Macroeconomics: The Day Ahead for 4 November

As markets and the world awaits the very tight US election with a good deal of trepidation, there is a light schedule of data and events, amounting to little more than the run of holiday delayed Manufacturing PMIs from India and the Eurozone, Turkish CPI and PPI, and the generally overlooked US Factory Orders. The OPEC+ decision to delay its planned 180K bbls increased in production will come as little surprise, but remains a case of kicking the can down the road. Yes, there is a great deal of political uncertainty and low visibility on the global economic outlook, but this is very unlikely to change materially over the coming month. There is a busy run of ECB speakers along with a meeting of Eurozone Finance ministers, which as noted in the week ahead is unlikely to do anything other than highlight the EU and Eurozone’s political paralysis: a very lamentable situation against the backdrop of a poor regional economic outlook. Spain’s better than expected Manufacturing PMI (54.5 vs. expected 53.2, prior 53.0) serves to reinforce the yawning gap in growth terms between it and the contraction in other major Eurozone manufacturing sectors.

RECAP: The Week Ahead – Preview:    

The new week is again replete with a lot of event risk, first and foremost the US elections on Tuesday and the weeklong Standing Committee of National People’s Congress meeting in China, but also Fed, RBA, BoE policy meetings and a raft of other central bank rate decisions, and indeed speakers. It also sees Services PMIs/ISM worldwide, China Trade, CPI and PPI, German Orders, Industrial Production and Trade, Japan Labour Cash Earnings and Household Spending along with UK BRC Retail Sales (though the Budget aftermath will remain the main talking point), and a further barrage of corporate earnings. Iranian leaders weekend vows to launch a further attack on Israel served as a reminder that assuming this particular risk might be dissipating appears for the time being to be a forlorn hope. In the commodity space, Saudi Arabia’s Aramco heads another busy week for sector corporate earnings, and is accompanied by the USDA WASDE and China CASDE monthly reports, while ADIPEC the world’s largest energy event headlines a busy run of conferences. A busier week for govt bond auctions has the US quarterly refunding of $125 Bln of 3, 10 & 30-yr, with the UK, EU, Germany, France, Spain and Japan also looking to tap markets for funding.

– USA: If polling is correct (far from assured), then there is little to choose between Harris and Trump in any of the seven swing states, even if markets are clearly discounting a much higher chance of a Trump win, and a potential ‘red’ (Republican) sweep in Congress. But given that polling tightness, it may be well into Wednesday before the outcome is clear, and with more than 200 state and supreme court legal cases disputing the election outcome and methodology, and the likelihood that Trump will not accept anything other than victory for himself and the Republicans, the potential for a very ugly and protracted outcome, potentially marred by violence looks to be highly elevated, and obviously raising even more doubts about the future of democracy in the US (though many parts of Europe also under the same cloud). Volatility in markets is all but assured, given the skew in expectations and a high probability that initial exit polls may well be confounded by the already high volume of early votes cast (75 million). The week’s statistical run could thus be rendered little more than statistical roadkill, amounting to little more than the Services ISM, that is forecast to drop back to 53.8 from 54.9, Factory Orders seen down -0.5% m/m, a further solid 2.5% q/q gain expected for Q3 Noan-farm Productivity and an anticipated marginal uptick for preliminary Michigan Sentiment to 71.0 from 70.5. Due to the elections, the Fed delivers its FOMC rate decision on Thursday, with a 25 bps cut to 4.50/4.75% expected, and also priced into markets. As for the Fed, Friday’s weather and strike distorted Payrolls and the fresh low for JOLTS Job Opening has given the FOMC something of a ‘get out’ clause, allowing for an anticipated further 25 bps rate cut, despite the stronger than expected GDP and Retail Sales readings, primarily on the grounds that the current policy rate is too restrictive, given the gradual fall in inflation. Given the proximity to election, it will eschew any reference to politics, and underline that it remains data dependent, but still on track to get rates to a more neutral level over time.

– China: markets will be hoping that the Standing Committee of National People’s Congress meeting will flesh out details of its stimulus measures, though it appears the aim primarily is to stabilize growth, rather than to pump prime domestic demand. Tuesday’s Services PMI is expected to echo the NBS surveys and Manufacturing PMI in suggesting that stimulus measures have given a small lift, even if questions remain over the durability. Thursday’s Trade data are expected to see Exports rebound to 4.5% y/y from September’s 2.3%, though the risks would appear to be for a more sluggish reading on the basis of Orders and other regional trade data, while Imports are forecast expected to slip into negative territory at -1.5% y/y, after a rise of just 0.3% in September; per se these would fit with the impression of increasing headwinds to external demand. Saturday’s CPI and PPI are forecast at 0.3% vs. 0.4% y/y and -2.5% y/y vs. -2.8% respectively, this despite favourable base effects for CPI, while a somewhat firmer tone to commodity prices should help to ease PPI deflation.

