The week ahead will not be as busy as the one just concluded but there are still some high impact data releases and geopolitical risk.
Beyond the data, markets will keep a close eye on Russia-Ukraine as well the a potential move by the US in Venezuela. President Trump on Friday pushed back on reports that he had given the greenlight for the US to conduct strikes on Venezuelan soil.
If such a move does materialize or if the situation escalates, we could see a rise in risk premium once more just as it appeared to be subsiding.
US earnings will also be key as more companies are scheduled to report next week.
Asia Pacific Markets
The Reserve Bank of Australia (RBA) is expected to keep its interest rates unchanged on Tuesday. This is because the inflation rate for the third quarter was higher than predicted and above the central bank’s 2.5% target.
This high inflation will likely be the deciding factor, outweighing the unexpected increase in the unemployment rate in September, especially since other job market indicators still show overall strength in employment.
Looking at China, the meeting between Presidents Xi and Trump last week successfully reduced the trade tensions between the two countries. Next week should be quieter in terms of major news from China.
The main economic report will be the trade data released on Friday. We predict that China’s export growth will slow down to 4.0% compared to last year, and import growth will also drop slightly to 3.2%. This slower pace for both exports and imports is expected to cause China’s trade surplus (how much more it exports than imports) to jump back up to $101 billion.
Lastly, we move to Japan where based on current projections, Japanese workers are expected to see their earnings and household spending increase. This suggests that consumer spending remains stable, even though inflation is high. Strong results from recent wage negotiations are likely to keep pushing wages higher, and the ongoing rally in the stock and asset markets could also encourage households to spend more.
US Government Shutdown Continues, BoE Decision and Inflation in Focus
Since the US government shutdown shows no sign of ending, we will have very little official economic data. However, the business and consumer surveys we do get are expected to confirm that the economy is slowing down. Key business reports (like the ISM indicators) suggest the economy is now growing at about 1-2%, which is decent but slower than the 2-3% growth seen recently.
Because the official jobs report is unavailable, the private ADP employment report has become extremely important. This report has shown that the private sector has cut jobs in three of the last four months, and we expect only a small gain of about 40,000 this month—a number that doesn’t signal a recovery, especially after major job cuts announced by companies like Amazon and UPS.
Finally, the University of Michigan confidence index will likely confirm that consumer confidence is weak due to worries about tariff-related price hikes and job security, meaning that spending by middle and lower-income families will likely continue to lag behind that of wealthier households.
Across the pond in the UK, stronger recent data on inflation and wages has brought back the possibility that the Bank of England might cut interest rates in November, although I still believe this is unlikely. The decision could be close, potentially a 5-4 vote in favor of keeping rates unchanged, with some members possibly voting for a much larger, 0.50% cut.
I don’t expect the Bank to give any strong hint about a December cut, as they will want to review the government’s late-November Autumn Budget first. However, my conviction regarding a December cut is growing, which would likely be followed by two more rate cuts in 2026.
