October 25th-31st week of heavy data and event prospects: the three central banks announced interest rate resolutions, the Fed entered a period of silence

During the week of October 25-31, the market will welcome a series of heavy data and events. In terms of events, focus on the interest rate decisions of the Bank of Canada, the Bank of Japan and the European Central Bank. In terms of data, US GDP in the third quarter, US PCE, EIA, initial application, personal expenditure, Eurozone GDP, CPI, etc. will all be released one after another, and investors need to pay close attention. It is worth noting that the Fed will usher in a period of silence next week, because the Fed will hold a November interest rate meeting in the early morning of November 4.

Monday and Tuesday keywords: German business climate, American consumer confidence

According to data released by the German think tank Iver Institute for Economic Research last month, the German business climate index in September still fell from the previous month, from 99.6 points in August to 98.8 points. This has been the third consecutive month of decline in the index.

Clemens Pfister, director of the Iver Institute for Economic Research, pointed out that most of the surveyed companies in Germany not only had a more negative assessment of the industry’s operating status than in August, but also had doubts about their development expectations in the next few months. In particular, the supply bottleneck of raw materials and initial products put pressure on the German economy and caused a serious impact on the industry.

At present, Germany’s October IFO business climate index is expected to be 98, a slight drop from September’s 98.8.

Consumer confidence in the United States unexpectedly fell for three consecutive months in September, dropping to its lowest level in seven months, as the new crown variant virus Delta and inflation concerns affected American households’ willingness to spend.

Data show that the US Consumer Confidence Index of the Consultative Chamber of Commerce in September fell to 109.3 from 115.2 revised in August, which was far lower than market expectations of 114.9.

Lynn Franco, director of the Consultative Council, said that September data showed that consumers’ concerns about economic conditions and short-term growth prospects have intensified, while the willingness to spend on housing, automobiles, and major home appliances has fallen again. Although concerns about short-term inflation have eased, the inflation rate remains high.

Franco said that consumers have become more cautious and may reduce spending in the future.

With the increase in commodity prices in October, the market’s expectations for U.S. inflation in the next five years rose to the highest level in 15 years on Thursday. This trend is expected to further hit consumer confidence. However, it is worth noting that as Christmas approaches, Consumers purchase goods in advance, which may boost consumer confidence.

Wednesday's keywords: U.S. durable goods orders, Bank of Canada decision, EIA

Although power shortages have led to a slowdown in output, due to the increase in factory prices of industrial products and the low base in the same period last year, the profit growth rate of China's industrial enterprises may increase in September.

The profit of industrial enterprises in September is expected to increase by 15.0% year-on-year, which is higher than the 10.1% increase in August.

Rising product prices may boost corporate profits. In September, factory prices for industrial producers rose 10.7% year-on-year, which was higher than the 9.5% increase in August.

Rising prices may offset the drag on corporate profits caused by the slowdown in industrial value-added growth. The industrial added value in September increased by 3.1% year-on-year, and in August it increased by 5.3%.

Data show that the US durable goods orders in August were 1.8% from the initial value, 0.7% expected, and -0.1% previously. Durable goods orders have improved for four consecutive months and have returned to their pre-epidemic levels.

In addition, the September Markit manufacturing PMI was 60.7, the lowest since April, which may cast a shadow on the September durable goods orders data. The current market expects the September month-on-month data to be -1%.

The Bank of Canada kept its benchmark interest rate unchanged at 0.25% at its September meeting and maintained its asset purchase plan at 2 billion Canadian dollars per week, which was in line with market expectations.

The Bank of Canada stated that supply chain disruptions are suppressing activities in certain industries, and the increase in new crown pneumonia cases in many regions poses a risk to the strength of the global recovery; it will continue to work to maintain policy interest rates at the effective lower limit until economic weakness subsides (expected economic The weakness will subside in the second half of 2022), thereby sustainably achieving the 2% inflation target.

Bank of Canada Governor McCallum said that when policymakers begin to cut stimulus measures, the first step will be to increase the central bank’s policy interest rate, rather than reduce bond holdings.

Analysts generally expect the Central Bank of Canada to raise interest rates at least once to 0.50% by the end of 2022, which is likely to be achieved in the second half of next year.

The latest data shows that the U.S. EIA crude oil inventory changes in the week ending October 15 actually announced a decrease of 431,000 barrels, an expected increase of 2 million barrels, an increase of 6.088 million barrels from the previous value; the actual announcement of a decrease of 5.368 million barrels of gasoline inventories, an expected decrease of 950,000 barrels Barrels, the previous value decreased by 1.958 million barrels; refined oil inventories actually announced a decrease of 3.91 million barrels, which is expected to decrease by 1.15 million barrels, and the previous value decreased by 24,000 barrels.

Analyst John Kemp pointed out that the developed economies of the United States and the OECD as a whole, commercial oil inventories have fallen below the average level of the five years before the new crown epidemic .

The IEA pointed out that the energy crises in Europe and Asia may further increase global oil demand by 500,000 barrels per day and increase the forecast of global oil demand in 2021 and 2022.

Analysts said this may mean that there is still room for further increases in oil prices this winter.

Thursday’s keywords: Bank of Japan resolution, European Central Bank resolution, US GDP in the third quarter, initial request, core PCE in the third quarter

In the September resolution, the Bank of Japan, as generally expected, maintained short-term interest rates at minus 0.1%, and the 10-year bond yield target remained unchanged at near zero. However, the view on exports and factory output was even more bleak, due to Asia Factory shutdowns have disrupted the supply chains of some manufacturers.

