In this episode:
- Japan in the Spotlight
- Global Macro Crosscurrents
- US Payrolls and Policy Risks
Japan in the Spotlight
- Key data includes industrial production, retail sales, Tankan survey, consumer confidence, and unemployment.
- LDP leadership election pits Takaichi (expansionary, yen-negative, equity-positive) against Koizumi (status quo).
- Markets will closely watch the yen and Nikkei as policy and political outcomes converge.
Global Macro Crosscurrents
- China PMIs, RBA meeting, Eurozone CPI, and Swiss CPI headline a busy global data calendar.
- EM inflation prints in Brazil, Indonesia, and South Korea provide important regional signals.
- Better-than-expected US data challenges the “soft landing” narrative, keeping global sentiment on edge.
US Payrolls and Policy Risks
- Labor data in focus: JOLTS (Tuesday), ADP (Wednesday), and nonfarm payrolls (Friday).
- ISM manufacturing and services, plus consumer confidence, add to the growth picture.
- Risks heightened by 100% tariffs on some pharmaceuticals and the threat of a US government shutdown.
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
So, after a relatively quiet week on the data front, next week looks set to bring a more acute focus on macro data events and likely volatility. Starting with Japan this week, what are we looking for?
Neil Staines
Absolutely. Great place to start this week, with a huge global focus on Japan. On the data front, we get industrial production and retail sales for August on Tuesday. On Wednesday we get the all-important Tankan business survey, and a chance for the Bank of Japan to assess the progress of corporate Japan—or at least their forward-looking sentiment—on overcoming the impact of tariffs. On Thursday we get consumer confidence, and on Friday we get a look at the unemployment rate.
That's not the end though. On Saturday of next week, we get the results of the LDP leadership election. Polling suggests it will be a close run between Takaichi and Koizumi. Takaichi is seen as the more interventionist or expansionary candidate—favoring bigger fiscal support—and likely therefore more yen-negative and equity-positive. Koizumi, on the other hand, is more of a status quo or continuation candidate.
The combination of the data and political developments next week brings the yen and the Nikkei right to the fore of markets, and we'll be watching developments very closely.
Matt Jones
And what about the rest of the developed market space and more globally? What are our key focal points next week?
Neil Staines
Yeah, absolutely. It's not just Japan with all the action next week; it’s a very heavy global data calendar too, as we roll into October.
On Tuesday, we get the China PMI data—a chance to see if recent equity outperformance is spreading to improved manufacturing and services sentiment at all ahead of the Golden Week holidays in China. Tuesday also brings the RBA meeting, which we expect to remain unchanged at 3.6%, after recent inflation data remained elevated and above target.
On Wednesday, we get the global manufacturing PMI (the final reading) and the first estimate of Eurozone CPI for September, although it would likely have to be a very big miss for this to be policy-relevant for the ECB at this stage of the cycle. On Thursday, we get Swiss CPI, which will be a focal point after the SNB left rates unchanged at 0%—teetering on the edge of negative rates in Switzerland.
The decision to leave rates unchanged this week came alongside a still very modest growth projection and inflation that remains well below target. So risks still remain to the downside for rates there. Then on Friday, we get global services PMI (the final reading for September), and even further afield across EM, we get inflation readings in Brazil, Indonesia, and South Korea—also worth watching closely.
As the recent flow of better-than-expected US data leads markets to begin questioning the macro narrative of a soft landing in the US, the global data will be under closer scrutiny next week.
Matt Jones
And finally, it's payroll week once more in the US—a huge focus for markets. How are we thinking about this and the other events in the US next week?
Neil Staines
Yeah, absolutely. It’s payroll week again. However, with a raft of Fed speakers this week further clouding the current monetary reaction function expectations—and highlighting Powell’s narrative that there is no risk-free path for policy—the data this week will be crucial to sentiment and positioning.
On the labor market side, we have JOLTS on Tuesday, ADP on Wednesday, and of course that very important payroll number on Friday, which is likely to bring some volatility back to markets. On the demand and growth side, we get ISM manufacturing on Wednesday and services on Friday, with consumer confidence on Tuesday to add to the mix.
As the tariff rollercoaster takes another rise at the end of this week—with 100% tariffs on some pharmaceuticals—global trade will also remain under the spotlight. And last but not least, next week may also bring a government shutdown in the US if Congress does not agree to an extension.
We look a little further into some of these issues in this week’s blog, but next week’s events are a huge focus for global 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
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