Subdued start to the week; China LPR cuts, German PPI, UK Rightmove House Prices, Korea Trade and Malaysian GDP to digest; Fed speakers and US Leading Index ahead
Fed Bostic and ECB Simkus comments underling increasing divergence in US and Eurozone rate outlooks
Week Ahead: IMF/World Bank meetings, BRICS Summit, BoC rate decisions, PMIs, Ifo and other surveys, US Durables and Home Sales, rush of corporate earnings worldwide dominate, as geopolitics, US elections and China continue to cast a long shadow
EVENTS PREVIEW
A rather subdued start to a busy week for events, with China’s slightly larger than expected 25 bps LPR cuts to digest along with UK Rightmove House Prices, Malaysian Q2 GdP, Korean Trade and German PPI, and nothing more than the US Leading Index ahead. A busy run of Fed speakers accompanies the start of the annual IMF & World Bank meetings, with little in the way of major corporate earnings scheduled for today. Bostic’s comments that he sees the Fed not needing to rush to get rates back to neutral underline the registered shift in Fed rhetoric, and it will be interesting to see if the array of regional Fed presidents echo his sentiments on rates. The larger than expected fall in German PPI and comments from ECB’s Simkus that is ‘disinflation gets entrenched’ then rates could go below ‘neutral’ underline the increasing divergence for rate prospects between the US and Eurozone.
RECAP: The Week Ahead – Preview: The new week is quite light in terms of major economic data, with the focus likely to be G7 & India flash PMIs and a rush of surveys in the UK & Europe (German Ifo & GfK, France Business Confidence and UK CBI Trends & GfK). The US also looks to the Fed’s Beige Book, Existing & New Home Sales and Durable Goods, UK has PSNB, Japan Tokyo CPI, and there are also inflation data in Brazil and Mexico. The Bank of Canada is expected to cut rates further , while China’s 1 & 5-yr LPR fixings are seen lowered by 20 bps to 3.15% and 3.65%. The IMF/World Bank meetings will see a lot of focus on high levels of debt worldwide (see charts) and ensure that there is a deluge of Fed, ECB, BoE and other central bank speakers, while in Russia there is the first BRICS summit since Iran, U.A.E., Ethiopia and Egypt joined, with Saudi Arabia still undecided, and others looking to join (e.g. Malaysia, Thailand & Turkey). It will be interesting to see whether much of a consensus can be built, given that both India and Brazil’s primary areas of interest (above all growth and scaling up capacity) are diverging further from those of China and Russia. The looming US elections will also cast a long shadow being just over two weeks away, along with the conflicts in the Middle East and Ukraine.
The US Q3 corporate earnings season cranks into full gear, with Tesla, 3M, AMD, Boeing, Coca-Cola, Colgate-Palmolive, Freeport-McMoRan, GE, General Motors, IBM, Lam Research, Union Pacific and UPS among the highlights, and there is also busy run of earnings in Europe and Asia, featuring the likes of Barclays, China Shenhua Energy, China Unicom Hong Kong, Chugai Pharmaceutical, CME Group, Coal India, Deutsche Bank, Eni, Equinor, Great Wall Motor, Iberdrola, KB Financial, Mercedes-Benz, Orange, Ping An Insurance, Sanofi, SAP, SK Hynix, and in South America Wal-Mart de Mexico and Vale. In the Commodities space, it’s a bonanza week for sector corporate earnings, and conferences: FT Energy Transition, Australia Energy & Climate Summit, Japan Power Week, WoodMac Gas & LNG, Singapore International Energy Week, Reuters Automotive USA, Kunming International Aluminium Forum & Wuhan International Copper Forum; there are also monthly USDA livestock, meat and dairy reports.
– U.S.A.: The Fed’s Beige Book may prove to be the highlight of the week, with growth seen described as ‘modest’ relative to the previous edition in which a relative majority saw activity unchanged or declining. It will offer some insights to the level of disruption from Hurricanes and Milton, which Monday’s Richmond Fed surveys will likely also evidence, as well as the impact of the port and Boding strikes, and a more measured and nuanced perspective on labour demand, following the unexpectedly robust September Payrolls report. Home Sales reports are expected to see Existing rise 0.5% m/m and New up 0.6% m/m, with both seen boosted by lower mortgage rates in the aftermath of the Fed’s 50 bps rate cut, with a shortage of Existing Home supply expected to help New Home Sales, despite homebuilders suggesting demand has been slow, and requiring support from incentives. Durable Goods Orders are forecast to fall 1.0% m/m, with the rise in Boeing orders in September, contrasting with hefty disruption to production, which will be rather more evident in October data; core orders measures are expected to be barely changed on the month, though with some downside risks from election uncertainty related deferrals of investment plans, which was evident in the recent Atlanta Fed CFO survey. Flash PMI readings are also seen little changed (Manufacturing 47.5, up 0.2; Services 55.0, down 0.2). A busy run of Fed speak, before the FOMC enters its purdah period ahead of the November 7 FOMC meeting, should help crystallize market expectations on that rate decision, though many Fed speakers may well be very circumspect in their comments, given the proximity of the election.
