Ready for another week?

Despite US treasury yields rising across the curve this month, US equity prices continue to hold their own. With most sectors making gains, technology continues to lag. On Friday, JP Morgan’s stock rose after profits beat expectations in the third quarter, hopefully setting the tone for the rest of the quarter. Jamie Dimon’s comments post the results on the wider outlook for the global economy seemed to focus on the geopolitical risks that could disrupt the economic outlook. This week’s earnings season will start in earnest, with Johnson and Johnson, United Health, several more banks, ASML, TSMC, and Netflix, to name a few, coming out with numbers.

After Thursday’s Consumer Price Index, which came in just about in line with expectations, Friday’s Producer Price Index for final demand in the US rose 1.8% year over year in September, below last month’s reading but ahead of the expected 1.6%. The dollar rose on the week against its basket of currencies. We had a strong employment report last week and inflation data this week that indicates inflation rates are not heading back to 2% as quickly as the Fed may want. Market traders still expect the Fed to cut by 25 basis points in early November, while the US economy appears to remain quite resilient. This week, we hear from several Fed members, and we shall see if their tone changes due to the recent data.

The price of crude did give back some of the gains it made earlier in the week but remains closer to 80 dollars than $70. According to a Bloomberg piece produced on the back of a Deutsche report, traders have built up one of the most significant short positions in history. Surprising considering the current geopolitical backdrop. Having spoked again at the start of the week, the Vix fear index gave back some ground.

Aside from earnings, US retail sales industrial production will be the focus, in which will be a slightly quieter week on the macro front. The focus will be Europe as the ECB meets on Thursday to make its latest interest rate decision, as well as sentiment indicators, including the ZEW survey. The ECB are expected to cut by 25 basis points on Thursday. As for the UK, after a slightly better-than-expected monthly GDP report on Friday. Key reports this week include the unemployment rate, inflation and retail sales. The inflation rate is seen falling to 1.9%, the lowest reading since July 2021, from 2.2% in August. The core rate is also set to fall but slower to 3.5% from 3.6%. The unemployment rate is anticipated to remain stable at 4.1%, while wage growth is expected to slow down to 5% from 5.1% when excluding bonuses. Retail sales, on the other hand, likely contracted 0.3%, following a 1% surge in August.