Week ahead: A look forward to what might be moving the markets

The spotlight this week will be on the flash manufacturing Purchasing Manager Index (PMI) for the Eurozone, the United Kingdom (UK), and the United States (US).

Additionally, the Bank of Canada’s interest rate decision will offer further insights into the direction of major central bank policies.

The People’s Bank of China is also set to announce its key mortgage rates, influencing sentiment in the commodities markets and Europe-related sectors, such as luxury and mining stocks.

In the US, Tesla and Amazon’s quarterly results will continue to provide insights into the growth trajectories of these tech giants.

Europe

S&P Global is set to release its manufacturing PMI for key European economies, including Germany and France.

Manufacturing activity fell deeper into contraction, with September’s data reaching the lowest level this year.

According to the research firm, Germany experienced the most pronounced deterioration in factory conditions over the past 12 months, while Spain posted the strongest performance in September.

France’s manufacturing PMI contracted for the 20th consecutive month, but the data was revised upwards to 44.6, though it remains at a modest level. Consensus forecasts suggest that manufacturing activity will improve but continue to contract in October.

In the services sector, eurozone activity expanded for the eighth consecutive month in September, though at the slowest pace since March.

Germany’s services PMI has shown expansion for six months, while the sector in France contracted for the second consecutive month in September. Both economies are expected to continue these trends into October.

Worsening economic data underscores a further slowdown in growth across the region, which may encourage the European Central Bank (ECB) to accelerate its rate-cutting cycle.

However, ECB President Christine Lagarde noted last week that she does not expect a recession and anticipates the economy will achieve a soft landing.

In the UK, business activity showed much stronger conditions, with both the manufacturing and services PMIs maintaining expansion in September.

Manufacturing activity has grown since May, and the services PMI has expanded consistently since November 2023. Business activity is expected to remain in growth territory for both sectors in October.

United States

In the US, the focus will also be on business activity in both manufacturing and services sectors. Manufacturing PMI has been in contraction since July, with the latest data indicating a softening trend.

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In September, manufacturing PMI declined to its lowest level since June 2023 due to weakened demand and political uncertainty.

In contrast, the services sector has remained robust, with PMI staying above 55 since June.

On the earnings front, Tesla and Amazon’s quarterly results will be key for market sentiment.

Investors will focus on Tesla’s revenue growth and further details about its Robotaxi and Full-Self Driving (FSD) strategy.

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Tesla’s third-quarter car deliveries fell short of market expectations, followed by a disappointing Robotaxi event, which caused its shares to drop by 16% in October.

Analysts expect Tesla to report earnings of $0.49 (€0.45) per share on revenue of $24.98bn (€23.04bn).

For Amazon, the key metrics will be the performance of its cloud division, AWS, and advertising revenue. Earnings per share are expected to reach $1.14 (€1.05), representing a 34% year-on-year increase, according to a consensus estimate by Zacks.

Asia-Pacific

In the Asia-Pacific region, China is set to announce its 1-year and 5-year Loan Prime Rate (LPR) decisions. The 1-year LPR serves as the benchmark for most corporate and household loans, while the 5-year LPR is typically used for mortgage rates.

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In September, the People’s Bank of China unexpectedly kept both benchmark rates unchanged at 3.35% and 3.85%, respectively. After a series of stimulus measures announced in September, the central bank is expected to cut both rates by 0.25% this week.

Canada

The Bank of Canada (BoC) is anticipated to deliver a significant rate cut of 0.5% this week, according to a Reuters consensus.

Canada’s headline inflation fell to 1.6% year-on-year in September, alongside weaker economic growth and a rising unemployment rate.

The BoC has been one of the most proactive central banks in cutting interest rates this year, with 0.75% already slashed since June.

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