In this episode:
- Weak Growth Meets Fiscal Uncertainty Ahead of the Budget
- A Quiet Week on Paper, but Critical Data Across Europe and Asia
- Rescheduled Data Flow and Rising Market Volatility Risks
Weak Growth Meets Fiscal Uncertainty Ahead of the Budget
- Headline UK CPI printed slightly higher but remained aligned with Bank of England forecasts and materially below September levels.
- Retail sales data showed clear weakness, reinforcing expectations for a December rate cut, with markets pricing roughly 22.5 bps.
- The upcoming Budget introduces meaningful fiscal risk, with markets wary of attempts to balance the books without tax hikes.
A Quiet Week on Paper, but Critical Data Across Europe and Asia
- Europe faces a full data calendar including German IFO, final Q3 GDP, unemployment, and flash CPI for France, Spain, and Germany.
- China’s recent export trends raise concerns for European—especially German—export performance.
- Key releases across Japan, Australia, New Zealand, Korea, Poland, Singapore, Mexico, Brazil, and India add breadth to an otherwise calm week.
Rescheduled Data Flow and Rising Market Volatility Risks
- FOMC minutes and delayed September payrolls highlighted modestly dovish elements, with mixed labour market signals.
- The US continues its data catch-up with retail sales and durable goods ahead of Thanksgiving.
- Low cross-asset volatility has come under scrutiny; recent equity and crypto pullbacks highlight rising year-end volatility risk.
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
It has been an interesting week for the UK from a macro perspective, and it’s likely to be a huge week next week, with Wednesday’s Budget taking centre stage. How are we thinking about the UK?
Neil Staines
Absolutely, it’s a great question. This week, CPI came in a touch hotter than expected in October, with headline inflation at 3.6% year-on-year. However, this was in line with the Bank of England’s forecasts and significantly lower than September, notably in core and services.
On the growth side, retail sales for October were very weak, with the headline figure down 1.1% month-on-month, leaving the year-on-year comparison at just 0.2%. Expectations were for almost 1.5%, so there was some notable weakness there. All of this left markets fairly confident that the economic weakness will be addressed by the Bank of England, initially with at least a 25-basis-point cut at the 18 December meeting. Twenty-two and a half basis points are currently priced by the market.
Of course, the elephant in the room for monetary policy and the wider economy is next week’s Budget. Leaks suggest income tax hikes are off the table due to an OBR growth upgrade, tempered by a productivity downgrade. But this is something the gilt market has already expressed its displeasure with. Instead, it seems the Chancellor is hoping to piece together a number of measures to balance the books. This will be under intense scrutiny, not just from taxpayers but also from financial markets. This may yet prove to be a risky strategy for the Chancellor.
Either way, as regular listeners will know, we see fiscal tightening and recent growth weakness as a trigger for a more activist Bank of England into 2026.
Matt Jones
And how about more globally? What are we watching in the global macro economy next week?
Neil Staines
We expect a relatively quiet week next week, but there are certainly some global highlights. In Europe, we get the German IFO for November on Monday, final Q3 GDP on Tuesday, and the unemployment rate on Friday. While fiscal stimulus should start to feed through into the data from Q4 onwards, recent data from China showing global export outperformance—despite drops to the US—is a worrying sign for Europe, particularly Germany. Next week, we also get French, Spanish, and German CPI—the flash readings for November—on Friday, making it an important week for Europe.
In Japan, with all eyes on the huge economic stimulus package from the new Prime Minister and the prospect of currency intervention to stem recent yen weakness, retail sales and industrial production on Friday may have added impact.
Australian CPI for October will be closely watched after comments this week from the RBA’s Hunter that the jobs market is too tight for inflation to settle at the central bank’s 2%–3% target. Across the Tasman, the RBNZ continues to battle more pronounced economic weakness and is expected to cut 25 basis points on Wednesday.
Further afield, we get retail sales from Korea and Poland; inflation data from Singapore, Mexico, Brazil, and Poland; and Q3 GDP for the Czech Republic and India. Quiet, but still plenty to look out for in the global macro economy next week.
Matt Jones
And finally, that brings us to the US, as usual. It seems we’re finally catching up with the shutdown-delayed US data. How are we thinking about the US next week and beyond?
Neil Staines
This week, we got a reminder of the current monetary policy debate with the minutes from the October FOMC meeting. We also received the delayed September non-farm payroll release, where higher headline job growth contrasted with an increased unemployment rate. We expand on these modestly dovish iterations, and our views on them, in this week’s blog.
But the emphasis on the evolution of US policy and its impact on monetary policy remains front and centre for financial markets. Next week, the data rescheduling continues with retail sales for September on Tuesday and durable goods on Wednesday. However, with Thanksgiving on Thursday, we expect a relatively light data focus from there.
Regular listeners will know that over recent weeks we have questioned the low level of cross-asset market volatility. The recent crypto and equity pullback has started to bring that further into focus. So far there has not been significant panic—it has been more about position reduction and profit protection. As we get closer to Thanksgiving and the Christmas holidays, the risk of higher volatility and further position reduction remains prominent. Perhaps next week the emphasis on US data will shift slightly more toward US asset markets.
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.
Disclosure
This communication is issued by Eurizon SLJ Capital Limited (“ESLJ”), a private limited company registered in England (company number: 09775525) having its registered office at 90 Queen Street, London EC4N 1SA, United Kingdom. ESLJ is authorised and regulated by the Financial Conduct Authority (FRN: 736926). This communication is treated as a marketing communication intended for professional investors only and is provided only for information purposes. It has not been prepared in accordance with legal and regulatory requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. It does not constitute research on investment matters and should not be construed as containing any recommendation, advice or suggestion, implicit or explicit, with respect to any investment strategy or financial instruments, or the issuers of any financial instruments, or a solicitation, offer or financial promotion relating to any securities or investments. ESLJ and its affiliates do not assume any liability whatsoever for the contents of this communication, save to the extent agreed in any written contract entered into between ESLJ and the recipient, and do not make any representation or warranty as to the accuracy or completeness of any information contained in this communication. Views are accurate as at the time of publication. Opinions expressed by individuals are their own and do not necessarily reflect those of ESLJ or any of its affiliates. The value of any investment may change and an investor may not get back the original amount invested. Past performance is not an indicator of future performance. This communication may not be reproduced, redistributed or copied in whole or in part for any purpose. It may not be distributed in any jurisdiction where its distribution may be restricted by law and persons into whose possession this communication comes should inform themselves about, and observe, any such restrictions.
ESLJ-211125-P1
Subscribe to our insights
If you are interested in our content, please sign up below and we will deliver Eurizon SLJ insights right to your inbox.
I consent to my data being collected and stored for the purposes of providing me information regarding my enquiry and related services. If you have any questions about your data please contact us at research@eurizonslj.com
Our Research
Our written research products aim to provide unique and orthogonal insights on key global economic and policy issues in a timely fashion.
