Macroeconomics: The Day Ahead for 24 October

  • Deluge of China statistics and ‘flash’ PMIs dominates statistical run, as politics continues to cast a long shadow; modest run of earnings, EU to auction debt
  • Delayed China data run confirms infrastructure stimulus offsetting otherwise weak domestic demand, and ongoing real estate crisis, with CPPC power shift signalling greater autocracy, and little prospect of recovery gaining real momentum
  • PMIs: Eurozone and UK weakness contrasts with Japan resilience and mixed picture in US
  • UK Conservative leadership contest potentially a seminal moment in reshaping UK politics; a closing of ranks behind Sunak may be no more than postponing inevitable


The week kicks off with a larger-than-expected data dump, thanks to the publication of the delayed China activity, real estate and trade statistics. The latter served to reaffirm the impression that while Industrial Output and FAI are propping up growth, domestic demand is overall weak, as confirmed by the soft Retail Sales and flattening Imports. To a large extent, this may be rather moot, given the ousting of so many pro-globalization / “opening up economy” officials at the weekend, and the unnecessarily humiliating ejection of former President Hu from the CPPC. It had been hoped that the just concluded People’s Party Congress would see some easing of its Zero Covid policy, and measures to alleviate the property sector’s woes, but this was not to be the case. Instead, the already signalled shift to balancing the long-term emphasis on development (i.e. growth) against security concerns, and a clearly more autocratic regime suggest an overall weaker growth profile, thus impairing demand for commodities, and likely heightening tensions with the US and the West, as well as the risk of dirigiste policy errors, particularly as it deals with the growing problem of climate change.

Otherwise, the focus will be on the run of ‘flash’ Manufacturing and Services PMIs, which thus far confirm that Japanese economic activity is holding up rather better than the Eurozone, where Manufacturing is now in what looks to be a protracted recession thanks to the demand destruction due to the Energy crisis, with UK readings also expected to be weak, while US Manufacturing is expected to hold up much than Services. The ongoing UK political crisis continues to be a sad farce, underlining that the political classes are more interested in posturing than dealing with the country’s multiple economic woes after former PM Johnson pulled out of the contest to take over as Conservative party leader and PM, leaving Sunak and Mordaunt to fight it out. Given that Sunak appears to have a very clear lead, the simple question is whether Mordaunt backs down for the sake of creating some semblance of party unity. If not, then whoever wins will likely have to face the prospect of being undermined by their internal party opponents, and likely ensuring that the party eventually splits, which would create more uncertainty, but ultimately usher in a long-overdue realignment of UK politics. A modest run of corporate earnings has results from Posco to digest, but the focus is on the deluge of earnings from major companies in numerous sectors over the next four days.

RECAP: The Week Ahead Preview

The new week’s data run is dominated by surveys at the start, first and foremost the G7 flash PMIs, German Ifo and US Consumer Confidence, while the back end of the week has US, European and South Korea Q3 GDP, along with national October CPI readings in the Eurozone. While no date has been set, the delayed run of China Q3 GDP, monthly activity data and Trade are also likely to be published. In monetary policy terms, the ECB meeting gets top billing (75 bps rate hike expected, and focus on QT timeline discussions), with the Bank of Canada seen hiking 50 bps and the Bank of Japan expected to hold, as are central banks in Brazil and Russia. Eminently politics will continue to cast a dark shadow, be that at national levels or geopolitically, with the focus on the UK Conservative Party leadership contest, and Brazil’s presidential election run-off taking place at the end of the week. It will be a very busy week for earnings, with 163 S&P 500 companies reporting, featuring megacap tech, industrial bellwethers such as Caterpillar, and a whole host of major energy and commodity producers and processors from around the world. The US tops a busy weekly schedule of govt bond auctions with $144 Bln total of 2, 5 & 7 -yr and FRN 2-yr, with UK, EU, Germany, Italy, Belgium, Japan, Australia and Canada also holding debt sales.

While the Fed goes into its usual pre-FOMC ‘purdah’ period, the various US statistical agencies will be churning out a very busy run of data. US Q3 GDP is expected to expand for the first time since Q4 2021, though the expected 2.3% SAAR pace (vs. Q2 -0.6%) is likely to be disappointing in the detail in contrast to Q1 and Q2. Personal Consumption is expected to slow to 0.9%, and Final Sales to Domestic Buyers to around 0.5%, with Housing Investment set to post a double-digit fall, Business CapEx to post a marginal increase, while Net Exports provide a big boost, though only thanks to a sharp drop in Imports (Goods Trade Balance also due this week), and Inventories as ever a sizeable wild card. Friday’s Q3 Employment Cost Index may however be the highlight of the week, with a marginally lower headline rise of 1.2% q/q seen, but Wages perhaps picking up 0.1/0.2 ppt from Q2’s 1.4%. Both FHFA and CoreLogic House Prices are expected to post sizeable m/m falls, while rising mortgage rates and the upturn in gasoline prices are expected to see Consumer Confidence dip to 105.5 after bouncing quite sharply from July’s low. Durable Goods are seen posting a 0.6% m/m increase thanks to aircraft, though core measures are only seen posting marginal gains. Friday’s Personal Income and PCE are forecast to see headline and core Deflators respectively rise 0.1 ppt to 6.3% y/y, and a 0.3 ppt jump to 5.2%, not far off February’s high of 5.4%. The case for a Fed pivot, or at least easing the pace of rate hikes is per se going to be a difficult one for the FOMC to make next week. New and Pending Home Sales are expected to slide, with the Richmond Fed Manufacturing Index seen at -5 from 0.