– Japan: While the outlook for BoJ policy remains to a certain extent contingent on political developments, and the fall-out on the JPY, a close eye still needs to be kept on wages and domestic private consumption. Labour Cash Earnings are expected to be unchanged at a solid 3.0% y/y, with the fall in CPI gives a boost to Real Earnings to 0.1% y/y from August’s -0.6% y/y, but Household Spending is still not expected to see any material boost from the rise in wages posting another drop of -1.8% vs. August’s -1.9%. For the time being, the latter allows the BoJ to take its time in deciding on when to hike again.

– Eurozone: policymakers in Europe will above all be focussed on the outcome of the US election, though there is an informal EU summit, and there are regular Finance Ministers meeting, that are scheduled to discuss competitiveness (or lack thereof), the EU recovery fund and financing for the Ukraine, all topics on which there is little agreement, and which political crises in France and Germany (and a potentially looming crisis in Italy) suggest there is little near term prospect resolution to, above all with Hungary holding the EU presidency. Many will be hoping that when Poland takes over the presidency in January, given PM Tusk’s stint as EC president. The week also brings key German data points, with Factory Orders expected to stage a dead cat 1.6% m/m rebound after sliding -5.8% m/m in August, by contrast Industrial Production is seen down -1.0% m/m after prior months readings of +/-2.9% m/m. Trade data did some improvement in the first two months of Q3, but Exports are expected to give most of the gains in prior months with a drop of -2.3% m/m, while Imports are forecast to rise just 0.1% m/m after sliding -3.4% m/m in August. On balance this should check any nascent hopes of a turnaround, following last week’s Q3 GDP.

– Other central bank meetings: Australia’s 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. In Sweden, the Riksbank is expected to diverge further from the ECB, and slash rates by 50 bps to 2.75%, and signal the likelihood of a further 25 bps cut in December, given that CPI is expected to remain below target, and following the unexpected -0.1% q/q drop in Q3 GDP, which along with other indicators suggest that the easing that it has undertaken thus far has not generated any traction. Norway’s Norges Bank and Poland’s NBP are both expected to hold rates at 4.50% and 5.75% respectively and continue to signal little immediate prospect of rates being cut.

– There are 102 S&P 500 companies reporting this week, with worldwide corporate earnings highlights as compiled by Bloomberg News likely to include: Earnings for the week: Adnoc Gas, Ahold Delhaize, Air Products & Chemicals, Airbnb, Amadeus It Group, American Electric Power, AIG  Group, Ansys, ANZ Group, Apollo Global Management, AppLovin, ADM, Arista Networks, ARM Holdings, AvalonBay Communities, Axon Enterprise, Barrick Gold, BMW, BCE, Becton Dickinson, BioNTech, Block, Broadridge Financial Solutions, Cencora, Chunghwa Telecom, Cloudflare, Coloplast, Consolidated Edison, Constellation Energy, Constellation Software Canada, Corteva, Coupang, Credit Agricole, CRH, Cummins, CVS Health, Daikin Industries, Daimler Truck Holding, Datadog, DBS Group, Deutsche Post, Diamondback Energy, Duke Energy, DuPont de Nemours, Emerson Electric, Enel, Energy Transfer, Engie, EOG Resources, Fair Isaac, Ferrari, Fidelity National Information Services, Fortinet, Franco-Nevada, Fujifilm, Gartner, Gilead Sciences, Great-West Lifeco, Henkel, Hershey, Honda Motor, Howmet Aerospace, HubSpot, Intact Financial, International Flavors & Fragrances, Iron Mountain, Itau Unibanco, Itochu, Johnson Controls International, KBC, Kenvue, Koninklijke Legrand, Life Insurance Corp of India, Manulife Financial, Marathon Petroleum, Marriott International, McKesson, Mettler-Toledo International, Microchip Technology, Mitsubishi Heavy, Motorola Solutions, MPLX, Munich Re, National Australia Bank, Nintendo, Nippon Telegraph & Telephone, Novo Nordisk, Novonesis (Novozymes), NXP Semiconductors, Orix, Orsted, OCBC, Palantir Technologies, PetroBras, PG&E, Public Service Enterprise Group, Qualcomm, Realty Income, Restaurant Brands International, Richemont, Rockwell Automation, Saudi Arabian Oil, Saudi Basic, Saudi Telecom,  Semiconductor Manufacturing International (SMIC), Sempra, Siemens Healthineers, SoftBank, Sony Group, State Bank of India, Sun Life Financial, Take-Two Interactive Software, Targa Resources, Tata Motors, TC Energy, Telefonica, Terumo, Texas Pacific Land, Thomson Reuters, Titan, Toyota Motor, Trade Desk, Trent, UniCredit, United Overseas Bank, Verbund, Vertex Pharmaceuticals, Vistra, Vonovia, Westpac Banking, Wheaton Precious Metals, Williams, Yum! Brands, Zoetis.