The final week of the third quarter will be a busy one, with investors keeping an eye on fresh economic data for the US including the ISM Manufacturing PMI and PCE inflation. Fed Chair Powell will also testify on Coronavirus and CARES Act before the Senate and lawmakers will try to pass a funding plan to avoid a government shutdown on October 1st. The Evergrande limbo is set to continue as markets expect an update on interest payment for a dollar-denominated bond and hope a default could be avoided. The 2-days ECB Forum on Central Banking will be keenly watched for more clues on the monetary policy outlook and traders will also pay attention to the outcome of the German federal election.
It will be a busy week in the US. On the data front, the ISM Manufacturing PMI should point to a slower although still strong rise in factory activity, with investors paying special attention to any sign of growing inflationary pressure, supply constraints and weakness in the labor market. In addition, the final estimate of second-quarter GDP is set to confirm the economic recovery gathered pace during the April-June period, helped by increases in household consumption, fixed investment, exports, and state and local government spending. Other notable publications include: personal income and outlays; PCE price index; durable goods orders; construction spending; CB consumer confidence; pending home sales; Chicago PMI; Case-Shiller home prices; Dallas Fed Manufacturing Index; the advance estimates of goods trade balance and wholesale inventories; and the final readings of Michigan consumer sentiment and Markit Manufacturing PMI.
Meanwhile, Fed Chair Powell will testify on the Coronavirus and CARES Act before the Senate and lawmakers in Washington will try to pass a funding plan to avoid a government shutdown on October 1st. The House already passed a bill to keep the government funded until early December and suspending its borrowing limit through 2022, but the bill faces a strong battle as it heads to the Senate.
In Europe, investors will be watching the outcome of the German federal election that marks the end of Angela Merkel’s 16 years in office. No single party is likely to achieve a majority, and the latest opinion polls suggested the center-left Social Democrats, led by finance minister Olaf Scholz, were narrowing a lead over the conservative CDU/CSU alliance, led by Armin Laschet while the Greens leader Annalena Baerbock lagged. On the economic data front, important releases include the Eurozone flash September’s inflation rate, likely influenced by soaring energy prices, unemployment rate and business survey; Germany Gfk consumer confidence, consumer price data, jobless data and retail sales; France consumer morale; Spain industrial confidence; Switzerland KOF Leading indicators; and Turkey trade balance. Major European economies will also see an update to September manufacturing PMIs. Elsewhere, the UK will publish the final estimate of second-quarter GDP growth and Markit Manufacturing PMI, alongside current account, Bank of England’s monetary indicators and Nationwide house price index.
Several central bank leaders will meet online for 2 days during the ECB Forum on Central Banking to discuss the future of monetary policy beyond the pandemic.
In China, the Evergrande saga is set to continue after the property giant did not pay $83.5 million in bond interest to its offshore bondholders last Thursday and gave no clarification to investors. The company still has a 30-day grace period and will default if that passes without payment. On the economic data front, China will publish September manufacturing PMI surveys from both the NBS and Caixin and updated figures for January-August’s industrial profits. In Japan, focus will turn to the Bank of Japan’s quarterly tankan business sentiment survey, which will probably show big manufacturers’ confidence remained strong in the third quarter. Data on industrial production, retail sales, consumer confidence, unemployment rate and housing starts will also be keenly watched. Australia is also set to release the Ai Group Manufacturing Index, private sector credit and the preliminary estimates of both retail sales and building permits.
Finally, worldwide manufacturing PMIs for September due on Friday will provide an update on the global economic recovery.