expected the Bank of Korea held rates overnight, but unexpectedly kept the door to a further rate cut open. That is accompanied by a smattering of ECB speakers, and perhaps more poignantly a two day EU leaders summit, which may be long on rhetoric, above all on the increased US pressure on Russia about Ukraine, but likely to continue to highlight ongoing paralysis on much needed economic and legislative reforms. The surprise jump in French Manufacturing Confidence (101 vs. expected 96) and related sub-indices looks rather anomalous, given the desperately poor state of French politics, particularly given the setback in Services confidence, and may raise questions about survey participation and data collection, as the sector sub-indices have been notably more volatile over the past year. Outside of that, there are the UK’s CBI Industrial Trends survey, Mexico’s mid-month CPI and US Existing Home Sales, which are expected to post a modest 1.5% m/m increase, but remain at a relatively subdued SAAR pace of 4.06 Mln, hampered by affordability and high mortgage rates issues. US corporate earnings highlights have a fairly strong resource sector feel, with Beker Hughes, Ford, Freeport McMorRan, Newmont Mining and Valero Energy among the highlights, as the Tesla results continue to be digested.

Governments in Central and Eastern Europe will welcome the underlying frustration on display as the US administration placed sanctions on Russia’s oil majors Rosneft and Lukoil with a degree of ‘we told you not to trust Russia, and you did not listen’. Russia’s bifurcated reaction to the US and accompanying EU sanctions underlines that it is much more fearful of US measures and largely dismissive of anything the EU puts in place. The latter more than likely predicated on more than ample evidence that while direct trade volumes between Russia and the EU have plummeted, trade via third countries in Eurasia and Central Asia has ballooned. As for US-China trade relations, the messaging remains very ambiguous – e.g. talk of US limiting exports of software to China needing to be balanced against the confirmed October 24-27 bilateral talks in Malaysia, and both the White House and the Treasury talking up the chances of a bilateral trade deal – in other words, this is largely posturing.

At the time of writing, China has just published the outlines of its 2026-30 following this week’s CCP Fourth Plenum, the initial headlines contain few if any surprises, stressing greater self-sufficiency and reliance, emphasizing the further development of high tech and energy transition innovations, expanding ‘effective’ investment (as has been the case for some time, but thus far not showing a lot of success). The only eye-catching wording was the need to ‘greatly revitalise consumption’. The rhetoric has a very familiar feel to much of the political narrative on the economy, and implies increased stimulus, but the question is whether this will continue to be piecemeal as it has been over the past 3 years, and overall only serving to stabilise rather than boosting the economy. The proof of that particular pudding will be revealed over coming weeks and months as the concrete measures to achieve this are unveiled. Given business and consumer confidence are so weak, it may be a case of needing to ‘go large or go home’.