Macroeconomics: The Day Ahead for 17 October

The week ends on a subdued note in statistical terms, with Singapore Trade and Malaysia’s provisional Q3 GDP (both much better than expected, in a further signal that Asia is riding out tariff wars a lot better than many had expected) to digest ahead of final Eurozone CPI, and the run of US data postponed due to the ongoing government shutdown. A more modest run of central bank speakers accompanies more Q3 earnings, which features JSW Steel and Zijin Mining in Asia, while American Express, Schlumberger and State Street are likely to be among the headliners in the US. Next week brings US CPI and New & Existing Home Sales, China’s Q3 GDP and run of monthly activity and property sector indicators, UK CPI, PSNB and Retail Sales, G7 & India ‘flash’ PMIs and Canadian CPI. The US Q3 earnings season picks up speed, with Alcoa, Cleveland Cliffs, Coca Cola, Ford, Freeport McMoRan, GE, GM, HCA, Netflix, Newmont, Proctor & Gamble, Tesla and Texas Instruments likely to be among the headline makers.

While many continue to pin their hopes on an easing of US banking regulations (above all a relaxation of the SIIB for Systemically Important Financial Institutions aka SIFIs), yesterday’s write-downs from Zions Bancorp and Western Alliance followed on from JP Morgan’s increased loan loss provisions earlier in the week as CEO Dimon warned about other ‘cockroaches’ in private credit. These serve as an additional reminder (if one was needed) that for all the risk appetite that has been on display since the April turnaround in equities that all is not well. While investment in AI remains explosive, and likely to provide a significant offset to the drag from trade tariffs and tensions, the evidence that this will be a universal positive is simply not there (nor should it be expected), and there will inevitably be a significant number of failed projects, very much in line with what happened during the dotcom bubble. While some of this week’s volatility in risk assets can be attributed to typical seasonal patterns, it has highlighted that with lofty valuations and so many national and geopolitical risks, caution and a need to diversify portfolios is required.