Key events to watch in the week ahead: 21 – 27 October 2024

This week’s overview

This week saw the S&P 500 and Dow Jones Industrial Average (DJIA) scale to fresh record highs, as resilient economic data continue to push back against growth risks while the 3Q corporate earnings season kicks off with optimism around major US banks.

Looking into the new week, here are five key events to watch.

US 3Q 2024 earnings season: Lockheed Martin, Boeing, Tesla

The US earnings season will head into its third week, with results from Tesla likely to be the key focus. Expectations are for a 12% decline in earnings per share compared to the previous year.

This comes as Tesla has been grappling with narrowing profit margins and a blunted near-term outlook, largely due to slumping electric vehicle (EV) prices and intensifying competition in key Asian markets. Any positive surprises in its earnings and outlook will be very much welcomed, following the recent disappointment around its Robotaxi event.

21 October 2024 (Monday, 9am SGT): China’s one-year and five-year loan prime rate (LPR)

The People’s Bank of China (PBoC) kept its key lending rates unchanged at the September fixing, with the one-year and five-year LPR kept at 3.35% and 3.85% respectively. That said, the PBoC subsequently lowered its seven-day reverse repo rate by 0.2%, along with a 50 basis point (bp) cut to its reserve requirement ratios (RRR) and a reduction in existing mortgage rates.

China’s policy settings are likely to remain accommodative, as the country struggles to meet its 5% growth target for 2024, with downside surprises in economic data revealing continued weakness. Ahead, the PBoC has anchored expectations for a 20 - 25 bp cut to loan prime rate next week and reiterated that further lowering of its RRR may take place by year end.

24 October 2024 (Thursday, 4pm SGT): Eurozone flash manufacturing and services Purchasing Managers' Index (PMI)

Last month (September), the HCOB Eurozone Composite PMI was revised higher to 49.6 from 48.9 and compared to 51 in August, as economic activity in the Euro Area fell into contractionary territory for the first time since February. Within the sub-indices, services slowed (51.4 vs 52.9), and the manufacturing contraction deepened (45 vs 45.8).

The slowdown in Europe’s economic activity, along with easing inflation, spurred the European Central Bank (ECB) to cut interest rates by 25bp this week. The ECB highlighted that the disinflation process "is well on track," with risks leaning towards inflation undershooting targets. The rates market is now fully pricing in another 25 bp cut from the ECB in December, with a 23% probability of a heftier 50bp cut.

Looking ahead, the preliminary forecast for this month's HCOB Composite PMI in October is for a rise to 50.1.

24 October 2024 (Thursday, 9.45pm SGT): US flash manufacturing and services PMI

Last month (September), the S&P Global US Composite PMI was revised lower to 54 from a preliminary reading of 54.4, easing from 54.6 in August. Divergent trends between the two sub-indices persisted, with growth in the service sector (55.2 vs 55.7) while the manufacturing downturn deepened (47.3 vs 47.9).

Looking ahead, the preliminary forecast for the S&P Global US Composite PMI in October is for it to remain stable at 54. The rates market is pricing in a 90% chance of a 25 bp Federal Reserve (Fed) rate cut for November and has a cumulative 42bp or rate cuts priced for year-end.

25 October 2024 (Friday, 7.30am SGT): Tokyo’s core consumer price index (CPI)

Tokyo core consumer inflation is generally considered a leading indicator of nationwide trends, which will be eyed to drive expectations around the Bank of Japan (BoJ)’s next move. For September, Japan’s key inflation gauge slowed to 2.4% (2.8% prior) with government utility subsidies in place, but was still slightly higher than the expected 2.3% consensus.

Thus far, inflation has been above the BoJ’s 2% target for the 30th consecutive month. Further policy normalisation may remain the likely path ahead, but the timing and scale of additional hikes will be the central focus for markets. As of today (18 Oct), markets are pricing for a 66% probability of a 10 bp rate hike in December. The BoJ was only projecting a 2.5% read in core inflation by March 2025, so any further persistence in inflation may support the case for more policy normalisation.