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.
Thank you very much Matt. It's great to be here.
Staring into next week, feels like a weekly game of higher or lower, really, when it comes to data. But what are you going to have your eye on in particular?
Absolutely. Yeah. Thanks, Matt. It's been another complex week for financial markets as the repricing of the US curve continued. Against an uncertain geopolitical backdrop. Central Banks on balance offered a more hawkish iteration in their updated guidance or commentary, notably Indonesia who unexpectedly hiked 25 basis points this week after an eight month pause but also Korea and Australia, where the rhetoric was more hawkish. Next week brings the latest ECB meeting and while the Governing Council's interpretation of or risks expressed to the growth and inflation backdrop will be keenly watched. It is likely that the ECB will be of reduced importance as policy rate is held unchanged and discussions likely center around a PEP reinvestment roll off which is still likely a long way off. However, while the U. S. curve likely continues to dominate market sentiment along with the current array of geopolitical risks, there are a few additional things we'll be looking out for next week.
Firstly, we get the global flash PMI data for October at the start of next week. Now, growth momentum will continue to be held under the microscope against an uncomfortable backdrop of multiple geopolitical concerns and a tightening of US financial conditions that is increasingly being felt by the global monetary system. Significant focus will be paid to the European data, particularly Germany, where services index of the PMIs is likely to be key. Expectations are for it to fall to around 50, exactly on the boundary of expansion and contraction, with connotations for a miss on either side there. Now, a more detailed picture of the German economic backdrop is likely to be attained throughout the week with retail sales, and ZEW survey for September and October, respectively. All data prints worthy of note, especially as they frame the discussions and possibly the narrative of next weeks ECB.
Secondly, we get U. S. Q3 GDP the first estimate. Now the number itself will be a significant focus. However, market implications, significantly less. For much of Q3, it was clear that through the sequential data our performance that there was a notably higher growth run rate, with expectations and implied respective market pricing adjusted throughout the quarter. Now expectations are for a very strong quarter, plus 4. 1 percent quarter on quarter annualized. But this is both expected and retrospective. Prospective headwinds, such as the return of student loan payments, potential U. S. government shutdown, as well as the tightening of financial conditions and the long and variable lags of previous rate hikes are likely to have a bigger impact in Q4 and Q1. This sentiment is echoed by Fed Chair Powell this week and a topic that we discuss further in this week's blog. The GDP release may not be market moving but against the current macro backdrop, where markets are recalibrating growth and fiscal deficit impetus on long term yields, it will likely be a key focal point.
Then finally next week, as markets continue to debate and price the implications for risk assets against a complex growth and term premium backdrop, we get earnings from some of the tech titans next week. Snapchat, Google, Microsoft and Texas Instruments on Tuesday. IBM, Meta on Wednesday. And Intel and Amazon on Thursday, among many others. Now earnings estimates going into the Q3 reporting season have been more stable than the downgrades going into Q2. But the results will be very keenly watched by markets and very important for risk asset sentiment, more broadly, a lot to pay attention to next week.
A lot to pay attention to indeed, as ever. But in the meantime, we have the weekend. I think I pretty much know, really, what you're going to be keeping an eye on. But why don't you tell us?
Yeah, thanks very much, Matt. We're back to Premiership Action after the international break with Liverpool, Everton, Chelsea, Arsenal and Aston Villa West Ham, the pick of the bunch, for this week's action. Formula One travels to Austin, Texas for the US Grand Prix. The title may already be claimed but it's still likely some key battles on the track. World Cup cricket continues with some big games. India versus New Zealand, the battle of the two unbeaten teams so far, and England versus South Africa. Crucial for England after two early losses in the tournament. But for me, it's all about the rugby. Argentina versus New Zealand on Friday night and the huge clash between England and South Africa on Saturday. England will need to be at their very best to compete with the immense South African power and pace. I can't wait.
Absolutely, an immense game indeed and fingers crossed that England can pull it out of the bag.
Thank you so much for joining us and for outlining your thoughts on the week ahead. I look forward to catching up with you again soon.
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