The start of a new quarter brings with it many of the old issues which markets have been juggling and battling for many months. We get another major central bank meeting this week, with the Reserve Bank of Australia meeting on Tuesday, while there will be more data to assess the strength in the services sectors, as well as the all-important US non-farm payrolls report.
Trade policy risks continue to remain high and US political risk has shifted to the impeachment process, even if further developments slow due to the House of Representatives now on a two-week recess. Watch instead for any possible cracks in the Republicans’ support for Trump, especially in the Senate they control and given the requirement of a two-thirds super-majority to convict in that chamber.
The week starts with China's state versions of its purchasing managers’ indices for September just as Asian markets open. The manufacturing PMI is already slightly in contraction, but the non-manufacturing and hence primarily services PMI continues to signal a moderate pace of expansion. Recall that another round of 15% tariffs on US$110 billion of Chinese imports was imposed by the US at the start of September. This may indicate added downside risk, at least to the manufacturing sector.
The US ISM manufacturing report is released on Tuesday, which may improve modestly given regional surveys did not fall as fast as this national ISM measure has done recently. However, the major focus will be on the labour market on Friday.
Payroll growth is cooling from the 200k monthly prints over the last few years, but the US economy is certainly not falling of a cliff. The unemployment rate is forecast to remain unchanged at 3.7%, while average hourly earnings are projected to have increased by 0.3% month-on-month.
We get to see if the ECB is making any progress toward its inflation goal with the first flash estimate on inflation. Expectations are for little real change while Germany, Italy and Spain update their inflation figures on Monday.
The UK will no doubt be moved most by Brexit developments. A snap general election is looking increasingly off the table before October 31 and so the key question now is if Prime Minister Johnson can make any meaningful progress a revised deal with the EU.
Here are the key events on the calendar across global markets this week:
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