Weekly Market Outlook (11-15 November)

UPCOMING
EVENTS:

• Monday: BoJ Summary of Opinions. (US Holiday)
• Tuesday: UK Labour Market report, Eurozone ZEW, US NFIB
  Small Business Optimism Index, Fed’s SLOOS.
• Wednesday: Japan PPI, Australia Wage Price Index, US CPI.
• Thursday: Australia Labour Market report, UK GDP,
  Eurozone Employment Change and Industrial Production, US PPI, US Jobless
  Claims, Fed Chair Powell.
• Friday: Japan GDP, China Industrial Production and
  Retail Sales, US Retail Sales, US Industrial Production and Capacity
  Utilization.

Tuesday

The UK Unemployment
Rate is expected to tick higher to 4.1% vs. 4.0% prior. The Average Earnings
incl. Bonus is expected at 3.9% vs. 3.8% prior, while the ex-Bonus measure is
seen at 4.7% vs. 4.9% prior.

The market sees
just a 20% chance of a 25 bps cut in December and, although a weak report might
raise the probabilities a bit, the market will likely focus more on the
inflation figures with two CPI reports left before the last BoE decision for
the year.

Wednesday

The Australian Q3
Wage Price Index Y/Y is expected at 3.6% vs. 4.1% prior, while the Q/Q measure
is seen at 0.9% vs. 0.8% prior. The data is unlikely to change anything for the
RBA although lower readings would be welcomed.

The US CPI Y/Y is
expected at 2.6% vs. 2.4% prior, while the M/M measure is seen at 0.2% vs. 0.2%
prior. The Core CPI Y/Y is expected at 3.3% vs. 3.3% prior, while the M/M
figure is seen at 0.3% vs. 0.3% prior.

At the latest
Fed’s decision, Fed Chair Powell said that they expect bumps on inflation and
that one or two bad data months on inflation won’t change the process. This
keeps the 25 bps cut in December in place even if we get higher inflation
readings.

The market though
is forward-looking, and the rise in Treasury yields showed that the market sees
risks to the inflation outlook. Moreover, the red sweep could increase those
fears if the progress on inflation stalls, or worse, reverses.

Therefore, higher
inflation readings might not change the near-term monetary policy outlook, but
I personally see it changing the market’s outlook and eventually the Fed’s one.

Thursday

The Australian
Labour Market report is expected to show 25K jobs added in October vs. 64.1K in
September and the Unemployment Rate to tick higher to 4.2% vs. 4.1% prior. The
data is unlikely to change anything for the RBA but faster than expected
weakening could see the market pricing in more aggressive rate cuts in 2025,
much like it did with the RBNZ.

The US PPI Y/Y is
expected at 2.3% vs. 1.8% prior, while the M/M measure is seen at 0.2% vs. 0.0%
prior. The Core PPI Y/Y is expected at 3.0% vs. 2.8% prior, while the M/M
figure is seen at 0.3% vs. 0.2% prior.

This report will
likely be seen in light of the US CPI data releases the day before and it might
add to the angst around inflation if both come out higher than expected.

The US Jobless
Claims continues to be one of the most important releases to follow every week
as it’s a timelier indicator on the state of the labour market.

Initial Claims
remain inside the 200K-260K range created since 2022, while Continuing Claims
after an improvement in the last two months, spiked to the cycle highs in the
last couple of weeks due to distortions coming from hurricanes and strikes.

This week Initial
Claims are expected at 224K vs. 221K prior, while there’s no consensus for
Continuing Claims at the time of writing although the prior reading saw an
increase to 1892K vs. 1852K prior.

Friday

The US Retail
Sales M/M is expected at 0.3% vs. 0.4% prior, while the ex-Autos M/M measure is
seen at 0.3% vs. 0.5% prior. The focus will be on the Control Group figure
which is expected at 0.3% vs. 0.7% prior.

Consumer spending
has been stable which is something you would expect given the positive real
wage growth and resilient labour market. We’ve also been seeing a steady pickup
in the UMich Consumer
Sentiment which suggests
that consumers’ financial situation is stable/improving.