Macroeconomics: The Day Ahead for 1 November

A relentless week for data and event risk ends with the US monthly labour data and worldwide Manufacturing PMIs/ISM headlining the data run, while Chevron and Exxon Mobil round off this week’s run of ‘Big Oil’ corporate earnings. With the Fed, RBA and BoE holding policy meetings next week, and many parts of Europe closed for All Saints Day, it is also little surprise that the events schedule is very sparse. But reports that Iran is planning a retaliatory attack on Israel once again serve as a reminder that geopolitical risk is always bubbling below the surface, even when last weekend’s Israeli attacks on Iran appeared to suggest that this particular source of risk was ebbing.  Outside of the labour data, the US also has Auto Sales and Construction Spending, while elsewhere there are Swiss and Indonesian CPI to digest, but with the US elections on Tuesday, and having just gone through month end, traders and investors will likely have little desire to open fresh positions, per se reaction to any surprises may prove to be more muted than would perhaps normally be expected. Outside of the US election and central bank meetings, next week also has Services PMIs/ISM worldwide, China Trade, German Orders, Industrial Production and Trade, Japan Labour Cash Earnings and Household Spending along with UK BRC Retail Sales. Despite the repricing of GBP and USD rate expectations, the consensus still looks for the Fed and the BoE to cut rates by 25 bps to 4.50%/4.75% and 4.75% respectively, while the RBA is expected to hold rates at 4.35%, and stick to hawkish messaging on the outlook, perhaps even more so after this week’s Q3 core CPI readings.

** World – October Manufacturing PMIs **

– Due to the All Saints Day holiday, the Eurozone PMIs will be published on Monday. Asian Manufacturing PMIs overnight continued to show most countries Manufacturing sectors remained in contraction outside of China and a sharp rebound in Vietnam. The UK Manufacturing PMI is expected to confirm the setback to 50.3, but the focus is now very much on reaction to the Budget in the run of November surveys, while the US Manufacturing ISM is forecast to edge up to 47.6 from 47.2, paced both by a small rebound in New Orders (47.0 vs. Sep 46.1) and a rise in Prices Paid (50.0 vs. Oct 48.3). But with the US labour data on tap and next week’s numerous event risks, reaction to the run of PMIs is likely to be very limited.

** U.S.A. – October Non-farm Payrolls, Unemployment, Average Earnings **

– The run of labour market indicators this week have mostly surprised on the upside, with the notable exception of the steep fall in JOLTS Job Openings, though the fact that there was a strong rebound in the Consumer Confidence ‘Labour Differential’ and a much stronger than expected ADP Employment (233K) should outweigh the JOLTS fall. The Payrolls consensus looks for a gain of 110K, predicated on some impact from Hurricane Milton which made landfall during the establishment survey week, as well as the Boeing strike, which is above all expected to weigh on Manufacturing Payrolls (median -30K), with election related hiring seen flattering headline Payrolls, and Private Payrolls seen up just 70K. Revisions will as ever require attention, with many anticipating a downward revision to September’s unexpectedly strong headline 254K and Private 223K. The Unemployment Rate is forecast to be unchanged at 4.1%, though the ADP jump imparts some downside risk, while Average Hourly Earnings are expected to be moderate in m/m terms to 0.3%, but hold at 4.0% y/y. Auto Sales are also due, with little change expected at 15.80 Mln vs. prior 15.77 Mln. In market reaction terms, the recent upward shift in term risk premia suggests that a weaker than expected outturn overall (generally not quite that clear cut) would prompt a larger reaction than a higher than expected reading, given that the latter has been largely priced in.