The last day of the month sees an avalanche of data that could move markets. But, given that a large number of traders are expected to be away from the floor due to a semi holiday, they could have a bigger impact on the markets. That reaction could quickly fade, however, as traders come back following the start of the new month.
China not expected to pick a direction
October was dominated by two factors: At the start there was a week-long national holiday. And at the end was the CCP Congress. Given those two events, Chinese firms were likely in a holding pattern to see how things evolved. Particularly in light of the delay in publication of key economic data through an important part of the period in which the survey was conducted.
There was some increased optimism that covid restrictions would be relaxed following the Congress, but that was dashed early this week. However, it’s likely most of the survey was already conducted before then, which could explain why PMIs remain largely unchanged.
The data points
Chinese firms have been hovering around the break-even level, as measured in PMIs at 50. Results have been technically in contraction or expansion, which doesn’t give the markets much to go by. If there is an unexpected move of a couple of points in either direction, it could change the optimism for the market. Particularly with regards to commodity currencies that supply China, as a lack of optimism among purchasing managers could imply less imports of raw materials.
China’s official NBS Manufacturing PMI is expected to remain essentially flat at 50.0 compared to 50.1 prior. NBS Non-Manufacturing PMI is expected to be similar, slipping a decimal point to 50.5 from 50.6 prior.
European prices refuse to go down
Later on Monday is the release of Preliminary European CPI figures for October. Although they can be revised with the official release, usually the revision is small and the market reacts mostly to the preliminary numbers. Even as the ECB is starting to grapple with higher prices, inflation is expected to keep rising.
Also at the same time is the first look at European growth figures, which are expected to slow down substantially and report the first negative growth rate since coming out of the pandemic. The drop is by the bare minimum, and could potentially be revised back out of negative. But both results would be technical in nature, and likely to keep markets from getting optimistic.
Stagflation ahead
Eurozone quarterly GDP is forecast to come in at -0.1% compared to 0.8% in the second quarter. The annual rate is expected to hit the breaks to 1.0% compared to 4.1% prior. Though it should be noted that part of that change can be due to the shifting comparables. The second quarter of 2021 was still affected by the pandemic, while there was better growth in the summer.
Monthly CPI change is expected to come down a little to 1.0% compared to 1.2% September. On an annual basis inflation is expected to tick up to 10.1% from 9.9% prior.
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