In-depth Analysis

Focus on central banks meetings (RBA, Fed, and BoE) and on the NFP report | Weekly Outlook

On Monday 31st: Retail Sales reports for Australia, Germany, and Japan are due, China publishes its Manufacturing PMI, and the EU reports its CPI figures.

On Tuesday 1st: China releases its Caixin Manufacturing PMI, the RBA meets on monetary policy, the US, and UK publish Manufacturing PMI, JOLTS Job openings report is due, and New Zealand publishes employment data.

On Wednesday 2nd: Spain, Germany, France, and the EU release Manufacturing PMI, the ADP National Employment Report is released by the US, Weekly Crude Oil reserves are published and the Federal Reserve meets on monetary policy.

On Thursday 3rd: Composite and Services PMIs are released for the UK, the BoE meets on monetary policy, and the US ISM Non-Manufacturing Index is due.

On Friday 4th: Services PMI for Spain, Italy, France, Germany, and the EU are released, Construction PMI from the UK is published and the US NonFarm Payroll data is due.

Weekly outlook

Most of the big-name companies have published their earnings reports for Q3 now, but there are a few notables left this week, particularly in the pharmaceutical industry. With many big tech companies having revealed the negative impacts on their businesses from the strong dollar relative to other currencies and higher inflation, it will be interesting for investors to see how this will hit bottom lines in other industries.

The public of Australia, the US, and the UK will all be eagerly awaiting the latest in Monetary Policy from their respective Reserve Banks this week, as many expect that the tightening cycle is still in its early stages, with more pain to come for mortgage holders.

Monday 31st of October

A collection of different Retail Sales reports for Japan, Australia, and Germany are due to be published today. Year-on-year, Japan is expecting retail sales of September to remain the same at 4.1%, as it slowly welcomes back tourists. Australians are starting to feel the pinch of higher rates and inflation but retail sales are still expected to reach +0.6% for September compared to August. German sales are forecast to have improved this September compared to the previous month with an increase from -1.3% to -0.3%.

China’s Manufacturing PMI, which sat at a reasonable level of 50.1 in September, is expected to drop to 50 in October. Remember that a level below 50 is a sign of contraction in the industry, based on a questionnaire about the employment environment, new orders, levels of inventory, production, and supplier deliveries, while a reading above 50 is a sign of expansion in the sector.

CPI data for the Eurozone is also due today for a look at how the bloc is responding to the fastest pace of interest rate hikes they’ve ever experienced. Yesterday, the ECB handed down another 75 basis point increase for the second time in a row and many economists will be looking for a reduction in the levels of inflation as a result. It’s expected to be down from 9.9% to 9.6% year on year for October.

Major Earnings Reports Due:

  • Stryker Corp

Tuesday 1st of November

China’s Caixin General Manufacturing PMI fell last month to an unexpected low of 48.1 as a result of continuing lockdowns from the country’s “Covid Zero policy”. Exports and new orders have been on the decline, but if expectations are correct there may be a rally in the sector with an increase from 48.1 to 49.

The Reserve Bank of Australia meets today to set its Monetary Policy for the coming period. After 6 consecutive increases where headline interest rates have been lifted a total of 250 basis points to 2.60%, it is expected that a less intense move of 25 basis points will be passed down at this point to 2.85%. The bank hopes to maintain its tightening policy to get a grip on inflation, now sitting at 7.3%.

Manufacturing PMIs are also due to be published for the UK and the US, with mixed results expected. The UK has been experiencing a contraction in growth in the sector, dropping last month to a dismal 45.8, with an expected small increase this month. While the US ISM Manufacturing PMI is expected to drop from 50.9 to 50.4.

JOLTS Job openings for the US as published by the Bureau of Labor Statistics will report on the number of vacancies available for September. Last month this went from 10.053M to 11.170M and will be closely watched by investors and the Federal Reserve.

The Employment Change and Unemployment Rate for New Zealand is set to be published, with optimistic expectations at this stage. Quarter on quarter for Q3 forecasts are for a bump from 0.1% to 0.5%, while the Unemployment Rate looks to be dropping from 3.3% to 3.2% for the quarter.

Major Earnings Reports due:

  • Eli Lilly & Co
  • Pfizer
  • Toyota Motor Corporation
  • Advanced Micro Devices

Wednesday 2nd of November

Manufacturing PMIs are due across the Eurozone today. Results are mixed but in general, the sector is leaning towards contraction with many figures remaining unchanged below the level of 50. Spain’s is expected to increase from 49.0 to 49.2, Italy expects a drop from 48.3 to 47.0. France, Germany, and the EU are all expected to remain unchanged at 47.4, 45.7, and 46.6 respectively.

The ADP National Employment Report, which measures the change in the monthly non-farm-related employment situation in the US, will be published, as usual, two days ahead of the official government data, the NFP report. The payroll data is gathered from around 400,000 businesses and provides a helpful preview of the report from the US Department of Labor Bureau of Labor Statistics. 

The weekly Crude Oil inventories will show the change in the number of barrels of crude held in the US, which will impact energy prices. Last week was well above forecasts with 2.588M from -1.725M.

The Federal Reserve meets for its November Monetary Policy Meeting today. Expectations are for another large bump in rates of 75 basis points to a range of 3.75% to 4.00%. Some economists are forecasting the strengthening of rates is to be relaxed at the Fed’s final meeting of the year in December. Households continuing to struggle with ongoing inflation and a huge jump in borrowing costs will potentially be given a welcome breather coming into the Christmas period.

Major Earnings Reports due:

  • Novo Nordisk
  • Qualcomm Inc
  • CVS Health Corp

Thursday 3rd of November

Composite and Services PMIs are released for the UK today. While the data is expected to show that business conditions are improving in the Manufacturing and Service sectors, they are still below the threshold of growth, forecast at 48.4 and 49.2 respectively. 

Again, from the UK, the Bank of England is meeting to set its Monetary Policy for the upcoming period. The BoE has increased rates 7 times for a total of 200 basis points so far since the tightening cycle began in December last year. It is widely expected that another significant increase of 75 basis points will be passed down at this meeting from m2.25% to 3.00%, with inflation sitting at 40-year highs at over 10%.

The US ISM Non-Manufacturing Index will be released on Thursday, giving insight into business activity excluding those in the manufacturing sector. The index has been consistently reflecting steady growth so far in 2022 and is expected to drop slightly from 56.7 to 56.0. 

Major Earnings Reports due:

  • ConocoPhilips Co
  • Amgen Inc
  • Paypal Holdings
  • Starbucks Corporation

Friday 4th of November

Services PMIs are due to be released from all over the EU today for October. Data is mixed, but for the most part, the numbers are either in decline heading towards further contraction or holding steady. Spanish Services is expected to drop again from 48.5 to 48.3, Italy is looking to drop from 48.8 to 48.5, while French, German, and the EU are expected to hold steady at 51.3, 44.9, and 48.2 respectively.

The UK releases its Construction PMI today, and it is forecast for a large drop from 52.3 to 48.0, indicating a sharp contraction in the industry. The index has shown very choppy results this year, so it will be interesting to see how this will be played out in the official data.

The highly anticipated Nonfarm payroll data from the US is also released today. The number of persons employed from month to month is closely watched by investors and the Federal Reserve, as it is an important indicator of economic growth. The employment change for October in comparison to September is expected to be 200K down from 263K. The Unemployment Rate is also expected to have climbed slightly for October from 3.5% to 3.6%, which is to be expected while monetary policy is continuing to be tightened.

 

 

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