G7 and Australia PMIs get the week underway, with only France’s Services and US Manufacturing indices seen above the key 50.0 level amongst US, UK and Eurozone readings, and there will be plenty of interest in whether Japan’s readings can hold September’s pick-up. Germany’s Ifo Business Climate is forecast to drop to 84.5 from 85.3, on the back of a sharp drop in the Current Assessment to 92.4 from 94.5, with GfK Consumer Confidence languishing close to its all-time low at -42.2. UK CBI Industrial Trends Orders are seen sliding to -12 from -2, while the CBI Retailing Survey puts in a dead cat bounce to -15, after plunging from +37 to -20 in September.

China still awaits the Trade data that had been scheduled more than a week ago, which is expected to see Exports slow to 4.0% y/y, echoing other trade data in other major Asian economies as external demand weakens, and Imports are seen flatlining in y/y terms, thanks to the sluggish recovery in domestic demand. But the focus will be on Q3 GDP, which is expected to post a tepid recovery of 3.4% q/q from Q2’s contraction of 2.6% q/q, with intermittent Covid lockdowns, summer power disruptions and property sectors providing major headwinds to any recovery. Monthly activity data are expected to be mixed, with Industrial Production seen rising to 4.9% y/y from 4.2%, helped by public sector spending boosting Fixed Asset Investment to 6.0% y/y (vs. 5.8%), which has given a sizeable boost to the Construction PMI, despite ongoing property sector woes. Retail Sales are however forecast to drop back to 3.5% y/y (vs. 5.4%), with lockdowns around the recent public holidays proving to be a major deterrent to the normally related boost to consumer spending. Wholly unsurprising given the latest debt default, Property Investment is expected to contract (forecast -7.5% vs. Aug -7.4%), with Residential Property Sales likely to remain in a sharp contraction (last -30.3% y/y), despite improving base effects.

In the Eurozone, national HICP and provisional GDP data will be published on Friday after the ECB meeting. While German HICP is seen unchanged at 10.9% y/y, readings in France (6.4% y/y vs. 6.2%) and Italy (9.6% vs. 8.9%) are expected to rise, but Spain is expected to fall to 8.0% from 9.0%, largely due to base effects. Provisional Q3 GDP readings are forecast to show France slowing to 0.2% q/q 2.1% y/y (vs. 0.5%/4.3%), Spain decelerating to 0.3% q/q 3.9% y/y (vs. 1.5%/6.8%), and Germany contracting -0.2% q/q to take the y/y rate down to 0.8% from 1.7%, the latter effectively confirming that Germany will be in recession by Q4.

Elsewhere Australia’s Q4 CPI is expected to show headline rising 1.6% q/q to jump the y/y rate to 7.0% from 6.1%, with Trimmed Mean (core) CPI seen up 1.5% q/q to take y/y rate up to a 31-yr high of 5.5%. Japan’s October Tokyo CPI is also expected to see substantial rises on all y/y measures: headline 3.3% vs. 2.8%, Ex-Food 3.1% vs. 2.8% and Ex-Food & Energy 2.0% vs. 1.7%. Canadian monthly GDP is forecast to eke out another marginal 0.1% m/m, to take the y/y rate down to 3.8%. Inflation readings in Latin America are expected to underline why Mexico’s central bank is still hiking, and Brazil’s BCB will hold this week, with Mexican CPI seen picking up in m/m terms on headline and core measures, to leave y/y rates little changed at 8.6% and 8.3% y/y respectively. By contrast, Brazil’s IPCA-15 inflation is forecast to drop sharply to 6.8% y/y from 8.0%, and the FGV IGPM measure to 6.7% y/y from 8.3%.

By contrast to the ECB and BoJ, there is some ambivalence about the size of this week’s Bank of Canada rate hike, the consensus looks for 50 bps, while markets are priced for closer to 4.0%, and much may depend on how much the accompanying Monetary Policy Report (MPR) revises down growth and inflation forecasts relative to July, as is widely anticipated. The BoC may above all be mindful of not adding to downward pressure on the CAD with a smaller hike, though this will have to be balanced against a dramatic slump in the domestic housing market.

