This week is filled with important economic events and corporate earnings, which are expected to influence market sentiment. Eurozone inflation data will be the focus for the region.
advertisementSeveral important economic indicators and corporate earnings will influence market sentiment this week. In the eurozone, several major economies are expected to release monthly inflation and quarterly GDP data, providing insight into the region's economic trajectory and providing guidance on the ECB's future interest rate path.
Globally, all eyes will continue to be on the United States, as non-farm employment statistics are the most important data for financial markets. The world's largest economy is also scheduled to announce its third quarter GDP. Investors are paying close attention to the earnings results of major technology companies, with results expected this week from Alphabet, Metaplatform, Apple and Amazon.
Other factors that will shed light on trends in these regional markets include the Bank of Japan's interest rate decisions, China's manufacturing and services PMI, and Australia's CPI.
European economic data to watch
This week will be a busy week on the European economic front as Eurostat releases important data for major countries.
Germany, Spain, France and Italy are all scheduled to release preliminary CPI figures for October and GDP statistics for the third quarter.
Inflation in these economies fell sharply last month, primarily due to a sharp year-on-year decline in energy prices.
However, the Eurozone's composite consumer price index (CPI) will be the most influential data for the region.
The headline inflation rate fell to 1.7% year-on-year, below the target of 2% and the lowest level since April 2021.
The European Central Bank (ECB) expects inflation to rise again in October due to base effects. According to consensus forecasts, annual CPI could rise to 1.9% in October, while core inflation could fall slightly to 2.6% year-on-year.
German economy continues to be sluggish
Looking at the gross domestic product (GDP) figures for these four countries, Germany remains the weakest, with economic growth contracting by 0.1% in the second quarter. Germany's manufacturing industry has been shrinking for the past two years, putting a huge dent in the overall economy.
In contrast, France, Italy and Spain all experienced economic growth in the first two quarters, with Spain standing out as the fastest growing economy in this group.
According to consensus forecasts, the three countries are expected to maintain similar growth trends in the third quarter, while Germany's economy is expected to continue contracting by 0.1%.
In the UK, the government's annual budget will be in the spotlight as it faces the challenge of rising budget deficits, slowing economic growth and reining in inflation. The focus will be on taxes, government spending, and welfare measures.
US labor market changes expectations
October's non-farm employment report will be the most important data for global markets, providing further clues about the future direction of the U.S. labor market.
US employment data for September was surprisingly strong, with 254,000 new jobs and the unemployment rate falling to 4.1% from 4.2% the previous month.
advertisementExpectations have changed due to the strong labor market, with markets now expecting the Fed to continue cutting rates by a slower 0.25% in November, rather than the previously expected 0.5%.
Consensus forecasts predict that the U.S. will add just 110,000 new jobs, potentially the lowest level since February 2021, while the unemployment rate will remain at 4.1% in October. .
A softening labor market could increase the likelihood that the Fed will accelerate its easing cycle, potentially boosting stock markets.
Additionally, the third quarter US developed GDP is crucial to market sentiment. Market participants believe the U.S. economy is on a soft landing, with gross domestic product (GDP) growing at 3% in the second quarter.
advertisementAnother resilient quarter would likely further strengthen expectations that the Fed will slow its easing cycle, pushing the dollar and stock markets higher. The world's largest economy is expected to maintain 3% growth in the third quarter, matching the pace of the second quarter.
On the earnings side, major technology companies such as Alphabet, Meta Platforms, Apple, and Amazon are scheduled to release their quarterly results, providing valuable insight into developments in the artificial intelligence industry.
Notable Asia-Pacific economic events
In the Asia-Pacific region, the Bank of Japan's (BOJ) interest rate decisions will be closely monitored.
The Bank of Japan raised policy interest rates in March and July with the aim of supporting the yen and lowering import prices. With Japan's inflation receding in recent months, the bank is expected to keep interest rates on hold this week, especially ahead of Japan's general election and the U.S. presidential election.
advertisementThe market currently expects the Bank of Japan to raise interest rates again in December or next January.
China's business activities in the manufacturing and services sectors will also be important to global markets.
China's manufacturing PMI has declined for five consecutive months through September due to weak demand and weak commodity prices.
However, the rate of decline in September was the slowest of the series, suggesting the possibility of a rebound in the future. Manufacturing PMI is expected to return to expansion, while non-manufacturing PMI is likely to continue growing this month.
advertisementAustralia will release its third quarter inflation data, a key indicator in determining interest rate policy by the Reserve Bank of Australia (RBA).
The RBA is the only central bank yet to start cutting interest rates in the global monetary easing cycle, as inflation continues to be high. Therefore, upcoming inflation data will be very important for future policy decisions. Monthly CPI in September was 2.7%, significantly lower than August's 3.5%.
Consensus forecasts suggest annual inflation will fall to 2.3% in the third quarter, with the RBA likely to begin its easing cycle sooner than previously expected.
