- MON: Eurogroup; Chinese Trade Balance (Oct), Swiss Unemployment (Oct), EZ Sentix (Nov), US Employment Trends (Oct), Australian Consumer Sentiment (Nov).
- TUE: US Midterms, CBR Policy Announcement, BoJ SOO (Oct), EIA STEO; EZ Retail Sales (Sept), US NFIB (Oct).
- MARRY: RBA Policy Announcement; Chinese CPI (October).
- GAME: Banxico Policy Announcements; Norwegian CPI (oct), US CPI (oct), IJC (w/e 31st oct), New Zealand manufacturing PMI (oct), Chinese M2 (oct).
- FRI: Final German CPI (Oct.), UK GDP estimate (Sept.), Preliminary GDP. (Q3), US University of Michigan Prelim. (Nov).
NOTE: previews are listed by order of the day
Chinese Trade Balance (Mon):
China’s trade surplus is expected to have widened further in dollar terms, with analysts expecting $95.80 billion from $84.74 billion previously. Exports are expected to have increased by 4.1% YoY (previously 5.7%) and imports are expected to increase by +0.1% YoY (previously +0.3%). It should be noted that the data will likely be too retrospective given the recent chatter surrounding a more targeted COVID policy from China; recent reports suggest that the Chinese CDC is working on a path to reopening, and Chinese health authorities will hold a press conference on targeted COVID prevention on November 5. A former Chinese government expert told a conference on Friday that many new COVID policies would be introduced over the next 5-6 months, and added that a “substantial change” in COVID policy would be coming soon.
US Midterm Elections (Tuesday):
All House seats will be elected and 35 Senate seats will be put to the vote. The Senate race is currently seen as a draw, but in recent days polls have tipped in favor of Republicans, according to FiveThirtyEight; Republicans should take control of the House. FiveThirtyEight sees an 80% chance the GOP will hold between 215 and 248 seats, adding that the House fate lies in Iowa’s 3rd district, North Carolina’s 13th district and Colorado’s 8th district, while that the three districts along the Texas-Mexico border will also be key. Within the Senate, particular attention is being paid to the Georgia, Nevada and Pennsylvania races, with Republicans trying to take Georgia and Nevada, while Democrats seek to take Pennsylvania from the opposition. If the Democrats retain control of the Senate and the House becomes Republican, it will be difficult to pass legislation in the next two years, where any measure passed by the House would likely be dead when it reaches the Senate, and vice versa . However, Republicans will likely use the debt limit and government funding limits to pressure Democrats into forcing them to the spending cuts negotiating table, some analysts say. The gubernatorial race is for 36 seats, made up of 20 Republicans and 16 Democrats. The gubernatorial races could have implications for the 2024 US presidential election, with a view to whether Florida Governor Ron De Santis should run for president from the Republicans, as well as former President Trump who has hinted that expects to show up again. Inflation and the economy have been one of the main concerns of the electorate, if not the main one; Bank of America suggests that if the Republicans win, it would mean the electorate wants low inflation, while if the Democrats win, it would imply the electorate wants low unemployment. BofA suggests that a Republican victory would also lead to monetary policy tightening and further yield curve inversion, while a Democratic victory would likely lead to looser fiscal policy and a steeper yield curve.
EZ Retail Sales (Tuesday):
Analysts expect Eurozone retail sales to rebound 0.3% M/M in September, after falling 0.3% in August; the yearly measure is expected to improve a bit but is still seen -1.3% Y/Y (prev. -2.0%). Moody’s analysts note that regional retail sales data in Germany and France surprised on the upside during the month, which bodes well for aggregate Eurozone data. However, Moody’s says it “doesn’t hold [its] breath for a pickup in consumer spending,” and instead expects retail sales “to contract through the rest of the year as inflation continues to erode the power of purchase and that dismal confidence reduces demand”.
