- Interest rate calls and accompanying narrative from Australia, UK and US to be closely followed
- UK Construction PMI could offer hint that supply chain woes are easing
- Eurozone unemployment could start to plateau around pre-pandemic levels
The week is set to start with China in the spotlight. Monday morning will see the publication of the private Caixin PMI Manufacturing Index for October, which is expected to hold broadly flat around the 50 mark. The reading had fallen below 50 – illustrating contraction in the sector – back in August and whilst this proved to be short lived, any repeat could raise fresh questions over the state of the Chinese economy.
On to Tuesday and the Reserve Bank of Australia will make its latest call over interest rates. Although some central banks are now starting to dial up underlying rates, expectations are that the Australians won’t be moving any time this year or indeed next. However, a policy easing strategy known as the Yield Curve Control program is seen as being past its useful life and could be formally dropped at the meeting. It is suggested that this would have the potential to act as something of a break on the overheating residential property market, although with inflation running at 3%, some will probably question whether such actions are sufficient.
Wednesday is set to be a busy session for economic data. The Nationwide Housing Prices for October will be released and this print will be closely followed given the fact it reflects the first data set after the stamp duty holiday finished. However, expectations are that month-on-month growth will remain intact, posting around 0.5%, up from the 0.1% a month ago and arguably heaping further pressure on the Bank of England to hike base rates.
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Eurozone Unemployment data for September is also set for release on Wednesday, with expectations being that this number could plateau around the 7.5% level. That would however be in line with numbers seen around two years ago and policymakers would likely see it as a successful navigation of the pandemic. The more important factor is arguably how well balanced that recovery has been across the diverse currency bloc, but it will likely fuel further calls from the wealthier North to move to a phase of policy tightening in a bid to reward savers – and throttle back inflation, too.
Across the Atlantic, the ADP Payroll Survey for October will be published as the usual curtain raiser ahead of Friday’s non-farms. Forecasts suggest we’ll see a slightly more subdued figure than was printed a month ago, with around 360,000 jobs being added. Arguably it would take a big hit on the downside to cause much disquiet here although this potentially could see hopes of a rate hike being pushed back even further into the New Year.
Rounding out Wednesday’s activity will be the latest from the Federal Open Markets Committee which should offer up more hints over the policy tightening timeline. The Fed arguably do a very good job when it comes to forward guidance and opinions are now moving towards the pace of action being increasingly aggressive once it does start. Confirmation that QE tapering will get underway is also expected, but the detail here has the potential to impact both the dollar and sentiment on equity markets, too.
Thursday sees UK Construction PMI for October, which is expected to show a month-on-month uptick from 52.6 to around 54. This is important because positive momentum here could be seen as a suggestion that some of the supply chain woes are starting to ease and with it have a disproportionate effect on the wider economic outlook. Equally however, a move closer to that break-even of 50 would raise fresh concerns as to just how difficult arrangements will become as we move into the winter.
Also on Thursday, the Bank of England’s Monetary Policy Committee will make its latest call over interest rates. There’s growing concern that the strength of the underlying economic recovery, combined with the threat of spiralling inflation, means that the bank will act sooner than had previously been expected. Opinions are divided as to whether we’ll see a move today, but if we do it would likely send a shockwave through the market, pushing Sterling higher and simultaneously knocking stocks.
Closing the week, attention will be back across the Atlantic with the release of assorted employment data from the Bureau of Labor Statistics. Non-farm payrolls are the headline grabber here, but also look at the overall unemployment rate which is forecast to remain unchanged from the 4.8% seen a month ago, and average hourly earnings. On an annualised basis, this is expected to come in close to the 4.6% we saw recorded in September which would arguably provide some reassurance that workers are at least keeping up with the reported inflation level. Again, the risk here would be a shortfall on the downside posing questions for policymakers over what this means for the timing of any plan to eventually hike interest rates.