But it will be the ECB and BoJ meetings that get more market attention. The ECB is expected to hike all its rates by 75 bps, taking the Depo Rate to 1.50% and the Refi Rate to 2.0%, with a further 50 bps seen in December, and a further 25 bps in February. It will also likely make changes to what it pays on bank deposits at the ECB, given that excess liquidity remains sky high at 4.67 Trln, and it is likely to reintroduce a tiering system, which would see around EUR 900 Bln excluded from being remunerated; alternatively (as has already been suggested by Centeno and Simkus), it could also change TLTRO III terms to reduce the effective subsidy that is currently being paid to banks. While QT has been put on the table for discussion, it is likely that the ECB will stick to the line that it will start once rate ‘normalization’ has been completed, and conditional on financial stability being preserved. On current market pricing that would mean after February, and presuming that it will remain passive, this would imply a pace of just under EUR 30 Bln/month.

As for the BoJ, no changes are expected to either the Call rate or its determination to defend its commitment to the 10-yr JGB yield target of 0.0% +/- 25bps, leaving markets focussed on its forecast update, which are likely to see GDP for the current and next fiscal year revised down, but inflation revised up. It will likely underline that even if core CPI hit 3.0%, it would need to see a marked acceleration in wage growth to ease back on monetary easing. The question then becomes how it addresses JPY weakness, beyond a commitment to intervention to lean against volatility. It has been very clear that while it can see that a weaker JPY will increase cost-push pressures, and likely to be a drag on real personal consumption, but a much more acceptable scenario than the negative consequences of a rate hike. Let there be no mistake that as and when any chink in this long-held BoJ view appears or is even mooted, the impact on markets around the world will make the recent turmoil in UK markets look like a walk in the park.

As for commodity markets, the pendulum still keeps swinging between supply and demand concerns for oil prices, with refining running flat out pace on both sides of the Atlantic above all for distillates, but inventories remain very low in seasonal terms. The fact that the gas for oil switch continues to be so attractive in comparative price terms is clearly not helping, and even gas for coal looks good, while there will continue to be a lot of focus on weather in Europe for gas and power markets amid much scepticism about prospective caps on Russian oil and gas prices, while logistics problems due to low levels on Mississippi river and dwindling Argentine wheat crop prospects occupy the minds of the Agricultural sector. Be that as it may, energy markets will be looking to outlooks from the numerous energy behemoths that are reporting this week, including Chevron, CNOOOC, Exxon Mobil, Eni, Equinor, PetroChina, Shell and Total Energies. Metals markets will focus in on outlooks being presented at London’s LME Week, as well as results from the likes of Baowu Steel, Caterpillar, Cleveland-Cliffs, Vale and Vedanta, while agricultural markets focus on ADM and Bunge, along with the Asia-Pacific Agri-Food Innovation Summit.

According to Bloomberg News tech giants, oil majors and automakers feature in a huge week for earnings, with Apple Inc., Microsoft Corp., Exxon Mobil Corp. and Ford Motor Co. all posting results. Beleaguered Credit Suisse also reports. Other earnings highlighted for the week include 3M, AbbVie, Airbus, Alphabet, Altria, Amazon, Ambev, Anheuser-Busch InBev, Aon, ADM, ANZ Bank, Banco Santander, Bank of China, Barclays, BASF, Biogen, Boeing, Boston Scientific, Bristol-Myers Squibb, BYD, Canadian National Railway, Canadian Pacific Railway, Capital One Financial, Caterpillar, Chevron, China Citic Bank, China Life Insurance, China Merchants Bank, China Petroleum & Chemical, Chipotle, Cnooc, Coca-Cola, Colgate-Palmolive, Comcast, Eni, GE, GM, Heineken, Hilton, Hitachi, Honeywell, HSBC, Intel, Keurig Dr Pepper, Kimberly-Clark, Kraft Heinz, Macquarie, Mastercard, McDonald’s, Mercedes-Benz, Merck, Meta, Novartis, Ping An Insurance, Porsche, Raytheon, Sanofi, Saudi Telecom, Shell, Shopify, T-Mobile US, Texas Instruments, UBS, UPS, Vale, Valero Energy, Visa and Volkswagen.

To view the full report and to sign up for daily market commentary please email

The information within this publication has been compiled for general purposes only. Although every attempt has been made to ensure the accuracy of the information, ADM Investor Services International Limited (ADMISI) assumes no responsibility for any errors or omissions and will not update it. The views in this publication reflect solely those of the authors and not necessarily those of ADMISI or its affiliated institutions. This publication and information herein should not be considered investment advice nor an offer to sell or an invitation to invest in any products mentioned by ADMISI.

Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.

ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.                  

A subsidiary of Archer Daniels Midland Company.

© 2022 ADM Investor Services International Limited.

Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.

ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.                  

A subsidiary of Archer Daniels Midland Company.

© 2021 ADM Investor Services International Limited.

Futures and options trading involve significant risk of loss and may not be suitable for everyone.  Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM.  The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.

Latest News & Market Commentary

Explore the latest edition of The Ghost in the Machine

Explore Now