Summary: The calendar for these two weeks is busy with central bank meetings and corporate earnings. The ECB will kick off the series of central decisions when they meet on Oct 27, followed by the Bank of Japan on Oct 28. The FOMC on Nov 2 is top of mind for investors. While a 75bp hike is well anticipated and nearly a done deal, investors will look for hints about the magnitude of hikes for the December meeting and beyond. The article from WSJ’’s Timiraos and comments from San Francisco Fed Daly stirred speculation for the Fed might be considering slowing from December. Some of the largest U.S. technology giants and global oil majors are reporting this week.
A series of central bank announcements will be key over the coming two week especially as there have now been hopes of a pivot following reports from Fed whisperer Timiraos at the WSJ suggesting that the November meeting will be used to discuss a slowdown of Fed tightening and dovish comments from San Francisco Fed Mary Daly. We have already had an indication of peak hawkishness from the Reserve Bank of Australia, and many other central banks remain of watch for a similar turn. However, another 75bps rate hike for the Fed at the November 2 meeting means there is still some room to run for that turn from other central banks.
The Bank of Canada decision this Wednesday is still a close call between 50 and 75bps, with the latest CPI remaining hotter than expected and some concern on CAD weakness as well which will likely get worse if BOC hikes by just 50bps ahead of Fed’s likely 75bps.
ECB’s rate hiking cycle has more room to run, and another 75bps increase in interest rates is expected at this Wednesday’s meeting.
Bank of Japan on October 28 will be key after an intervention on Friday saw USDJPY slide from 152 to lows of 146.23, reaffirming our view that any change in BOJ policy is unlikely. The only means they prefer to use as of now are unscheduled bond buying operations to ease the pressure on bond markets, and intervention in the FX markets to get rid of the speculative shorts. Markets will likely continue to test BOJ’s policy limits, especially with Tokyo CPI for October also due on Friday, October 28, and likely to zoom above the 3% mark.
Meanwhile, UK faces the biggest rate rise in three decades, with the Bank of England forced to step up in fight against inflation and defend the sterling at the November 3 amid the political and economic chaos that is ensuing. A 75bps rate hike is fully priced in, and some are also expecting a 100bps rate hike.
The first print of third quarter GDP is due in the US on Thursday, before the PCE data comes out on Friday, October 28. GDP growth is likely to turn positive in Q3, with Bloomberg consensus expectations at 2.3% q/q from -0.6% previously. However, smaller imports will likely play a large role in the improved headline, with the rising business uncertainty and rapid Fed rate hikes mean that consumer and business spending will likely show some slowing. PCE data is the Fed’s preferred inflation gauge, and this is likely to continue to rise and come in at 6.3% y/y in September from 6.2% y/y in August. This will make Fed’s job of conveying a downshift in the pace of rate hikes, if they plan to do that, a lot tougher.
This week we have Microsoft (MSFT:xnas) and Google (GOOG:xnas) reporting on Tuesday, followed by Meta (META:xnas) on Wednesday and then Apple (AAPL:xnas) and Amazon (AMZN:xnas) on Thursday. Investors will likely monitor closely the cloud computing business outlook provided by Amazon’s AWS, Microsoft’s Azure, and Alphabet’s Google Cloud. Five of the western world’s biggest oil and gas majors, which have a combined market cap of more than $1 trillion, are reporting Q3 results this week. Shell (SHEL:xlon) and TotalEnergies (TTE:xpar) are due to report on Thursday while Exxon Mobil (XOM:xnys), Chevron (CVS:xnys) and Equinor (EQNR:xosl) will deliver their results on Friday. The market will be watching for their respective outlook on demand for oil and gas and whether the growing political pressure for oil companies to spend more on exploration and development will translate into improved capital investment appetite. In Asia, PetroChna (00857:xhkg) and CNOOC (00883:xhkg) are reporting on Thursday, and Sinopec (00386:xhkg) is reporting on Friday.
Elon Musk and Twitter face an Oc.t 28 deadline to finalize their USD44 billion deal that was first announced in April. If the takeover doesn’t go through, a Delaware Chancery Court judge will set new trial dates in November.