Chinese CPI (Wednesday):
Annual consumer prices are expected to have cooled slightly in October to 2.5% Y/Y (prev. 2.8%), while the monthly measure is accelerating slightly to +0.4% M/M (prev. 0.3%). The PPI should fall by -1.4% over one year (before +0.9%). Using the Caixin PMI as a proxy, in October “the rate of inflation was the fastest since February, and above the long-term average of the series; producer prices rose, often reflecting the passing on of higher costs to customers, according to anecdotal evidence. Along with higher oil-related prices, companies reported higher payrolls, which led to higher operating expenses. That said, the overall rate of cost inflation was the second slowest in the past 14 months. As a reminder, last month’s CPI measures were affected by the lockdowns (ahead of the CCP National Congress) which affected consumption patterns. In addition, the headline CPI was driven by higher food prices, with pork prices rising around 36% in September after a 22.4% gain in April – note that the Chinese government released frozen pork from state reserves in an effort to control prices.
US CPI (game):
Analysts expect core consumer prices to recover 0.7% M/M in October, accelerating from the 0.4% M/M rate in September; the core gauge is seen cooling off a touch at 0.5% M/M, lower than the 0.6% M/M in September, but still high against historical levels. The data will be framed in the context of the Fed’s progress in reducing inflation. After November’s FOMC meeting, Fed Chairman Powell said it was “very premature” to consider pausing or ending the rate hike cycle, noting inflation remains well above to the Fed’s long-term goals, with price pressures evident for goods and services. Although longer-term inflation expectations still seem well anchored, the Fed wants to see inflation come down decisively and is ready to stay the course until the job is done. Powell’s message was that the Fed is firmly committed to its 2% inflation target. Powell, however, hinted at a potentially slower pace of rate hikes in December; the statement said the Fed will take into account “the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments” when determining the pace of futures rate increases. Analysts explained that with rates in restrictive territory, the Fed may slow the pace of normalization to assess the impact of the 375 basis point rate hike triggered since March. Currently, the market is split on whether the Fed will implement a 50 or 75 basis point rate hike in December. As a result, the market seems to be of the view that if inflation metrics go down (and traders are watching global inflation data including CPI, PCE, wage metrics in the data on employment, consumer inflation expectations via surveys, etc.), this gives the Fed the hedge to downgrade to the lower increment; however, if the inflation data does not cooperate, the Fed will prefer a bigger hike, and potentially an even higher terminal rate (Powell suggested that the eventual peak in the target fed funds rate is above 4.6% expected in the September projections; money markets peak at 5.00-5.25% in Q2 2023).
Banxico (game) announcement:
At its last policy meeting, Banxico raised interest rates by 75 basis points to 9.25%, in line with consensus, and minutes from that meeting suggested further rate hikes were on the table. The central bank’s recent monthly poll found that analysts thought rates would end 2022 at 10.50%, raising their expectations by 10.25% in the previous month’s poll – and it looks like the current level of rate has started to spark conversations within the board about when it will end. the touring bike. Board member Esquivel, whose term ends at the end of this year, recently warned against raising rates to an extremely restrictive level given the weakening economy, and said that policymakers should start thinking about the end of the rate hike cycle, arguing that a benchmark rate between 10.25-10.50% should be a sufficiently high and restrictive rate level. He also said rate expectations for next year are “uncharacteristically” high and “we can’t think they’ll be able to stay there for very long.” Indeed, this thinking is in line with the central bank’s poll, where analysts believe rates will fall to 9.75% next year (in the previous poll, they were expecting 10.25% in 2023).
UK GDP estimate (Friday):
August’s monthly GDP data printed -0.3% M/M, painting the picture of a losing economy, and analysts at Investec believe a similar picture could be seen in data from September, with the potential for an even steeper decline; he forecasts a monthly decline of 1.0%. September’s downside will be exacerbated by a one-time factor relating to Queen Elizabeth II’s funeral during the month, which was a public holiday – Investec notes that the character of this type of holiday is different from that of other public holidays, with many businesses close as a sign of respect. The September data also complements Q3, where the street expects UK GDP to have fallen 0.2% Q/Q, offsetting the 0.2% Q/Q growth seen in Q2; the annual measure is expected to show 2.8% year-on-year growth. Investec claims that if the historical data is not revised, the UK will have managed to avoid technical recession for the time being (as defined by the traditional measure of “two consecutive quarters of negative growth”); “Recession is also not likely by the fourth quarter, as it is highly likely that a rebound in GDP followed in October as activity picked up after the end of the national mourning period,” writes the bank, but “we nevertheless expect a recession in 2023 as higher interest rates bite amid fiscal tightening.
For more research like this, check out Newsquawk’s
live squawk box for 7 days free.
