Key events to watch in the week ahead: 9 – 13 October 2023

This week’s overview

Wall Street saw another week of de-risking, albeit with some attempt to stabilise in the lead-up to the upcoming US non-farm payroll release, as the Treasury yield rally eased. For the week ahead, market participants will continue to seek for clues on the Federal Reserve’s (Fed) monetary policy outlook, before market attention starts to gradually shift towards the upcoming US earnings season.

Here are four things to note next week.

12 October 2023 (Thursday, 2am SGT): US Federal Open Market Committee (FOMC) minutes

As widely expected, the Fed maintained its target rate for the Fed Funds at 5.25%-5.50% at its September meeting.

However, the Fed caught the market off guard as the 2024 median dot moved up 50 basis-point (bp) to 5.1% (from 4.6% in June), indicating just two cuts next year are expected versus four previously. Furthermore, the dots showed that 12 of 19 Fed officials favour another rate hike this year.

The minutes will likely echo the tone of the Fed's hawkish hold and reiterate that it is unable to rule out another rate hike this year and that rates are set to stay higher for longer.

12 October 2023 (Thursday, 2pm SGT): UK gross domestic product (GDP)

The UK economy contracted by -0.5% month-on-month (MoM) in July 2023, the biggest decline so far this year, exceeding consensus expectations for a -0.2% fall. The sharper-than-expected fall was driven in part by wet weather and industrial action.

This month, the market is looking for GDP to contract by -0.1% MoM, as higher interest rates and cost of living expenses weigh on consumer demand.

12 October 2023 (Thursday, 8.30pm SGT): US consumer price index (CPI)

Despite the Fed pencilling in a final rate hike before year end, broad market consensus are that the Fed may not follow through with it. With that, the upcoming US inflation data will be closely watched to provide the much-needed validation on whether we may have already seen the peak in US rates.

Current expectations are for headline CPI to register a 3.6% year-on-year growth in September, down from previous 3.7%. Similarly, the core aspect is expected to moderate to 4.1% from previous 4.3%. Month-on-month, both headline and core aspects are expected to turn in a 0.3% growth.

Further cooling in US inflation may give the Fed room to keep rates on hold at subsequent meetings, especially with some tightening effect from the surge in US bond yields lately and easing pricing pressures from falling oil prices. Nevertheless, with core inflation still more than two-fold above the Fed’s 2% target, the central bank may continue to hold on to their hawkish tone to retain their credibility.

13 October 2023 (Friday, 9.30am SGT): China’s inflation rate

After slipping into deflation for the first time in two years, China’s consumer prices has managed to revert to positive growth in August, with expectations for prices to stabilise further in September. Current consensus for its September CPI are for a 0.2% year-on-year growth, up slightly from previous 0.1%.

Aside, the contraction in producer prices are expected to ease further for the third straight month, with a -2.5% year-on-year read versus the previous -3.0%. While market participants may be comforted with any signs of stabilisation in the economy, the still-subdued inflation readings may continue to reflect overall weak demand and potentially for more to be done by authorities.