Monday, Oct 24
US: S&P Manufacturing PMI (Oct, preliminary)
US: S&P Services PMI (Oct, preliminary)
Eurozone: PMI Manufacturing, Services & Composite (Oct, flash)
UK: PMI Manufacturing, Services & Composite (Oct, flash)
Japan: PMI Manufacturing (Oct)
Tuesday, Oct 25
US: Conference Board Consumer Confidence (Oct)
Germany: IFO Business Climate & Expectations (Oct)
UK: CBI Business Optimism (Oct)
Singapore: CPI (Sep)
Wednesday, Oct 26
US: New Home Sales (Sep)
US: 5-year treasury note auction
Eurozone: ECB M3 (Sep)
Australia: CPI (Sep)
Singapore: Industrial Production (Sep)
Thursday, Oct 27
US: Jobless Claims
US: GDP (Q3, 1st revision)
US: Durable Goods Orders (Sep)
US: 7-year treasury note auction
Eurozone: ECB Meeting
Friday, Oct 28
US: Personal Income & Spending (Sep)
US: PCE (Sep)
US: Employment Cost Index (Q3)
US: Pending Home Sales (Sep)
US: U of Michigan Consumer Confidence & Inflation Expectations (Oct, final)
Germany: GDP (Q3)
Germany: HICP (Oct, flash)
France: GDP (Q3)
France: HICP (Oct, flash)
Japan: BOJ, end of policy meeting
Japan: Tokyo CPI (Oct)
Japan: Unemployment Rate (Sep)
Monday, Oct 31
Eurozone: CPI (Oct)
Eurozone: GDP (Q3)
Germany: Retail Sales (Sep)
Japan: Industrial Production (Sep)
Japan: Retail Sales (Sep)
China: NBS Manufacturing & Non-manufacturing PMIs (Oct)
Tuesday, Nov 1
US: JOLTS Job Openings (Sep)
US: ISM Manufacturing (Oct)
China: Caixin China PMI Manufacturing (Oct)
Wednesday, Nov 2
US: ADP Employment Change
US: FOMC Meeting
Eurozone: S&P Global Eurozone Manufacturing PMI (Oct, final)
Germany: Unemployment (Oct)
Germany: S&P Global/BME Germany Manufacturing PMI (Oct, final)
Thursday, Nov 3
US: Unit Labor Costs (Q3, preliminary)
US: Jobless Claims
US: S&P Global US Services PMI (Oct, final)
US: Durable Goods Orders (Sep, final)
US: ISM Services (Oct)
Eurozone: Unemployment Rate (Sep)
China: Caixin China PMI Services (Oct)
Friday, Nov 4
US: Non-farm Payrolls, Unemployment Rate & Average Hourly Earnings (Oct)
Eurozone: S&P Global Eurozone Services PMI
Eurozone: PPI (Sep)
Germany: Factory Orders (Sep)
Germany: S&P Global German Services PMI (Oct, final)
Tuesday, Oct 25: Alphabet (GOOG:xnas), UPS (UPS:xnys), Microsoft (MSFT:xnas), Visa (V:xnys), Coca Cola (KO:xnys), Raytheon (RTX:xcse), Ping An Insurance 02318:xhkg),
Wednesday, Oct 26: Meta (META:xnas), Bristol-Myers Squibb(BMY:xnys), Thermo Fisher Scientific (TMO:xnys), Postal Savings Bank Of China (01658:xhkg), WuxiTec (02359:xhkg), ZTE (00763:xhkg), BAIC Motor (01958:xhkg)
Thursday, Oct 27: Apple (AAPL:xnas), Amazon (AMZN:xnas), Intel (INTC:xnas), Mastercard (MA:xnys), Shell(SHEL:xlon), TotalEnergies (TTE:xpar), China Galaxy Securities (06881:xhkg), China Life Insurance (02628:xhkg), Guangzhou Auto (02238:xhkg)
Friday, Oct 28: Exxon (XOM), Chevron (CVX), Abbvie (ABBV), Jiangxi Ganfeng Lithium (01772:xhkg), Agricultural Bank of China (01288:xhkg), China Construction Bank (00939:xhkg), China Merchants Bank (03968:xhkg), ICBC (01398:xhkg), LONGi Green Energy Technology (601012xssc), BYD (01211:xhkg), Citic Securities (06030:xhkg), Haitong Securities (06837:xhkg)
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
