Please see below Brooks Macdonald’s Weekly Market Commentary received yesterday afternoon 30/10/2023
• US equity market enters correction territory after falling more than 10% from its July peak
• Eurozone CPI and GDP will be in focus this week ahead of Friday’s US employment report
• Central banks from Japan, the US and UK will all issue their latest guidance this week.
US equity market enters correction territory after falling more than 10% from its July peak
After the US equity index moved c. 0.5% lower on Friday, the index has officially entered correction territory, being now more than 10% lower than its end of July peak level. Of those losses, around half of them have taken place in the last fortnight alone. Friday’s losses occurred despite strong results from Amazon and Intel which were released after the market close on Thursday.
Eurozone CPI and GDP will be in focus this week ahead of Friday’s US employment report
Starting with Europe, this week sees the release of the preliminary CPI releases as well as the Q3 GDP numbers. In terms of GDP, economists expect for there to have been no growth across the Eurozone in Q3 with the year-on-year growth rate at just 0.15%. Both headline and core Eurozone CPI readings are expected to cool with the headline rate expected to lurch lower from 4.3% year-on-year to 3%. The main US datapoint this week will be the US employment report on Friday where consensus expects 189k jobs to have been created after a blockbuster September that saw 336k new jobs. Before we get to Friday we will see the ECI, JOLTS, ADP and initial jobless claims data which will all give their own insights into the labour market. Lastly, earnings season continues apace this week with Apple releasing on Thursday likely to be the highlight.
Central banks from Japan, the US and UK will all issue their latest guidance this week
This week sees the Bank of Japan, Federal Reserve and Bank of England issue their latest monetary policy guidance. The Bank of Japan concludes its meeting tomorrow with investors split on whether the central bank will abandon the yield curve control which effectively caps yields on government bonds through quantitative easing. The BoJ is likely to revise up its near-term inflation forecasts which will put the bank under pressure. Then on Wednesday we hear from the Federal Reserve which is expected to stay on hold, but investors will be looking for guidance on December’s meetings. A strong US economy makes the argument for a December interest rate hike but equally the recent run-up in Treasury yields is doing some of the Fed’s work for it already.
Our last central bank this week will be the Bank of England on Thursday. The Bank of England is not expected to raise interest rates or change its guidance however there is likely to be some dissent amongst voting members. Several members are concerned by the still strong pace of wages, favouring additional hikes, though these individuals are likely to be outnumbered by those cautious around the strength of the UK economy.
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Charlotte Clarke
31/10/2023