Written Commentary
Slightly busier day for data has Japan PPI, UK BRC Retail Sales and US NFIB Small Business Optimism, but focus remains on geopolitics along with first batch of US corporate earnings, IMF World Economic Outlook and Financial Stability Review, OPEC Oil Market report also due.
- Japan PPI: slide in rice prices and base effects account for unexpected drop; broad pressures evident elsewhere set to keep annual rate high
- U.K.: BRC Sales and Barclaycard surveys point to some consumer belt tightening, but not to sharp setback …for now
- Few surprises in IMF forecast update or array of outlook risks
EVENTS PREVIEW
Geopolitics, Earnings and the IMF in Focus
The conflicts in the Middle East and Black Sea continue to dominate the backdrop, with a few items to digest on the statistical schedule from the overnight Japan PPI and UK BRC Retail Sales to US Existing Home Sales and the NFIB survey. But it will be the first batch of US corporate earnings (Citi, Goldman Sachs, JP Morgan, Johnson & Johnson and UnitedHealth i.a.) that grab the limelight, along with the overnight IMF’s World Economic Outlook and Financial Stability Report. The energy sector looks to BP’s Q3 trading update and the monthly OPEC Oil Market Report. The RBA’s September policy meeting minutes were as hawkish as expected, though also confirming that the September hike was rather more pre-emptive than implying a follow-up hike in November. There are a number of central bank speakers also on tap, with comments from BoE’s Greene typically hawkish, and those from Fed’s Waller and Hammack reiterating familiar and somewhat divergent standpoints on the policy outlook.
Japan PPI and UK Consumer Spending
The unexpected m/m fall in Japan’s PPI still leaves the y/y rate very high at 6.8%, and was mostly due to a plunge in rice prices, amplified by base effects after a sharp jump last year, but upward pressures remained very evident in chemicals, plastics, metals and telecoms equipment prices. Per se, this does not alter prospects for another BoJ rate hike in December. UK BRC Retail Sales posted a modest though slightly higher-than-expected 1.0% y/y rise, paced mostly by a rebound in non-food goods purchases, with a dip in Barclaycard Consumer Spending to 2.0% combining to suggest that while higher energy prices are constraining consumer spending, there is little evidence of a sharper setback.
IMF Outlook and Geopolitical Risks
The IMF World Economic Outlook contained few, if any, surprises, with the overall upgrade to 2026 global GDP paced by upward revisions for Europe (primarily the UK and Germany, i.e. acknowledging better-than-expected Q2 outturns), offset by a hefty downward revision to GCC countries (above all, and unsurprisingly, Saudi Arabia). It noted the strong contribution to global GDP from AI investment, while highlighting risks of a sharp setback in investment if productivity gains do not materialize, alongside high energy prices, rising interest rates, geopolitical instability and government debt loads, all of which have already been much discussed.
Sources suggesting that the US/Russia diesel ‘deal’ was aimed at softening Moscow’s stance on peace talks to end the war in Ukraine are not that surprising, but equally highlight a willingness to make concessions to the Kremlin without any material reciprocal concessions, while leaving key territorial issues unresolved, which sets a high bar to any form of rapprochement between Russia and Ukraine. Of particular note is the news that security warning systems failed to send any advance alerts about the Houthi attacks on Riyadh airport, particularly as unnamed officials have suggested that this was because the mobile phone alerts that had previously been provided were judged to be socially disruptive and were suspended. In doing so, the resulting uncertainty
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