UPCOMING EVENTS:
- Monday: BoJ Summary of Opinions. (US Holiday)
- Tuesday: UK Labour Market report, Eurozone ZEW, US NFIB Small Business Optimism Index, Fed’s SLOOS.
- Wednesday: Japan PPI, Australia Wage Price Index, US CPI.
- Thursday: Australia Labour Market report, UK GDP, Eurozone Employment Change and Industrial Production, US PPI, US Jobless Claims, Fed Chair Powell.
- Friday: Japan GDP, China Industrial Production and Retail Sales, US Retail Sales, US Industrial Production and Capacity Utilization.
Tuesday
The UK Unemployment Rate is expected to tick higher to 4.1% vs. 4.0% prior. The Average Earnings incl. Bonus is expected at 3.9% vs. 3.8% prior, while the ex-Bonus measure is seen at 4.7% vs. 4.9% prior.
The market sees just a 20% chance of a 25 bps cut in December and, although a weak report might raise the probabilities a bit, the market will likely focus more on the inflation figures with two CPI reports left before the last BoE decision for the year.
Wednesday
The Australian Q3 Wage Price Index Y/Y is expected at 3.6% vs. 4.1% prior, while the Q/Q measure is seen at 0.9% vs. 0.8% prior. The data is unlikely to change anything for the RBA although lower readings would be welcomed.
The US CPI Y/Y is expected at 2.6% vs. 2.4% prior, while the M/M measure is seen at 0.2% vs. 0.2% prior. The Core CPI Y/Y is expected at 3.3% vs. 3.3% prior, while the M/M figure is seen at 0.3% vs. 0.3% prior.
At the latest Fed’s decision, Fed Chair Powell said that they expect bumps on inflation and that one or two bad data months on inflation won’t change the process. This keeps the 25 bps cut in December in place even if we get higher inflation readings.
The market though is forward-looking, and the rise in Treasury yields showed that the market sees risks to the inflation outlook. Moreover, the red sweep could increase those fears if the progress on inflation stalls, or worse, reverses.
Therefore, higher inflation readings might not change the near-term monetary policy outlook, but I personally see it changing the market’s outlook and eventually the Fed’s one.
Thursday
The Australian Labour Market report is expected to show 25K jobs added in October vs. 64.1K in September and the Unemployment Rate to tick higher to 4.2% vs. 4.1% prior. The data is unlikely to change anything for the RBA but faster than expected weakening could see the market pricing in more aggressive rate cuts in 2025, much like it did with the RBNZ.
The US PPI Y/Y is expected at 2.3% vs. 1.8% prior, while the M/M measure is seen at 0.2% vs. 0.0% prior. The Core PPI Y/Y is expected at 3.0% vs. 2.8% prior, while the M/M figure is seen at 0.3% vs. 0.2% prior.
This report will likely be seen in light of the US CPI data releases the day before and it might add to the angst around inflation if both come out higher than expected.
The US Jobless Claims continues to be one of the most important releases to follow every week as it’s a timelier indicator on the state of the labour market.
Initial Claims remain inside the 200K-260K range created since 2022, while Continuing Claims after an improvement in the last two months, spiked to the cycle highs in the last couple of weeks due to distortions coming from hurricanes and strikes.
This week Initial Claims are expected at 224K vs. 221K prior, while there’s no consensus for Continuing Claims at the time of writing although the prior reading saw an increase to 1892K vs. 1852K prior.
Friday
The US Retail Sales M/M is expected at 0.3% vs. 0.4% prior, while the ex-Autos M/M measure is seen at 0.3% vs. 0.5% prior. The focus will be on the Control Group figure which is expected at 0.3% vs. 0.7% prior.
Consumer spending has been stable which is something you would expect given the positive real wage growth and resilient labour market. We’ve also been seeing a steady pickup in the UMich Consumer Sentiment which suggests that consumers’ financial situation is stable/improving.
