Week Ahead
The week begins on a relatively subdued note, preceding the start of the COP30 Conference, Later today we will hear from the BoE’s Lombardelli. The Germany ZEW survey and the UK employment figures will be key on Tuesday, while the US bond markets will be closed for Veterans Day. We will also hear from the ECB’s Kocher on inflation, rates and their impact on the economy, and counterpart Vujic at a separate event, and the BoE’s Greene. Germany CPI follows on Wednesday and central bank chatter includes the BoE’s Pill, and the Fed’s Williams at the US Treasury Market Conference, with Bostic and Paulson attending different events. UK GDP and industrial production prints are due on Thursday. The ECB’s Galhau, the Fed’s Musalem and Hammock and the BoE’s Greene will garner market focus. China property prices, retail sales and industrial production, and eurozone GDP and employment figures will be released on Friday. We also have a bumper earnings week for the market to digest.
The US senate managed to beat the record for the longest shutdown in history. As a result, markets were left in the dark amid limited data. The ISM manufacturing contracted further in October, while the ISM services expanded. The ADP surprised to the upside with 42k jobs added, crucially, the 3-month average was only 3.3k the weakest level since August 2020. Moreover, the volatile Challenger job cuts soared 175.3% in October, the highest level for any October since 2003. The cuts were largely driven by cost-cutting, softening demand, and the adoption of Artificial Intelligence. These elevated layoff figures, which have pushed the year-to-date total above one million, reinforce concerns about a broader economic slowdown, particularly in sectors like technology and warehousing. We then had the preliminary University of Michigan sentiment figures for November signalling a noticeable decline in consumer confidence, significant fall in current conditions to historic lows, and eased expectations.
Markets also had to contend with mixed Fed rhetoric, and broadly robust US corporate earnings. The yield on the 10-year UST was marginally higher, closing at 4.10% last week. Meanwhile, the S&P Index fell 1.63%. The dollar ticked lower following the weaker jobs data and sentiment figures towards the end of the week. Brent Crude fell 2.21%, closing the week at $63.63pb.
Closer to home the Bank of England's (BoE) Monetary Policy Committee (MPC) recently voted by a narrow 5-4 majority to hold the Bank Rate steady at 4% for a second consecutive meeting, despite inflation having fallen and the economy showing signs of weakness. Governor Andrew Bailey, who cast the deciding vote, stated a preference to "wait and see" whether inflationary pressures would continue to fade and to assess the impact of the upcoming Autumn Budget. The MPC acknowledged that inflation has likely peaked at 3.8% (above the 2% target) and is set to fall gradually but cited the ongoing risk of price and wage increases becoming entrenched. This cautious stance, combined with updated forecasts signalling rising unemployment and subdued growth, has fuelled market expectations for a potential rate cut as early as December, provided the post-Budget economic data offers sufficient clarity on disinflation.
Elsewhere, China’s October trade data disappointed with exports falling for the first time since Trump unleashed his "liberation day” tariffs in April. Import data also missed expectations, rising 1.0%. CPI unexpectedly rose 0.2%yoy in October supported by demand for travel, food and transport, while factory gate prices fell 2.1%.
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