Key events to watch in the week ahead: 7 – 13 October 2024

This week’s overview

Geopolitical tensions in the Middle East dominated the risk environment this week, keeping sentiments in a cautious tone for further developments. Oil prices are the clear beneficiary from the conflict, with geopolitical risk premium mounting on expectations of a potential supply disruption of crude supplies in the Middle East, alongside some optimism that China’s recent series of stimulus efforts may offer some uplift for oil demand.

But of course, the question now is whether there will be an actual disruption in crude supplies, which will very much revolve around Israel’s upcoming response and that should keep risk assets in a waiting game potentially over the weekend.

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

US 3Q 2024 earnings season: Blackrock, JPMorgan, Wells Fargo

The 3Q 2024 earnings parade will kick off with the major US banks, starting 11 October 2024, with JPMorgan and Wells Fargo leading the pack. We have written about a preview for US banks here: https://www.ig.com/sg/news-and-trade-ideas/us-banks-3q-earnings-preview--what-to-expect-241002

8 October 2024 (Tuesday, 8.30am SGT): Reserve Bank of Australia (RBA) meeting minutes

At its September meeting, the RBA kept its official cash rate hold at 4.35% for a seventh consecutive meeting. In the accompanying statement, the RBA retained its note from last month that while higher interest rates are working to bring demand and supply closer to balance, underly inflation has been above the midpoint of the target for 11 consecutive quarters and "has fallen very little over the past year."

While the statement read hawkish, the tone of the press conference that followed was more dovish. The RBA Governor confirmed that the option of rate hikes was not discussed and that the question was “whether or not the messaging should change.”

The meeting minutes will be scrutinised for any discussions by the RBA Board on rate cuts by other central banks and insights into how close the RBA might be to considering a similar move. The rates market is pricing in 17 basis point (bp) of rate cuts for December and a cumulative 70 bp for May 2025.

10 October 2024 (Thursday, 2am SGT): Federal Open Market Committee (FOMC) meeting minutes

At the recent FOMC meeting, the Federal Reserve (Fed) surprised somewhat with an outsized 50 bp cut, but made it clear that it is a front-loading move by guiding for smaller cuts over the next few meetings. Discussions around the rate decision will be put under scrutiny in the upcoming Fed minutes, especially when policymakers’ opinions had not been fully aligned behind the decision (Governor Michelle Bowman as the dissenter).

The latest Fed’s economic projections showed that while economic conditions may be softer than its June projections, the totality of the forecasts do not seem to be screaming for a recession ahead. While unemployment rate was revised higher to 4.4% (4.0% prior) and real gross domestic product (GDP) was a tad lower for 2024 (2.0% vs 2.1% prior), they are expected to maintain at these levels for 2025 and beyond.

Policymakers’ views around the economy will likely be under the radar as well, with a soft-landing narrative likely to be reiterated, in line with recent communication from Fed officials. Market participants will also be seeking clues on policymakers’ conviction around upcoming rate cuts.

10 October 2024 (Thursday, 8.30pm SGT): US consumer price index (CPI)

In August, the annual headline inflation rate in the US cooled for a fifth straight month, dipping to 2.5%. This marked the lowest level since February 2021, down from 2.9% in July and below the 2.6% expected.

The annual core inflation rate, which excludes the more volatile food and energy sectors, remained at a three-year low of 3.2% in July 2024, matching market expectations. The monthly core inflation edged up to 0.3% from 0.2%, above forecasts for 0.2%

The preliminary expectation for this month (August) is for annual headline inflation to ease to 2.3% and core inflation to fall to 3.1% YoY. The rates market is pricing in 34 bp of Fed rate cuts for November, with a cumulative 70 basis points of Fed rate cuts priced in by year-end.

13 October 2024 (Sunday, 9.30am SGT): China’s consumer and producer price index (CPI, PPI)

Despite China's consumer inflation accelerating in August to its fastest pace in six months, it was largely attributed to higher food costs from weather disruptions. Underlying pricing pressures have not been broad-based, which suggests that domestic demand remains weak and does not offer much reassurances around China’s economic recovery. To reinforce that, producer prices in August worsened to a four-month low at -1.8% year-on-year.

Ahead, deflation concerns are likely to persist. Expectations are for China’s September consumer prices to contract 0.3% year-on-year, a reversal from the 0.6% expansion in August. Producer prices are expected to expand 2.3% from a year ago, versus the 1.8% contraction in August.

That said, market participants have managed to look past the weaker-than-expected Purchasing Managers' Index (PMI) figures this week, as optimism around China’s recent stimulus prevails. Expectations are that any policy success from the recent series of stimulus may come with some lag, with one to watch if market participants can shrug off upcoming weakness in pricing pressures as well.