The first full week of November brings with it the usual torrent of economic data from both sides of the Atlantic, offering crucial insights into the health of the global economy. US factory orders are expected to show continued weakness, with forecasts pointing to a 0.5% decline in September. Durable goods orders are also anticipated to remain in negative territory. However, some glimmers of hope emerge from the services sector, with the ISM Services Index expected to show continued expansion, albeit at a slightly slower pace.
All eyes will be on the Federal Reserve’s monetary policy meeting. With inflation showing signs of easing, the market is widely anticipating a 25 basis point cut in the federal funds rate, bringing the upper bound to 4.75%. This would mark the second consecutive rate cut, signalling the Fed’s commitment to supporting economic growth. However, the Fed’s forward guidance will be closely scrutinised for any hints about the future trajectory of interest rates.
Across the Atlantic, Europe’s former economic powerhouse, Germany, continues to grapple with industrial weakness. Factory orders are expected to rebound in September, but the year-on-year figures are likely to remain in negative territory. Industrial production is also forecast to contract, adding to concerns about the country’s manufacturing sector. The HCOB Composite PMI (compiled by S&P Global), a key gauge of business activity, is expected to remain below the 50 mark that separates expansion from contraction, indicating ongoing challenges for the German economy.
In France, the economic picture appears equally subdued, with industrial production expected to show a modest decline. More significantly, the country’s trade deficit remains a concern, and the government’s fiscal position is under pressure. The upcoming release of the French budget balance figures will be closely watched by investors to see how much more it has deteriorated from the current EUR 172 billion. Expectations are that France will see a budget deficit of over 6% of GDP this year.
Meanwhile, in the UK, attention will be focused on the Bank of England’s monetary policy meeting. With inflation below the 2% target and economic growth remaining subdued, the central bank is expected to ease by a further 25bps to leave the base rate at 4.75%. However, the Bank’s accompanying statement will be parsed for any clues about its future policy intentions.
Recent economic data in the UK has been mixed, however this week we may see better data. The S&P Global/CIPS UK Services PMI is expected to show a slight improvement in October, and the construction PMI points to further expansion but at a slower pace than previously.
While these economic data releases will undoubtedly generate headlines, it is the upcoming US presidential election that is likely to dominate market sentiment. The outcome of the election could have a profound impact on global economic and political stability. The election outcome could influence everything from trade policy and fiscal stimulus to environmental regulations and healthcare reform. Markets are likely to remain on edge until the results are clear, with any unexpected developments potentially triggering sharp swings in asset prices, hence the recent rise in the VIX Index to around 22. Ultimately, the economic data, while important, may end up being a mere sideshow to the main event: the US presidential election.
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