This week is packed with significant economic events and corporate earnings that are expected to influence market sentiment, particularly focusing on Eurozone inflation data.
In the Eurozone, several key economies will release monthly inflation figures and quarterly GDP data, providing insight into the region’s economic direction and informing the European Central Bank’s (ECB) future interest rate decisions.
Globally, the U.S. will also capture attention with the highly anticipated non-farm payroll report, a critical indicator for financial markets. Additionally, the U.S. will report its third-quarter GDP, while major tech companies like Alphabet, Meta Platforms, Apple, and Amazon are set to announce their quarterly earnings.
Other notable events include the Bank of Japan’s interest rate decision, China’s manufacturing and services PMIs, and Australia’s Consumer Price Index (CPI), all of which will contribute to understanding developments in these regions.
Key Economic Data in Europe
This week is particularly busy for European economies, with Eurostat releasing important data for Germany, Spain, France, and Italy. These countries will publish their preliminary October Consumer Price Indices (CPIs) and third-quarter GDP figures.
Inflation in these nations experienced a sharp decline last month, primarily due to a significant decrease in energy prices. The Eurozone’s overall composite flash CPI will be the most critical metric, with headline inflation dropping to 1.7% year-on-year, below the ECB’s 2% target, marking the lowest rate since April 2021.
The ECB anticipates inflation may rise again in October due to base effects, with consensus forecasts suggesting an increase to 1.9% in annual CPI and a slight dip in core inflation to 2.6%.
Germany’s Economic Struggles
Among the four economies, Germany continues to show weakness, having contracted by 0.1% in the second quarter. The country’s manufacturing sector has faced a downturn for the past two years, dragging down overall economic performance. In contrast, France, Italy, and Spain have all seen economic growth, with Spain noted as the fastest-growing economy among them.
Expectations for the third quarter suggest these three nations will continue their growth trends, while Germany’s economy is projected to contract further by 0.1%.
In the UK, the government budget will attract scrutiny as officials navigate rising deficits, sluggish economic growth, and efforts to control inflation, with particular attention on tax, spending, and welfare policies.
U.S. Labor Market Influences
The non-farm payroll report for October will be crucial for global markets, shedding light on the U.S. labor market’s direction. September’s data surprised many with 254,000 new jobs added and the unemployment rate falling to 4.1%.
This strong labor market has shifted expectations, with analysts now anticipating the Federal Reserve to slow its rate cuts to 0.25% in November instead of the previously expected 0.5%. However, forecasts suggest only 110,000 new jobs may have been added in October, the lowest since February 2021, with the unemployment rate expected to hold steady at 4.1%.
A weaker labor market could prompt the Fed to expedite its easing cycle, potentially boosting stock markets.
Additionally, the U.S. advanced GDP for the third quarter will be closely monitored. Analysts expect growth to remain steady at around 3%, matching the previous quarter’s performance, which would further support the notion of a soft landing for the economy.
Asia-Pacific Economic Highlights
In the Asia-Pacific region, the Bank of Japan’s (BOJ) interest rate decision will be a focal point. After raising rates in March and July to bolster the yen and reduce import costs, the BOJ is expected to maintain its current rates this week, especially with Japan’s general election and the upcoming U.S. Presidential election on the horizon.
Market speculation suggests a potential rate hike in December or January.
China’s manufacturing and services sectors will also be critical, as the manufacturing PMI has contracted for five consecutive months due to weak demand and low commodity prices. However, the latest decline was the mildest, hinting at a possible rebound. Analysts expect the manufacturing PMI to return to growth, while the non-manufacturing PMI is anticipated to continue its upward trajectory.
In Australia, the release of third-quarter inflation data will be crucial for the Reserve Bank of Australia’s (RBA) interest rate strategy. The RBA has yet to implement a rate cut amidst high inflation levels. September’s monthly CPI recorded a decline to 2.7% from 3.5% in August, with forecasts suggesting annual inflation may cool to 2.3% in the third quarter, possibly encouraging the RBA to start its easing cycle sooner than anticipated.
