Increasing hopes of a mini trade-deal between the US and China and receding fears around a no-deal Brexit have helped calm markets lately, but it is to be seen whether they fed into October’s macro data.

The eurozone and US publish October’s purchasing managers’ index next week, with hope in both geographies for signs that the decline in manufacturing will stabilise on easing geopolitical risks. Services activity, which was partially affected by manufacturing weakness last month, should also rebound modestly and remain in expansionary territory in both regions.

Overall, the outlook for business activity should remain benign in the fourth quarter and we wouldn’t ring the recession bell unless there was a dramatic fall in the PMIs. Improved sentiment should spill over to households. The final University of Michigan Sentiment for October is likely to confirm a trend upward from September, despite slowing payroll growth and the latest round of tariffs on consumer goods.

In the eurozone, the focus will be on monetary policy as the European Central Bank (ECB) meets on 24 October, the first monetary policy meeting for the new ECB president, Christine Lagarde. The tone is likely to stay dovish although further easing should be off the table for now. The latest Bloomberg survey points to the ECB maintaining its deposit rate at -0.50%, after it was cut from -0.40% in September.

Following the central bank’s decision to reintroduce quantitative easing in November, rate cuts seem less likely without a significant worsening in the bloc’s macroeconomic backdrop (which we don’t see materialising for now) and more clarity on Brexit. Indeed, uncertainty over the UK’s departure from the European Union remains one of the main catalysts of market sentiment in the bloc. Until a definitive resolution is in place, eurozone consumer confidence, due out next week, is likely to worsen.

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