European Central Bank (ECB) policymakers have been dropping hints aplenty that they intend to cut rates again this month. Markets have almost fully priced the ECB to cut rates for a third time this year amid unexpectedly soft inflation and a weak economic outlook. Meanwhile, earnings season kicks off properly on Wall Street.
Here are the week’s key events:
Chinese inflation data for September presents the first major economic release to set the tone for the week. Consumer inflation accelerated in August to the fastest clip in a half a year, but this was mainly down to higher food costs from weather disruptions as producer price deflation got worse. The consumer price index rose 0.6% from a year earlier in August, versus a 0.5% rise in July. Markets will also be digesting a finance ministry press conference on Saturday which was slated to detail plans on fiscal stimulus.
Earnings season on Wall Street resumes with financials and a number of Dow components due to report today. Ahead of this, sterling traders will keep a close watch on the latest UK employment and wage data.
The Bank of England has mooted a more aggressive cutting cycle but a lot will depend on wages, which along with services inflation have been notably sticky. But wage growth did slow in the three months to July, sliding to 5.1% from 5.4% in the three months to May.
Germany’s economic woes may be laid bare again by the latest ZEW economic sentiment report, whilst Canada’s inflation data will be watched ahead of the upcoming Bank of Canada decision.
Earnings: Bank of America (BAC), Citigroup (C), Goldman Sachs (GS), Johnson & Johnson (JNJ), UnitedHealth Group (UNH)
Following the employment data, the UK remains in focus with the latest inflation report for September. Inflation in the UK held steady at 2.2% in August, close to the Bank of England’s 2% target. However, services inflation rose to 5.6% from 5.2%, indicating the persistence of underlying drivers of price pressures. Core inflation rose to 3.6% from 3.3% in July also.
Earnings: Abbott Laboratories (ABT)
The European Central Bank is all but certain to cut rates again — for the third time this year.
Policymakers have been making it quite clear — French central bank chief Francois Villeroy de Galhau said a cut is likely and would not be the last. Bundesbank Chief Joachim Nagel, one of the most hawkish members of the Governing Council, said he’s willing to talk about an interest-rate cut. ECB President Christine Lagarde has made it pretty plain that a cut is the most likely outcome amid weakening economic growth and a sharp fall in inflationary pressures.
The market will be most concerned about the guidance for future cuts and whether the ECB gives a signal that it feels it needs to catch up a bit. Meanwhile, look out for the US retail sales data and Philly Fed manufacturing index. The Netflix earnings report is due after the close.
Earnings: Blackstone (BX), Morgan Stanley (MS), Taiwan Semiconductor Manufacturing (TSM), Netflix (NFLX)
China data early doors will set the tone for the Asian session – 1-year and 5-year loan prime rates are slated for review, though lately the authorities in Beijing have been rolling out stimulus measures at unscheduled times.
GDP, retail sales and industrial production figures will be worth keeping an eye on. UK retail sales figures and US housing starts data is also due.
Earnings: American Express (AXP), Procter & Gamble (PG), SLB (SLB)
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