The Governor of the Bank of Japan Haruhiko Kuroda said that if necessary, he will not hesitate to expand the easing measures.

As Japan's domestic energy and raw material costs rise, Japan's consumer prices in September ushered in the first rise in 18 months. But the market still expects the Bank of Japan to raise interest rates the slowest among the world's major central banks.

The European Central Bank may pave the way for a major asset purchase decision at its December meeting at its meeting next week. Central Bank Governor Lagarde should insist on her view that recent high inflation is unlikely to continue. It opens the door to increase the pace of monthly bond purchases under the APP plan after the PEPP epidemic asset purchase plan expires in March next year.

It won’t be long before the price pressure from energy costs alone will be enough to push overall inflation beyond the ECB’s 2% target.

The Management Committee may ignore the rise in inflation for the time being-the increase in basic price pressure is still modest, and there is still a lot of room for growth in the job market.

The European Central Bank may continue to believe that the risks facing the economy are "generally balanced," even though the downside risks are greater than the upside risks.

Wall Street’s sentiment regarding the US economy in the third quarter is heating up. In August, Goldman Sachs announced that it lowered its third-quarter GDP growth forecast for the United States from 8.5% to 5.5%.

In the latest report, Morgan Stanley lowered its third-quarter GDP forecast for the United States, slashing from the previous estimate of 6.5% to 2.9%.

Factors such as the epidemic, supply chain bottlenecks, and high inflation continue to drag down the U.S. economy, and the government’s momentum for economic growth brought about by stimulus spending has been released ahead of schedule.

In terms of initial data, the data performed well this week, and it is expected to continue to improve next week, indicating that the labor market is gradually recovering, albeit at a slower pace.

Friday keywords: Eurozone GDP, CPI, US PCE, personal spending, Canadian GDP

Driven by the strong rebound in consumer services across the Eurozone, the Eurozone economy is expected to continue to maintain very strong growth. However, we have slightly lowered the GDP growth forecast for the third quarter from the previous 2.0% growth to 1.8% , and expect the economic growth rate to slow further in the fourth quarter.

The promotion of vaccinations across Europe has made it possible for the service industry to reopen on a large scale in the third quarter. For most of the second quarter, the French and German hotel industry and Eurozone travel have been subject to strict controls. We expect the hotel and entertainment services industry to rebound strongly, driving Eurozone GDP growth by up to 1.5% from the previous quarter.

In contrast, activities in other areas of the economy are quieter. After the expansion in the second quarter, due to supply chain issues disrupting factories and construction sites, especially in Germany, the output value of the manufacturing and construction industries in the third quarter was basically the same.

As supply chain issues continue until the end of this year and the beginning of next year, coupled with the slowdown in the recovery of the consumer service industry, we expect GDP growth in the fourth quarter to slow to 1.1%. However, the deployment of the EU Recovery Fund will help promote overall economic activity in the Eurozone and should support the economy to maintain relative growth in the next few quarters.

The Eurozone economy will return to pre-pandemic levels before the end of the year.

The Eurozone inflation rate reached 3.4% in September (the last time the inflation rate reached this level was in 2008), and the inflation rate is expected to see an energy-driven rise again this month. We expect the headline inflation rate to reach 3.7% in October, while the core inflation rate should remain stable at 1.9%. We expect the headline inflation rate to reach a peak of 4.1% in November.

Since the end of last year, the overall inflation rate in the Eurozone has risen at a dizzying rate, and the upward trend continues. Nevertheless, the rise in inflation is largely driven by higher energy costs. Due to the surge in electricity and natural gas prices in the region, road fuel costs have risen again. We expect that energy in October will increase the inflation rate by 0.3 percentage points compared to September. For the same reason, November will further increase by 0.3 percentage points.

As energy prices continue to rise and the statistical effect of tourism-related services increases, the overall inflation rate may jump to 4.1% next month, and the core inflation rate may jump to 2.1%. Nevertheless, we expect that this should be the peak value touched by the data, and the overall and core inflation rates should begin to gradually decline, as some one-time effects begin to diminish. These one-off impacts include temporary tax cuts from Germany, the recovery of road fuel costs after the epidemic, and the statistical impact of the weights used in the HICP basket.

More than half of inflation in the Eurozone is driven by energy prices.

After the two-month upset of US non-agricultural data, supply chain problems still exist, and inflation concerns continue to heat up. Therefore, there is reason to believe that the US September PCE price index will continue to rise. The current market is expected to be 4.5%, compared with the previous value of 4.3%.

Personal spending data is expected to slow down slightly, which is related to the continued decline in consumer confidence.

Canada’s gross domestic product (GDP) fell by 0.1% in July, better than the previously estimated drop of 0.4%. Among the 20 industrial sectors monitored by Statistics Canada, 13 industries showed growth, including hotels and restaurants. The largest, achieving double-digit growth for the second consecutive month.

The Canadian economy contracted in the second quarter, and almost no one expected such a regression at the beginning of the year. But the latest gross domestic product (GDP) data shows that the Canadian economy will avoid a double-dip recession because it seems that there is enough momentum to avoid a contraction for the second consecutive quarter.

The Bureau of Statistics’ preliminary GDP estimate in August showed that the Canadian economy had grown by 0.7%. Considering that the monthly growth rate of the Canadian economy is often about 0.2%, this will be a strong result.

Toronto-Dominion Bank economist Tanabasingam said: “Further reopening across the country has promoted a strong rebound in the high-touch service industry. This strong momentum continued until August. A key reason for the health of GDP estimates."