Macroeconomics: The Day Ahead for 1 November

A new month gets underway with the All Saints Day holiday thinning market participation above all in a number of EU countries, and also delaying the release of some Manufacturing PMIs, which dominate the statistical release schedule. As expected the RBA hiked rates a further 25 bps overnight to 2.85%, and confirmed more hikes to come, with markets priced for a further 100 bps by July 2023 and a terminal rate of 3.85%, but all eyes remain firmly on the Fed tomorrow and the BoE on Thursday. There are South Korea’s Trade data (larger than expected fall in Exports, and a higher than expected rise in Imports due to energy prices and a strong USD), the marginally higher than expected uptick in China’s Caixin Manufacturing PMI (49.2 vs. forecast 48.5), with other Asian PMIs either dropping m/m, or edging up but remaining in the contraction zone, with the continued very notable exception of a robust print from India. Ahead lie Manufacturing PMIs for UK, USA, Canada, Brazil & Mexico, US JOLTS Job Openings, Construction Spending and Auto Sales, while late this evening BoC’s Macklem and Rogers testify to the Senate Committee on Finance, and it will be another very busy day for corporate earnings. But much of this is likely to be little more than statistical roadkill, as markets focus on the unconfirmed reports that a committee is being set up in China to look at how it might exit its Zero Covid policy, and by contrast, some very stark warnings from UK PM Sunak and Chancellor Hunt that there is an ‘eye watering’ gap in UK public finances which will require both spending cuts and tax hikes to rectify. The question on the latter is very simply whether their budget plans will re-open the deep rift in the ruling Conservative party.

** U.S.A. – Manufacturing ISM & Auto Sales **
The Manufacturing ISM is expected to dip to stall speed at 50.0 from September’s 50.9, i.e. a rather more modest fall than the drop in the PMI to 49.9 from 52.0, though still confirming that activity in the sector has effectively stalled. Details as ever remain important, above all given that the fall is seen being driven by a fall in the Supplier Deliveries sub-index, indicating improving supply chains, though any falls in Orders, Output or Employment would obviously send a less welcome signal on activity. It should be remembered that historically a reading at or below 48.0 on the headline index (rather than 50.0) signals contraction. A sizeable jump in Auto Sales to a 14.50 Mln SAAR pace from September’s 13.49 Mln, with a combination of replacement demand as a consequence of Storm Ian, and a very benign seasonal adjustment that anticipates that NSA sales drop m/m, skewing the risk to the upside of the consensus, and per se give a boost to headline Retail Sales. Auto Output remains heavily constrained by supply chain issues but did pick up in September, though replacement demand will still likely have to be largely met by used car sales.