Ahead of the game: 30 October 2023

US share markets tumbled this week, with the tech-heavy Nasdaq officially entering correction territory, as earnings reports failed to excite, higher bond yields and geopolitical tensions weighed.

In Australia, the ASX 200 took its lead from Wall Street but was also impacted by the release of a hotter than expected inflation data and hawkish RBA communique, which will likely see the central bank raise rates by 25bp when it meets in November.

• US Q3 GDP soared to 4.9% YoY, beating a 4.5% market forecast
• Aussie Q3 inflation outpaced expectations: Headline dipped to 5.4% YoY, still besting a 5.3% forecast
• RBA's Trimmed Mean eased to 5.2% YoY but topped a 5% forecast
• Europe's ECB paused rate hikes, saying current levels suffice for targeted inflation
• China's NPC greenlit a mid-year budget boost, a first since the 1998 Asian Financial Crisis
• Crude sank 5.14% to $83.55 amid Middle East tensions
• Gold is up nearly 8%, now trading at $1985
• Wall Street's VIX eyes a second week above 20%.

• AU: Retail Sales (Tuesday, October 30 at 11.30 am AEDT)
• AU: Private Sector credit (Tuesday, October 31 at 11.30 am AEDT)
• NZ: Unemployment (Wednesday, November 1 at 8.45 am AEDT)
• AU: Building Approvals (Wednesday, November 1 at 11.30 am AEDT)
• AU: Balance of Trade (Thursday, November 2 at 11.30 am AEDT)
• AU: Home Loans (Thursday, November 2 at 11.30 am AEDT)

• CN: NBS Manufacturing (Tuesday, October 31 at 11.30 am AEDT)
• JP: BoJ Interest rate decision (Tuesday, October 31 at 2 pm AEDT)
• CN: Caixin Manufacturing PMI (Wednesday, November 1 at 12.45 pm AEDT)

• GE: Inflation Rate (Tuesday, October 31 at 12 am AEDT)
• GE: Q3 GDP (Tuesday, October 31 at 7 pm AEDT)
• EA: Q3 GDP (Tuesday, October 31 at 9 pm AEDT)
• EA: Inflation Rate (Tuesday, October 31 at 9 pm AEDT)
• UK: Bank of England Interest Rate Decision (Thursday, November 2 at 11 pm AEDT)

• US: CB Consumer Confidence (Wednesday, November 1 at 1 am AEDT)
• US: ADP Employment Change (Wednesday, November 1 at 11.15 pm AEDT)
• US: ISM Manufacturing (Thursday, November 2 at 1 am AEDT)
• US: ISM JOLTS Job Openings (Thursday, November 2 at 1 am AEDT)
• US: FOMC Meeting (Thursday, November 2 at 5 am AEDT)
• US: Non-Farm Payrolls (Friday, November 3 at 11.30 pm AEDT)
• US: ISM Services (Saturday, November 4 at 1 am AEDT)

• JP

Bank of Japan interest rate decision

Date: Tuesday, 31 October at 2 pm AEDT

The wide consensus is that the BoJ will maintain the short-term interest rate target at -0.1%. However, the focus will be on whether the central bank will make further adjustments to its yield curve control policy, which currently has a 1% upper limit, or introduce other policy modifications, especially given the recent rise in Japan's 10-year government bond yields to a decade high.

After upside surprises in Japan's core inflation for the third consecutive month and a more than 20% gain in oil prices since its July meeting, it is expected that the upcoming inflation forecasts will be revised higher.

Therefore, attention will also be focused on whether an upward revision in inflation forecasts could meet policymakers' condition for 'sustainable inflation,' which might trigger a policy pivot. Despite this, BoJ doves may still rely on the lack of upward momentum in wage pressures to argue for a continued wait-and-see approach.

Japan's average cash earnings and inflation chart

• US

FOMC meeting

Date: Thursday, 2 November at 5 am AEDT

At its meeting in September, the Fed decided to maintain the target range for the Federal Funds rate at 5.25%-5.50% and retained its tightening bias.

"The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals."

In recent weeks, several Fed speakers, including Fed Chair Powell, have sounded more cautious. They have noted that the rise in longer-term bond yields and tightening financial conditions have reduced the need for further monetary policy tightening.

As such, the market is widely expecting the FOMC to keep the Federal Funds target rate unchanged at 5.25%-5.50% in November. The more cautious shift in tone noted in recent Fed speak will likely be reflected in softened forward guidance, with the Fed also expected to acknowledge the run of strong economic data.

Fed funds rate chart

• UK

Bank of England interest rate meeting

Date: Thursday, 2 November at 11 pm AEDT

The BoE is expected to keep the interest rate unchanged at the upcoming meeting, continuing the pause in its monetary policy tightening cycle from the September 2023 meeting. Thus far, policymakers have raised rates 14 consecutive times since December 2021, with a cumulative 500 basis-point tightening.

While September's UK inflation (headline at 6.7%, core at 6.1%) remains more than three times the central bank's 2% target, the moderating trend in pricing pressures, softer wage growth, and still-weak economic conditions may provide reasons for a more cautious approach from policymakers.

Nevertheless, the message that interest rates will remain high for longer is likely to be emphasised, and market expectations have also been very much aligned, pricing in rate cuts only from September 2024 onwards.

BoE bank rate chart

• US

NFP

Date: Friday, 3 November at 11.30 pm AEDT

In a speech at the Economic Club of New York last week, Fed Chair Powell noted that, although labour market conditions remain tight, various indicators suggest the labour market is cooling.

The Fed Chair's remarks came just a fortnight after the September Non-Farm Payrolls report, which showed that the US economy added an eye-popping 336,000 new jobs—almost double the forecasted 170,000.

For this month, the market anticipates the US economy will add 145,000 jobs in October, with the unemployment rate expected to hold steady at 3.8%. US wage growth is projected to rise by 0.3% month-on-month, up from 0.2% in September, which would result in an annual rate declining to 4% from 4.2%.

Unemployment rate chart

• US

Q3 2023 earnings season

Q3 earnings season continues with reports set to drop from companies including McDonalds, AMD, Pfizer, Airbnb, Apple and Berkshire Hathaway.

Economics calendar

All times shown in AEDT (UTC+10).