In the first week of October, Final September Purchasing Managers Indices (PMIs) will be released across all main regions (US, China, Eurozone and UK). Despite some recent goodwill gestures from both US and Chinese authorities, manufacturing will likely continue to suffer from a slowdown in global trade. As such, we expect the indicator to remain in contraction territory in most regions although momentum should stabilise. Services activity, on the other hand, is likely to continue to expand, albeit at a more moderate pace.
Amongst all this uncertainty, the household sector has proven very resilient so far and investors will continue to pay close attention to developments in the Eurozone and US labour markets. Unemployment rates for August (EU) and September (US) are likely to remain at multi-decade lows but with the US Federal Reserve (Fed) having tied its monetary policy to incoming data, September’s US non-farm payrolls will likely be the most important catalyst of the week. Recent data would suggest that job creation may have slowed down but we still expect healthy earnings growth.
The week starting on Monday 7th October should be quieter on the data front with investor focus likely to move to US-China trade talks which are currently scheduled to resume on 10thOctober. Nevertheless, September’s Consumer Price Index (CPI) will likely draw some attention after the US Fed’s decision to cut interest rates last month. After a soft reading in August, the recent spike in oil prices may lead inflation to rebound temporarily although it should remain below the Fed’s 2% target.
While China didn’t follow the US in cutting interest rates, September’s money supply growth may give the market some indication as to whether the country’s central bank will need to go further than the cut in banks’ reserve ratios announced last month.
Finally, with the 31st October deadline fast approaching, uncertainty around Brexit is as high as ever. With only a few days left before the critical EU Leaders Summit (October 17-18), news flow is likely to accelerate. In regards to data, August GDP and industrial production are likely to confirm that growth in the UK remains sluggish.
Written by: Barclays Private Bank