Key Factors:- Next week’s events include significant bank profits, the latest inflation figures, ECB Monetary Policy Meeting, Chinese CPI etc.

 

Key Takeaways

• The earnings season begins next week, with reports from major banks and financial organizations such as JPMorgan Chase, Wells Fargo, Citigroup, BlackRock, and PNC Financial Services.
• Earnings will also be reported by PepsiCo, Delta Air Lines, Walgreens Boots Alliance, and UnitedHealth.
• The US Labor Department will provide the most recent consumer and producer pricing figures.
• The Federal Reserve will release meeting minutes from the most recent FOMC meeting.

After the Indigenous Peoples’ Day holiday on Monday, earnings season begins next week with results from major banks and financial organizations such as JPMorgan Chase, Wells Fargo, Citigroup, BlackRock, and PNC Financial Services. Next week, PepsiCo, Delta Air Lines, Walgreens Boots Alliance, and UnitedHealth will all report earnings.
On Wednesday and Thursday, we’ll get the most recent inflation statistics, as well as updates on producer and consumer prices.
The Federal Reserve will also issue meeting minutes from its most recent Federal Open Market Committee (FOMC) meeting on Wednesday.
Finally, beginning Tuesday, Amazon will offer its two-day “Prime Big Deal Days” event, during which Prime members may take advantage of bargains and discounts on popular brands and products.

Weekly Economic calendar USA Oct 9 to Oct 13

  

Tuesday 

• NFIB Business Optimism Index (Sept)
• Consumer Inflation Expectations (Sept)
• Wholesale Inventories (Aug)

Wednesday 

• Producer Price Index (PPI) (Sept)
• FOMC Meeting Minutes
• MBA Mortgage Applications (For week ended Oct6)

Thursday 

• US CPI
• US Jobless Claims
• API & EIA Crude Oil Stock Change (For week ended Oct6)

Friday 

• Michigan Consumer Sentiment Index – Preliminary Reading (Oct)
• Export and Import Prices (Sep)

TOP FACTORS IN WALL STREET DAY WISE

Wednesday

The US PPI

The US PPI Y/Y is predicted to meet 1.6%, while the M/M is 0.3% vs. 0.7%. Y/Y Core PPI is forecast at 2.3%, up from 2.2%, while M/M is 0.2%, up from 0.2%. This report may not move the market as much as the CPI report the next day.

FOMC minutes
The markets respond to the FOMC Meeting Minutes, although the fluctuations normally fade after three weeks because the contents are mostly known. Remember that the Fed left the FFR at 5.25-5.50% as predicted, raising growth and inflation projections and lowering unemployment. The Dot Plot showed that the FOMC expected another 25 bps raise by year’s end but “surprisingly” only 50 bps of rate decreases in 2024, down from 100 bps.

Thursday

US CPI

US CPI Y/Y is predicted at 3.6% vs. 3.7%, and M/M is 0.3% vs. 0.6%. Expect Core CPI Y/Y at 4.1% vs. 4.3% and M/M at 0.3% vs. 0.3%. A hot CPI report could drive the Fed to boost 25 bps at the November meeting, given the robust economic data and NFP beat last Friday.

Jobless Claims in the United States
As the US labor market remains strong, weekly jobless claims continue to outperform predictions. This week’s consensus has Initial Claims at 210K vs. 207K before, with no consensus for Continuing Claims at the present, despite the earlier reading of 1664K.

 Friday

Consumer Sentiment at the University of Michigan

The University of Michigan Consumer Sentiment Index is anticipated to fall to 67.4 from 68.1 before. Since October of last year, consumer morale has been growing as consumers’ finances improved as a result of lower inflation and increased salaries. Higher oil costs have recently weighed on sentiment, but the good news is that inflation forecasts have not risen as much as feared.

Other Events

Meetings of the IMF and the World Bank

Global finance executives and central bankers will gather in Marrakesh, Morocco, for the annual meetings of the International Monetary Fund and the World Bank.
The talks are taking place against a backdrop of concern over whether inflation can be brought under control without throwing major economies into crisis.
Aside from various visits by central bankers and policymakers, the IMF’s World Economic Outlook, which includes an updated set of forecasts, is set to be released on Tuesday.

The Earnings Season Has Begun

Earnings season begins next week, with results from major banks and financial firms such as JPMorgan Chase, Wells Fargo, Citigroup, BlackRock, and PNC Financial Services.

Companies are generally gloomy about their earnings prospects. According to FactSet data, 74 S&P 500 businesses have released negative earnings guidance, while 42 have issued favorable outlooks. The number of companies providing guidance has risen to 116, the largest since FactSet began tracking this statistic in 2006, exceeding the previous high of 113 last quarter.

The Most Recent Inflation Figures

We’ll obtain the most recent price adjustments next week. The Bureau of Labor Statistics (BLS) will release the September Producer Price Index (PPI) on Wednesday, which will track inflation from the perspective of manufacturers and wholesalers.

