Macroeconomics: The Day Ahead for 19 October

Given the mounting array of uncertainties from the conflict in the Middle East, China’s property sector woes and tech / trade tensions with the US, and the ‘high for longer’ G7 rates narrative, the day’s run of largely second tier economic data may struggle to get much of a ‘look in’, with the focus on Powell’s speech at the Economic Club of NY and another barrage of Fed and ECB speakers. Statistically there are Japan’s Trade, China’s New Home Prices and French Business Confidence to digest, while ahead lie US weekly jobless claims, Philly Fed Manufacturing survey and Existing Home Sales. The latter are seen falling a relatively sharp 3.7% m/m to a 3.89 Mln SAAR pace, which would be the fourth successive m/m drop, underlining the downward pressure from high mortgage rates, as well as echoing August’s sharp 7.1% m/m fall in Pending Home Sales. Weekly Jobless Claims are seen little changed at a still very low 210K, though there are some modest upside risk from the UAW autoworkers strike.

As expected the Bank of Korea held rates overnight, while maintaining a tightening bias, while Bank Indonesia unexpectedly resumed its rate hikes with a 25 bps increase to 6.0%, citing the weakness of the Rupiah as a key factor, and underlining once again the fall-out pressure on Asian currencies and conversely upward push on inflation rates due to low rate regimes in Japan and China. A more modest run of US corporate earnings features AT&T, Blackstone, Freeport-McMoRan and Union Pacific amongst others, as the overnight results from Taiwan’s TSMC are digested. A busier day for govt bond auctions has multi-tranche sales in France and Spain, while the US sells 20-yr TIPS and Canada 10-yr. Powell will doubtless be cautious in offering guidance, above all wanting to avoid leaving the Fed in a position of being hostage to fortune, but stress that the inflation fight has not been won, while acknowledge the even higher level of uncertainty about the domestic and global economic outlook, likely echoing Waller’s emphasis on patience and ‘wait, watch and see’ in his speech yesterday. The Beige Book noted that ‘Labor market tightness continued to ease across the nation’. ‘Prices continued to increase at a modest pace overall. Districts noted that input cost increases have slowed or stabilized for manufacturers but continue to rise for services sector firms.’ ‘Consumer spending was mixed, especially among general retailers and auto dealers, due to differences in prices and product offerings’ and ‘Manufacturing activity was mixed, although contacts across multiple Districts noted an improving outlook for the sector. The near-term outlook for the economy was generally described as stable or having slightly weaker growth.’