Week ahead: Apple earnings dominate, as FOMC, BoJ and BoE bring central bank theme

Monday 30 October

German & Spanish CPI

The week starts with a focus on the eurozone with inflation data from the likes of Spain and Germany dominating. With Tuesday set to bring the wider eurozone inflation gauge, markets will likely look at these initial figures as an indication over where the regional figure might move. Spain has been the most successful at driving down inflation thus far although the recent rebound has taken headline CPI to 3.5%. Perhaps more worrying is the core inflation rate of 5.8% which should be followed closely for any signs of additional disinflation. The recent decline in German CPI has been one of the main reasons why people felt so confident that the ECB would pause their tightening process last week. That sharp decline in German CPI alleviated the pressure placed on the ECB to tighten further. Another sharp decline from 4.5% has been speculated, with such a move potentially weakening the euro given the knock-on implications for Tuesday’s eurozone CPI figure.

Tuesday 31 October

BoJ interest rate decision

The Bank of Japan look to provide the highlight in an Asian session that also includes a raft of Japanese and Chinese data points. The continued weakening of the Japanese yen over recent months has put pressure on the Bank of Japan to intervene, with the 150 USDJPY threshold perceived as the key level that has historically been protected. With price currently around that level markets we’ll look for any signals that’s the BOJ might look to step in and support their currency. The recent Tokyo core CPI reading of 2.7% marked the first rise in six-months, but the disinflation trend doesn’t point towards any shift towards tighter policy as things stand.

Eurozone CPI and GDP

The euro looks set for a volatile Tuesday morning with October inflation data released alongside the flash GDP reading for the third quarter. Markets will be especially attentive to the inflation side of this story with forecasts signalling a potential sharp decline in the headline CPI rate from 4.3% to 3.3%. The core inflation rate is also expected to decline although at a much more moderate pace. With the Q3 GDP rate expected to show either flat or negative growth, we could see the euro we can on the potential that the ECB has in fact reached its terminal rate.

Wednesday 1 November

FOMC interest rate decision

The Federal Reserve interest rate decision looks set to dominate Wednesday’s trade with markets widely expecting another pause to interest rates from Powell and Co. Recent economic data out of EU does highlight ongoing strength from a consumption perspective with outperformance in the GDP reading coming alongside some impressive retail sales numbers. With that in mind there is a possibility that the Federal Reserve does raise again this year although market pricing points towards December as the only meeting that has a chance of seeing additional tightening. While the Federal Reserve may opt to surprise markets the most likely event would be a rate pause with volatility coming around any change in expectations for a December hike.

Thursday 2 November

BoE interest rate decision

The central bank theme continues into Thursday with the Bank of England expected to make their decision on whether to keep rates on hold or hike once again. While the MPC opted to bring their tightening phase to an end at the September meeting, the breakdown in votes showed that the decision was on a knife edge. The vote to pause rates only passed thanks to a majority of five, compared with the four members that thought another hike was necessary. This highlights a strong potential for additional tightening if we fail to see the economy or inflation data deteriorate. Unlike it’s eurozone neighbours, the UK disinflationary has been minimal of late, with the past two readings of 6.7% coming in just below the 6.8% rate seen back in July. The longer this stagflation persists, the more likely we are to see that pendulum swing back in favour of an additional rate hike.

Apple Q3 earnings

Tech stocks have been in for a rough ride thus far with Alphabet, Microsoft, Amazon, and Meta all reporting last week. Even those companies that have managed to outperform on both revenues and earnings have often found their gains short lived as wider risk off sentiment takes hold. Apple earnings will continue to be dominated by iPhone demand, although the Q3 figure is typically less important than Q4 given the mid-September release of the iPhone 15. The fourth quarter outlook will be key given questions over demand, while traders should also look out for data around the services side of the business given the high margins.

Friday 3 November

US jobs report

The week crescendos into Friday’s U.S. jobs report with markets looking out for whether last month’s bumper 336K payrolls figure was a one off or indicative of a booming US jobs market. Average earnings data remains key given the implications it has for inflation, with the gradual decline over recent months alleviating fears of underlying price pressures. Meanwhile the unemployment rate has been relatively steady throughout the year, with markets expecting another 3.8% reading for October. Any jump in unemployment or sharp payrolls decline could raise questions over the health of the economy, although the strength of last months payrolls figure could ease those concerns.

Alibaba earnings

Chinese giant Alibaba look to close out the week, with traders seeing their earnings as a good proxy for Chinese consumption levels. Inflationary pressures in China have been minimal compared to the West, but that removes some of the tailwind provided to the likes of Amazon.com given the increased value in sales over the past year.