• US Presidential election and its aftermath set to dominate week
  • Bank of England and Federal Reserve both update on monetary policy
  • An improving US employment situation may offer some solace in a potentially turbulent week.

The week is set to be a busy one, both in terms of economic and political news. First up will be Eurozone Manufacturing PMI data for October. This is expected to once again confirm signs of expansion with a print close to 55 expected, up from the 53.7 seen for September and providing some much-needed respite for the ECB.

UK Manufacturing PMI will follow and although the trend here is expected to be downward, the final reading should still be conformably above the break-even 50 mark for once more. An sign of a sharper deceleration however will raise concerns that the initial rebound, seen as the country came out of the tightest lockdown, is now exhausted and could in turn be a cause for concern.

Also due on Monday is the final US Manufacturing PMI, a reading which has been relatively steady for the last few months. No marked change is expected here an arguably it would take a significant deviation to have much impact given what’s up next…

There’s little high-profile economic news on the calendar for Tuesday, but US election talk is likely to dominate regardless. The polls have Joe Biden in the lead, but the heavy use of postal voting, the prospect of far higher than normal turnout and the fact that many suggest what happens next may be less than diplomatic – whether that’s the result being disputed or violence on the streets – means America will be well and truly in the spotlight. Markets are already jittery over the resurgence of COVID-19 and this risks heaping on further pressure. UK investors are additionally exposed as a win for Biden is seen as being worse for the negotiation of any post-Brexit trade deal.

The fall out of Tuesday’s election should be expected to headline for some time, but Wednesday does see macroeconomic data back on the agenda, too. Revised Services PMI readings are expected, from the Eurozone, UK and USA. The Eurozone figure is expected to be the outlier here, confirming the sector remains in contraction. Critically, the dominance of services means that any assurance expansion is still being seen in the UK could provide some meaningful support in what could be an unsettled market.

ADP Payroll data for October is also due, acting at the traditional curtain-raiser ahead of Friday’s non-farm payrolls. Once again a healthy number of jobs will be added – a print in excess of half a million is expected – but this is still only covers a fraction of the jobs lost earlier in the year.

On Thursday, attention will shift to Central Banks. With a potentially disruptive trail of events following the US election, these events should be considered ‘live’ and as such difficult to call. The Bank of England’s Monetary Policy Committee will call first and the key questions being asked here is whether there will be further clues over a move to negative interest rates or will the QE package be expanded. As matters stand right now, both look likely, although it’s the timing that remains open to debate.

The Federal Reserve’s FOMC is also due to announce its latest stance over rates along with holding a press conference, but given how close this is to the timing of the US Presidential election, there’s little expectation that anything new will emerge here.

Rounding out what will could well be a strange week, the Halifax House Price Index for October is once again set to defy expectations, showing further growth in UK property prices. There are mounting concerns that real trouble lies ahead once the COVID support schemes are wound down, so this print which is tipped to show close on 10% annual growth, may simply heighten fears over the scale of any reversion.

Back across the Atlantic and the more granular employment data is set for release. In addition to the Non-Farm Payrolls which are expected to mirror the ADP Survey, attention will also be on the October Unemployment Rate which is expected to ease slightly from last month’s 7.9% and Average Hourly Earnings which are also expected to grow modestly from last month. Should this hold true then the numbers may be able to provide a little calm in an otherwise turbulent market. 

Article by Tony Cross of Monk Communications. This article first appeared in Octo
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