Weekly Market Outlook: All Eyes on Brexit
The economic data for the week ahead will be likely overshadowed by the Brexit developments. After months of stalemate, there seems to be some kind of progress.
But hopes diminished quickly after UK lawmakers voted down the deal on Saturday. This means the UK will seek an extension to Brexit. The UK government sent a letter to the EU to formally seek an extension to Brexit to 31 January 2020. The situation remains fluid for the moment.
The US-China trade deal has taken a backseat after the initial euphoria which saw equities rising. Both sides now have an incentive to close the limited phase one deal. Investors expect the deal to be closed any time before the middle of November.
On the economic front, data is sparse with the exception of the ECB’s monetary policy meeting. This will be Mario Draghi’s final monetary policy meeting as he makes way for Christine Lagarde.
Investors will, therefore, brush aside any economic data from the eurozone.
Here’s a brief look at the key economic events coming up for the week ahead.
A Somewhat Busy Week for the Eurozone
Data from the eurozone this week be mixed with the ECB’s monetary policy meeting, which is the main event.
On the economic front, some flash PMI’s are due over the course of the week. Investors will likely overlook this data against the ECB’s meeting.
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Eurozone Flash PMIs to Rebound
In September, PMIs fell across the globe. The pace of declines was also significantly higher than the forecasts. Investors are hopeful that activity across manufacturing and services will pick up.
As a result, there is scope for both the PMIs to rise slightly off September’s decline. But one month’s data isn’t going to do much for investors.
Not Much to Expect from the ECB
The European Central Bank’s monetary policy meeting this week will not likely spring any surprises. The ECB already announced its restart of the bond purchases.
The asset purchase program is due to begin on November 1st, while the tiering will start from the end October. Investors do not expect to see much on monetary policy at this week’s meeting.
The economic outlook for the eurozone turned weaker since the announcement made a few months ago. However, with the trade outlook improving and the possibility of a Brexit solution, markets will be looking forward with some optimism.
This ECB meeting will also be the last monetary policy meeting under Mario Draghi’s leadership.
A Slow Week for the USD
There isn’t much happening from the United States this week. Economic data stands out only with the release of the durable goods orders report mid-week. The remainder of the week will see the flash PMIs from Markit.
There are also no Fed speeches lined up as the FOMC meeting is due in a week’s time. Therefore, the blackout period will add further calm to the markets.
Durable Goods to Decline in September
US durable goods orders are set to continue with the bearish trend. The data for September is forecast to show another slow month. For September, headline durable goods orders are due to fall by 0.5%.
Meanwhile, core durable goods orders are set to fall by 0.2%. This comes after a slow pace of increase in the previous month. Durable goods orders were weak in August and could be lower in September.
Flash PMI’s to Remain Somewhat Stable
IHS Markit will be releasing the monthly flash PMI figures this week. The manufacturing and services PMI are to largely remain stable for the month of October.
The US manufacturing and non-manufacturing PMI from the Institute for Supply Management both fell in September. Particularly, the manufacturing PMI fell below the 50-index signaling contraction.
If the declines in the sector are strong, then Markit’s data could also see some contraction.