In this episode:
- UK: Data in Focus Ahead of the Budget
- Global: Earnings, Politics, and Policy Watch
- US: Inflation, Earnings, and a Stalled Government
UK: Data in Focus Ahead of the Budget
- Following an in-line August GDP print and signs of moderating wage pressures, markets are sharpening their focus on UK data ahead of the November 28th Budget.
- September’s CPI (Wednesday) and retail sales (Friday) will be pivotal in shaping expectations for the Bank of England’s policy path into Q4 and early 2026.
- With fiscal tightening expected, Neil sees the Bank of England “picking up the slack,” anticipating faster rate cuts than markets currently price in.
Global: Earnings, Politics, and Policy Watch
- Q3 earnings season unfolds amid heightened US–China tensions and tentative Russia–Ukraine peace talk prospects, setting a volatile backdrop for risk sentiment.
- ECB President Lagarde and Chief Economist Lane speak Tuesday, ahead of the ECB blackout—markets will watch closely for any hints beyond the “good place” policy stance.
- Japan’s CPI (Friday) and the shifting domestic political landscape could have significant implications for the yen, Nikkei, and JGBs, as leadership uncertainty lingers.
US: Inflation, Earnings, and a Stalled Government
- The US government shutdown continues, with Treasury estimates suggesting daily costs of around $15 billion and growing macro uncertainty.
- Key Q3 earnings from Netflix, GM, GE, Tesla, IBM, and Intel will test market resilience amid lingering credit concerns tied to regional banks.
- The September CPI release (Friday) is crucial as the Fed weighs balance sheet runoff adjustments and potential SLR reform — both seen as duration-positive for US bonds.
Transcript (AI Generated)
Matt Jones
Welcome to "The Long & Short of the Week Ahead", a production of Eurizon SLJ Capital that takes a look at the macro-economic themes of the week ahead and has been recorded for professional investors.
My name is Matt, Head of Distribution for Eurizon SLJ Capital, and I'm joined by Neil Staines, Senior Portfolio Manager.
Welcome back, Neil. It's great to have you here with us again.
Neil Staines
Thank you very much Matt. It's great to be here.
Matt Jones
Now, in the UK, as we move towards the Budget at the end of November, we get some interesting economic data next week. How are we thinking about the UK next week and beyond?
Neil Staines
Yeah, absolutely. Thanks, Matt. After a broadly in-line monthly GDP print for August last week, and some suggestion that wage pressures are finally starting to moderate in the UK, we expect a more acute market focus on the UK data in the run-up to the Budget on November 28th—specifically with an eye towards the Bank of England’s reaction function.
Next week, we get house price data on Monday and government borrowing data on Tuesday, but most significantly, the CPI print for September on Wednesday and retail sales for September on Friday are likely to draw attention. Inflation and consumption trajectories will, in our view, be key in shaping the monetary policy function in Q4 and Q1 of next year.
Regular listeners will know our views on the underlying UK economic trajectory, and our view that the likely significant fiscal tightening at the end of November leaves the Bank of England having to pick up the slack.
Bank of England speakers have shifted notably more dovish over recent weeks, and we continue to expect faster rate cuts in the UK than the markets are currently pricing. Now, as MPC members move into their blackout period ahead of the October 30th meeting, the data next week will be a huge focus.
Matt Jones
And how about further afield? How are we looking at the global economic trajectory, and what events are we focused on next week?
Neil Staines
Yeah, absolutely. With Q3 earnings season getting into full flow globally, equity markets will continue to be a huge focus, set against a volatile geopolitical backdrop—with rising US-China tensions on one hand and potential Russia-Ukraine peace talks on the other.
On the data front, on Monday we get New Zealand Q3 CPI. After the 50-basis-point cut this month and the admission that, against a disappointing growth backdrop, inflation is a nail-biter, this may bring greater scrutiny.
On Tuesday, we get commentary from both ECB President Lagarde and Chief Economist Philip Lane. Any hints or inferences on policy risks beyond the “good place” narrative for current policy will be closely watched, especially as we move into the ECB blackout ahead of their October 30th policy meeting.
On Friday, we get CPI data out of Japan. This will be a very important focus—not just for the Bank of Japan, but for front-end Japanese rate markets. We discuss this further in this week’s blog.
Despite the surprise victory of Takaichi in the LDP leadership election, the collapse of the coalition and potential collaboration of three smaller parties in Japan could even see DPP’s Tamaki become Prime Minister. Political developments in Japan next week will be very closely watched, with significant implications for the yen, the Nikkei, and JGBs.
Lastly, we get global flash PMIs on Friday—an important gauge of global sentiment and a mark-to-market against global macroeconomic uncertainties.
Matt Jones
And finally, as usual, what about the US? What are we watching from a corporate, political, and macroeconomic standpoint next week?
Neil Staines
That’s a great question. As you say, a broad range of dominant factors remain at play in the US at the moment.
On the political front, the government shutdown remains unresolved, with little movement on either side of the political divide. Treasury Secretary Bessant this week suggested that the shutdown is costing the US around $15 billion a day, and we continue to view macro uncertainty as rising with the duration of this shutdown.
On the corporate front, there have been some notable—if so far modest—concerns about regional banks and the crossover into wider credit, both public and private. These have been prominent into the close of this week. Next week, we also get some high-profile Q3 earnings releases—Netflix, GM, GE, Tesla, IBM, and Intel, to name but a few.
And finally, we get the return of data—or at least one key piece of data: the CPI print for September. Powell this week inferred that they have alternative measures of visibility on the jobs market, where downside risks remain, but less so for inflation. So not just markets, but the Fed will be watching closely on Friday.
Powell also said that the Fed is considering ending its balance sheet runoff plan—in a move that, especially in conjunction with SLR reform, remains very duration-positive in the US. Overall, our macro view of continued disinflation and growth moderation remains—leading to a weaker dollar, higher duration, and higher equities.
However, risks to that backdrop are rising in the near term.
Matt Jones
Fantastic. Thank you for joining us once again and outlining your thoughts on the week ahead. I look forward to catching up with you again next time.
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