– Canada: the consensus looks for the Bank of Canada to slash rates by 50 bps to 3.75%, predicated on headline CPI falling well below, and core measures holding close to its 2.0% target, as well as a further moderation in wage growth (4.5% y/y vs. prior 4.9%). But with the Canadian Dollar under pressure, both from deferred Fed rate cut expectations and weak oil prices, Employment posting a very solid increase of 46.7K, and the BoC’s Q3 Business Outlook survey seeing a sharp rebound in Future Sales to 13.0 from 1.0, the BoC may err on the side of caution, above all given that it is already ahead of the Fed.
– UK/Eurozone PMIs/surveys: PMIs for the Eurozone are expected to see Manufacturing remaining very weak at 45.1, and Services expanding marginally at 51.5, in both cases fractionally higher than September, with a very similar profile expected for Germany’s Ifo and French Business Confidence, a modest improvement anticipated in Italian Manufacturing and Consumer surveys. In the UK, PMIs are seen unchanged at 51.5 and 52.4, though negative pre-Budget chatter and some other anecdotal evidence imparts some downside risks, which will likely also weigh on GfK Consumer Confidence (forecast -21 vs. prior -20)
– Japan: the slide in the Economy Watchers survey (47.8 vs. prior 49.0) suggests that the flash Services PMI will drop back after climbing to 53.1 in recent months, while persistent weakness in Machinery Orders implies the Manufacturing PMI will hold below the 50.0 level as it did during Q3. But the focus will be on Friday’s Tokyo CPI, with the consensus looking for a sharp deceleration in headline (1.8% y/y from 2.2%) and ex-Fresh Food (1.7% y/y from 2.0%), though ‘core core’ is forecast to be unchanged at 1.6%. However, some forecasters suggest that the sharp rise in wage costs and the lingering impact of JPY weakness on imports of raw materials impart some potentially sharp upside risks, above all given the usual round of price hikes at the start of the H2 fiscal year. While the BoJ has effectively all but ruled out an October rate hike, an upside surprise may well prompt markets to re-price limited expectations of a December hike.
– There are 114 S&P 500 companies reporting this week, and a busy week for worldwide corporate earnings, with highlights as compiled by Bloomberg News likely to include: 3M, Adani Green Energy, Ameriprise Financial, Amphenol, Aon, Arthur J. Gallagher, Asian Paints, Assa Abloy, AT&T, Atlas Copco, Bajaj Finance, Bajaj Finserv, Baker Hughes, Barclays, Boeing, Boston Scientific, Canadian National Railway, Canadian Pacific Kansas City, Canon, Capital One Financial, Carrier Global, BRE Group, Centene, CGN Power, China Shenhua Energy, China Unicom Hong Kong, Chugai Pharmaceutical, CME Group, Coal India, Coca-Cola, Colgate-Palmolive, CoStar Group, Danaher, Dassault Systemes, Deutsche Bank, Deutsche Boerse, Dexcom, Digital Realty Trust, DLF, DNB Bank, Dover, Dow, DSV, DTE Energy, East Money Information, Edwards Lifesciences, Eni, Equinor, Fanuc, First Citizens BancShares, Fiserv, Freeport-McMoRan, GE Vernova, General Dynamics, General Electric, General Motors, Great Wall Motor, Hangzhou Hikvision Digital Technology, Hartford Financial Services, HCA Healthcare, HDFC Bank, Heineken, Hexagon, Hilton Worldwide, Hindustan Unilever, Honeywell International, Hong Kong Exchanges & Clearing, Iberdrola, IBM, ITC, Jiangsu Hengrui Pharmaceuticals, JSW Steel, KB Financial, Keurig Dr Pepper, Kimberly-Clark, Kone, Kotak Mahindra Bank, Kuehne + Nagel International, Kweichow Moutai, L3Harris Technologies, Lam Research, Lloyds Banking, Lockheed Martin, Luxshare Precision Industry, Mercedes-Benz, Moody’s, Nasdaq, NatWest Group, Newmont, NextEra Energy, Norfolk Southern, Northrop Grumman, Nucor, NVR, O’Reilly Automotive, Old Dominion Freight Line, Orange, Paccar, Philip Morris International, Ping An Insurance, PulteGroup, Raymond James Financial, ResMed, Roper Technologies, RTX, S&P Global, Samsung Biologics, Sandvik, Sanofi, SAP, ServiceNow, Sherwin-Williams, Shin-Etsu Chemical, Sika, SK Hynix, SE Banken, T-Mobile US, Tesla, Texas Instruments, Thermo Fisher Scientific, Tractor Supply, Tyler Technologies, UltraTech Cement, Union Pacific, UPS, United Rentals, Vale, Valero Energy, Veralto, Verizon Communications, Vertiv, Wal-Mart de Mexico, Waste Connections, Westinghouse Air Brake Technologies.
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