Because manufacturers’ costs are eventually passed on to consumers, producer prices are sometimes regarded as a leading predictor of consumer prices.

On Thursday, the newest Consumer Price Index (CPI) will be released. According to the Federal Reserve Bank of Cleveland, consumer prices rose 0.4% last month and 3.7% year on year. Core prices, which exclude volatile food and energy costs, were also anticipated to be up 0.4% from August and 4.2% year on year.

Since September 2021, this would be the smallest annual rise.

U.S. stocks ended the week mixed after Friday’s unexpected jobs report.

The major indexes closed neutral after another week of top-heavy trading in which large-cap growth stocks—particularly mega-cap information technology and internet stocks—outperformed the market. The equally weighted S&P 500 Index underperformed its market-weighted equivalent by the greatest margin since March, reflecting most stocks’ underperformance. Over the same period, Russell indexes showed that large-cap growth stocks beat value stocks, and the S&P 500 outpaced the Russell 2000 Index by the most.

Americans continue to return to the labor force.

T. Rowe Price traders noted that volumes were generally subdued through most of the week as investors awaited the closely watched official nonfarm payrolls report on Friday, hoping it would show another hiring decline that would convince Federal Reserve policymakers to forgo another rate hike. After the Labor Department reported 336,000 nonfarm job gains in September, double consensus estimates, stock futures sank dramatically before the equities market began.

Not always attracted by high earnings.

However, the jobs report’s nuanced picture appeared to spur a market comeback after equities trading opened at 9:30 a.m. Average hourly wages climbed 0.2% in the month, lowering the year-over-year growth to 4.2%, its lowest since June 2021. At 62.8%, the labor engagement percentage was at its highest since February 2020, before the pandemic lockdowns. The data revealed that rising supply rather than rising demand drove the labor market, creating a more benign inflationary environment.

This week, several more muted economic indications calmed expectations of a GDP and inflation recovery, according to our traders. In September, industrial activity perked up somewhat, while the much larger and healthier services sector showed that growth had slowed significantly since August. On Wednesday, payroll processor ADP reported that private sector payrolls rose 89,000 in September, the weakest gain since January 2021.

Treasury yields rise.

Friday morning’s 10-year U.S. Treasury note yield hit a 16-year high of 4.89% before falling as shares rose. Treasury yields jumped early in the week, causing munis to outperform and lower ratios. Our traders highlighted that new offerings fared well despite economic downturn, and the following week’s issuance volume was likely to drop significantly.

Some investment-grade corporate bonds were oversubscribed due to low issuance. Spreads widened this week, and regional bank issues underperformed. Rates fell and equities fell early in the week, putting pressure on high yield bonds. The primary market was quiet, and our traders don’t expect issuance to increase until volatility decreases. Collateralized loan obligation managers bought bank loans, although they were more selective given the macro environment.

Weekly Global Market Calendar (09 Oct-13 Oct)

Tuesday, October 10

• US NFIB Small Business Optimism Index. 
• Japan Current Account (aug)

Wednesday, October 11

• US PPI
• FOMC Minutes. 
• Japan Machine Tool Order (sep)
• China Vehicle Sales (sep)

Thursday, October 12

• Japan PPI
• Machinery Order
• UK GDP
• ECB Minutes
• US CPI
• US Jobless Claims
• NZ Manufacturing PMI. 

Friday, October 13

• China CPI
• China Trade data
• Eurozone Industrial Production
• US University of Michigan Consumer Sentiment.

Global Markets check

Europe

The pan-European STOXX Europe 600 Index fell 1.18% in local currency as bond yields rose amid concerns about increasing interest rates. Major major indexes declined. Italian FTSE MIB fell 1.53%, German DAX down 1.02%, and French CAC 40 Index fell 1.05%. The UK FTSE 100 fell 1.49%.

After a turbulent week in European bond markets, Germany’s 10-year government bond yield fell below 3% but remained near a decade-plus high. French and Italian bond yields rose amid caution. Inflationary pressures kept the 10-year UK government bond rate near its highest level since August 2008.

Economic indicators show eurozone economy faltered in Q3.
Official and private statistics suggested the eurozone economy slowed in the third quarter. The S&P Global Composite Purchasing Managers’ Index (PMI) fell for the fourth straight month in September at 47.2. (PMIs below 50 indicate business production decline.)

The EU’s statistics office revealed that eurozone retail sales declined 1.2% sequentially in August due to a steep drop in gasoline, mail orders, and internet shopping.

German exports decline for second month, industrial orders rise.
German industrial orders rose 3.9% in August after falling 11.7% in July. Strong computing, electronic, and optical product growth fuelled the rise. Exports declined 1.2% sequentially in August, far more than expected, after a 1.9% drop in July due to sluggish global demand.

