Will the ‘Trump trade’ remain a big driver of markets with the US election day now so close? The dollar continued its October rally, and yields edged higher last week. The moves were reversed modestly by the end of the week, as investors possibly questioned the sustainability of the recent sharp rise in US rates. Oil prices retraced some of the decline from recent weeks which has weighed on energy-importing currencies such as euro and yen. The latter has been the big loser in October in general amid the moderation in the Fed pricing as US recession fears have been placed on the back burner.

This week will be eventful with the US monthly jobs report likely the marquee risk data release. Markets will also look out for the number of job openings in the JOLTS report, which is an important measure of labour demand for the Fed. Non-farm payrolls are likely to slow dramatically from the previous month. But how much impact will the weather-related distortions, favourable seasonal adjustment and Boeing strikes have on the figures, and influence on next week’s FOMC rate decision?

Given the backdrop of 3% growth, low unemployment, stock markets at all-time highs, and inflation still above 2%, many on Wall Street are questioning why the Fed cut rates 50bps in September. Added too that feeling is why the market expects the Fed to cut rates down to 3%. Those questions could intensify over the coming week on any strong data surprises.

It’s the biggest week for megacap tech earnings with five of the Magnificent Seven reporting their quarterly results. Google parent, Alphabet, release on Tuesday, Microsoft and Facebook parent, Meta, on Wednesday and Apple and Amazon on Thursday, all after the US closing bell. These companies’ results will have an outsized influence on markets due to their huge market caps and weightings in the major indices.

In Brief: major data releases of the week

Wednesday, 30 October 2024

– UK Budget: In Labour’s first budget for 14 years, higher taxes are likely in some form. Day-to-day spending on Government departments will have to increase, while higher investment may be more modest.

– US GDP: Expectations are for Q3 growth to hit 3% again, matching the prior quarter. Resilient consumer spending has kept the economy relatively buoyant amid the solid jobs market with low unemployment. 

Thursday, 31 October 2024

– Bank of Japan Meeting: The policy rate is expected to remain steady at 0.25%. Focus will be on the quarterly outlook report. Growth is predicted to be revised downwards and inflation higher for 2024. Policy normalisation will continue if the economy develops in line with the Bank’s forecast. 

– Eurozone CPI: Headline inflation is expected to rise 1.9% in October, from the prior 1.7% and core inflation to remain at 2.7%. Energy prices are to blame for the uptick, but prices are closing in on the ECB’s target. 

– US Core PCE: The Fed’s favoured inflation gauge is forecast to print at 0.2%. This is one-tenth higher than the August print, which leaves the 3-month annualised rate at 2.1%.

Friday, 01 November 2024

– US Non-Farm Payrolls: The headline is expected to print at 120k, well below the prior 254k. The jobless rate is forecast to remain unchanged at 4.1% and average hourly earnings one-tenth lower at 0.3%. Hurricanes and strikes are likely to impact the data.

– US ISM Manufacturing: Consensus sees the October survey rising modestly to 47.6 from 47.2. Manufacturing remains in contraction mirroring regional surveys. Hopes are that pre-election uncertainty may reverse.