Weekly Market Outlook

U.S. payrolls and Eurozone Q3 GDP

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The week ahead will mark the change into a new trading month. Economic data will, therefore, cover the month of October which will shed light into the state of the global economies for the third quarter of the year.

Inflation data from the U.S. and the third quarter CPI report from Australia will keep investors tuned on. Among the central bank meetings, the Bank of England and the Bank of Japan are slated to meet this week. Both central banks are expected to keep monetary policy unchanged at this week’s event.

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The payrolls report will be coming out on Friday. Data covers both the U.S. and the Canadian economies.

Here’s a quick recap of the leading economic events due this week.

Flash PMI’s and advanced GDP reports from the Eurozone

The week ahead will be marked a busy calendar as far as the Eurozone is concerned. The economic data kicks off from Tuesday which will see the release of the French quarterly GDP report. Later in the week, the Italian GDP report comes out culminating with the initial third-quarter GDP data from the Eurozone.

The Eurozone’s second-quarter GDP was measured at 2.2% on the year. Economists polled, expect the third quarter GDP on an annualized basis to rise at a slower pace of 1.8% on the quarter.

Later in the week, the flash inflation estimates will be coming out. The Eurozone’s inflation was seen stalling at 2.1% on the year ending August while the core CPI which excludes the volatile food and energy prices rose 0.9%.

For September, the annualized inflation data according to the flash estimates are forecast to rise 2.1% on the headline and 1.1% on the core inflation rate.

U.S. payrolls and inflation data

The week ahead will mark the start of a new trading month. The data will, therefore, focus on the important monthly indicators. The week starts with the personal consumption expenditure report. The Fed’s preferred gauge of inflation will cover the month of September.

Economists polled expect the core PCE price index to rise 0.1% on the month. This puts the annual core PCE price index unchanged at 2.0% and right at the Fed’s 2.0% inflation target rate. Personal spending an income details are also due over the week. Estimates point to a modest increase from 0.3% previously to 0.4% on both personal income and spending data.

Fed officials will be carefully watching these reports ahead of the December Fed meeting where interest rates are most likely to be hiked.

Later in the week, the monthly nonfarm payrolls report will be released. The median estimates point to a 190k headline print. This marks a strong pickup compared to August’s payrolls report which showed 134k. Of course, revisions to past data will be something to watch.

The U.S. unemployment rate which unexpectedly fell to 3.7% is forecast to remain unchanged. The monthly wage growth is however forecast to rise at a slower pace of just 0.2% on the month, slower than the 0.3% increase seen the month before.

Not to forget, the Institute of Supply Management will be releasing the monthly manufacturing PMI report. The median forecasts point to a somewhat steady pace of activity with the index expected to remain steady at 59.5. This marks a moderate decline from 59.8 in August.

Bank of Japan monetary policy meeting

The Bank of Japan will be holding its monetary policy meeting this week on Wednesday. No changes are expected from the BoJ as interest rates and the central bank’s QE program are forecast to remain unchanged.

The BoJ is likely to maintain a wait and watch mode as the central bank’s monetary policy divergence continues against the other major central banks. Still, investors will be looking for any clues from the BoJ on the forward guidance.

Japan is expected to start its sales tax that is due to come into effect from October 2019. Also known as the consumption tax, this is supposed to play a significant role in pushing inflation higher. As a result, the BoJ is unlikely to damage the status quo.

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