UK housing prices, construction fall
Mortgage provider Halifax said that UK house prices declined 0.4% in September for the sixth month in a row. Nationwide Building Society, another mortgage institution, predicted house prices were steady last month after falling 0.8% in August. Both indexes fell the most annually since 2009.

Construction purchasing managers in September reported the fastest drop in homebuilding activity in more than three years, according to an S&P Global/CIPS poll.

Japan

Japanese stocks sank 2.7% in the Nikkei 225 Index and 2.6% in the TOPIX Index this week. Rising U.S. bond yields and fears about central banks remaining hawkish weighed on stocks. Japan’s August economic data revealed falling real earnings and consumer expenditure, hurting on mood. Conversely, the Bank of Japan’s (BoJ) recent quarterly Tankan survey found that a weak yen has bolstered Japanese company business morale, providing support.

Yen rebound sparks intervention talk
Following the yen’s near-instant surge after briefly breaching the JPY 150 against the U.S. dollar level, many market participants suspected Japan’s Ministry of Finance (MoF) had intervened in the foreign exchange market to stop its slide. MoF officials did not disclose whether they interfered after the yen fell to its lowest level in 11 months, but they stressed that they would act against extreme volatility without ruling out any possibilities. The yen rose to JPY 149 against the dollar to end the week.

The 10-year Japanese government bond (JGB) yield increased to 0.80%, a 10-year high, from 0.76% last week. The sell-off in U.S. Treasuries and anticipation that the BoJ will normalize monetary policy sooner than later raised rates notwithstanding the BoJ’s unplanned purchases of JGBs at maturities between five and 10 years.

Strong service sector growth contrasts with declining manufacturing.
According to au Jibun Bank’s latest Purchasing Managers’ Index (PMI), Japan’s services industry grew steadily in September, supported by client demand after influenza restrictions were lifted earlier this year. The services PMI fell to 53.8 from 54.3 in August, indicating smaller expansion. In September, output and new orders decreased considerably, lowering the manufacturing PMI to 48.5 from 49.6.

China

The Mid-Autumn Festival and National Day holiday in China stopped financial markets last week. They will resume on Monday, October 9. The Hong Kong Stock Exchange resumed trading last Tuesday, and FactSet reported a 0.14% drop in the Hang Seng Index for the holiday-shortened week.

Factory production rises for first time in six months
China’s factory activity expanded for the first time since March, suggesting the economy may have bottomed. From 49.7 in August to 50.2 in September, the manufacturing PMI exceeded expectations. The August nonmanufacturing PMI rose to 51.7 from 51.0, above expectations. While the private Caixin/S&P Global survey of manufacturing and services activity fell from the previous month, it nevertheless expanded.

Chinese domestic activities increased throughout the eight-day holiday. The Ministry of Transport reported 395 million road, rail, air, and waterway trips in the first four days of the holiday, about 76% more than the previous year. Box office sales in the first three days above last year’s RMB 1.2 billion. Saturday saw more than 160,000 mainland Chinese and Hong Kong visitors visiting Macau, the most since the pandemic.

The crisis-hit Chinese property industry improved slightly in September. According to China Real Estate Information Corp., top 100 developer new home sales declined 29.2% in September from a year earlier, falling from 33.9% in August. Beijing launched a series of property sector stimulus measures in August, slowing the month-on-month fall.

Global Events in details

THURSDAY OCT 5

ECB Monetary Policy Meeting
The ECB Monetary Policy Meeting Accounts, like the FOMC Minutes, are released four weeks following the Policy Decision and rarely move the market. Last meeting, the ECB raised interest rates by 25 bps, with a 50/50 possibility of a hike or pause. The ECB stated that it “judges that rates have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to the target”. They are claiming they are done tightening, as the ECB members have been stating in their comments after the monetary policy meeting.

FRIDAY OCT 6 

Chinese CPI

The Chinese CPI Y/Y is projected to be 0.2%, up from 0.1% previously, while the M/M reading is expected to be 0.3%, up from 0.3% previously. The PPI Y/Y is predicted to continue negative at -2.4%, down from -3.0% previously. The Chinese inflation rate fell into deflation in July before returning to positive territory the following month as officials continued to implement softening measures to prop up their faltering economy.

EARNINGS CALENDAR

Tuesday, OCT 10

PepsiCo. (PEP)

Neogen Corp. (NEOG)

Wednesday, OCT 11

Infosys Ltd. (INFY)

Fastenal Co. (FAST)

Delta Air Lines (DAL)

Walgreens Boots Alliance (WBA)

Domino’s Pizza (DPZ)

Commercial Metals Co. (CMC)

Thursday, OCT 12

UnitedHealth Group (UNH)

JPMorgan Chase (JPM)

BlackRock (BLK)

Progressive Corp. (PROG)

Citigroup (C)

Wells Fargo (WFC)

PNC Financial Services (PNC)

For details

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