Nov 6
VOT Research Report
Analytics and Recommendations
Check for central bank spokespeople’ remarks to determine if they support the tone each of the central banks set last week.
The final three major central bank meetings for late October and early November were held last week. All three hikes went as planned. The RBA raised rates by 25 basis points and is expected to do so again. The Federal Open Market Committee (FOMC) increased rates by 75 basis points, but warned that the final rate is now more important than the rate of increase. The BOE also increased rates by 75 basis points, but it informed the markets that the final rate will be lower than anticipated. Watch for proceeded with unpredictability as the results wait into this week.
Additionally, on Tuesday are the US midterm elections. Biden will have a harder time getting his agenda passed if there is a swing in either the House or the Senate. Also, don’t forget that earnings season is still going on, and on Thursday, the markets will get CPI data from the US!
Central Banks The RBA increased its cash rate by 25 basis points last week, as anticipated, to 2.85%.In addition, the central bank now anticipates a peak in inflation of around 8% this year, up from 7.75% in the past. The Committee also increased the inflation outlook for 2023 to 4.75 percent and the inflation outlook for 2024 to 3%.
The Reserve Bank of Australia (RBA) stated that it anticipates increasing interest rates further in the coming months. However, the amount and timing of these increases will be determined by the board’s assessment of the outlook for inflation and the labor market in addition to any new data .In addition, Governor Lowe of the RBA stated that, if deemed necessary, it would return to larger rate hikes but would also remain on hold.
The Fed Funds rate was expected to reach a range of 3.75 percent to 4.0% when the FOMC increased rates by 75 basis points last week. “In determining the pace of rate hikes, we will consider cumulative tightening policy, policy lags, and economic and financial developments,” the Committee stated, was interestingly interpreted as dovish. This led many to believe that the Fed would slow the rate of increase by 50 basis points at the meeting in December. However, the mood changed during the press conference.
It seems so. However, markets will have to wait for the CPI report this week and additional clarification from Fed speakers. Last week, the BOE voted 7-2 to increase rates by 75 basis points. Interest rates increased significantly to 3% as a result. The principal focus point from the gathering was the Council noticed that the pinnacle loan fee is probable lower than suggested by the business sectors. It also mentioned the possibility of a recession lasting two years.
The Committee anticipates that inflation will reach its highest point of 10.9%.However, Bailey stated that the terminal rate was 5.25 percent, implying that it would be lower. He also said that the economy might have shrunk by -0.5 percent in the third quarter. Friday will see the first report on the UK GDP for the third quarter.
The statements showing that Inbound data suggest that the absolute level of rates will be higher than previous expected, How steep to raise the rates is much more important than tempo of stiffening,” and “Stalling is not something we are starting to think about or discussing” all altered the discussion’s dovish tonality to hawkish.
US Midterm Elections Democrats and Republicans will compete for control of the Senate and House of Representatives on Tuesday. In the House of Representatives, there are 435 open seats because each seat is up for reelection every two years. With 221 seats, the Democrats currently hold a slim majority in the House.212 seats are held by Republicans. As a result, in order for Republicans to retake control of the House, they will need to win five more seats in addition to the ones they currently hold. Going into the weekend, polls indicate that the Republicans will win the House.
There are only 35 open seats in the Senate .Republicans currently hold 21 of those seats, while Democrats hold 14 of them .At the moment, the Senate is split 50/50, with Vice President Harris taking the lead when necessary. As a result, Republicans only require a net gain of one seat to take control of the House. President Biden will have a harder time getting his agenda through Congress if Republicans win the House or Senate .The economy, inflation, gun control, and the right to abortion are among the most important concerns of voters.
Earnings Two weeks into the second month of the quarter, earnings season has passed the hump .However, there are still some big names to come, so don’t get too comfortable! Markets will hear from DIS, OXY, AZN, RIVN, AMC, ADSG, NIO, RBLX, and PMPEX this week, in addition to an update from house builders in the UK economic Data
Although the economic calendar is lighter this week, the data we see will be crucial! Later in the week, the most important economic data prints will be released. The CPI for October will be released by the US on Thursday. The headline print is anticipated to decrease slightly to 8% YoY from 8.2% in September .Additionally, it is anticipated that the core rate will decrease to 6.5% from 6.6% in September. Evidently, these two readings are significantly higher than the Fed’s target of 2% inflation. The UK will present its first look at Q3 GDP on Friday.
The expectation for Q2 is -0.5% versus +0.2%, as Bailey hinted. Is there a recession brewing in the UK economy? Additionally, on Friday, the US will deliver the primer perusing for Michigan Customer Feeling for November. The report’s inflation sections will be of interest to the markets. The following economic data are scheduled to be released this week:
Tuesday, China exchange Equilibrium (OCT)
Germany: Manufacturing (SEP) in the UK: Germany’s Halifax House Price Index (OCT):Tuesday US Construction PMI (OCT):Japan’s midterm elections in 2022:Opinions from the BoJ on New Zealand: Expectations for Business Inflation (Q4 EU):US Retail Sales by Sep: Japan: IBD/TIPP Economic Optimism on Nov. Australia: Reuters Tankan Index (NOV)Australia’s Westpac Consumer Confidence Index (NOV):Australia’s NAB Business Confidence (OCT):China’s final building permits (SEP):China’s OCT CPI: Mexico: PPI (OCT)Crude Inventories CPI (OCT) Thursday, Japan: US Orders for Machine Tools (OCT):Mexico CPI (October):Friday’s Interest Rate Decision in New Zealand: Japan’s Business NZ PMI (October):Germany: PPI (OCT):UK’s CPI Final (OCT):Prel (Q3) GDP Growth Rate in the UK: Production Manufacturing (SEP) UK:UK Industrial Production (SEP):The US Trade Balance (SEP):Preliminary Consumer Sentiment in Michigan
The report’s inflation sections will be of interest to the markets. The following economic data are scheduled to be released this week:
Tuesday, China: Exchange Equilibrium (OCT)
Germany :Manufacturing (SEP) in the UK: Germany’s Halifax House Price Index (OCT):Tuesday US Construction PMI (OCT):Japan’s midterm elections in 2022:Opinions from the BoJ on New Zealand: Expectations for Business Inflation (Q4 EU):US Retail Sales by Sep: Japan: IBD/TIPP Economic Optimism on Nov. Australia: Reuters Tankan Index (NOV)Australia’s Westpac Consumer Confidence Index (NOV):Australia’s NAB Business Confidence (OCT):China’s final building permits (SEP):China’s OCT CPI: Mexico: PPI (OCT)Crude Inventories CPI (OCT) Thursday, Japan: US Orders for Machine Tools (OCT):Mexico CPI (October):Friday’s Interest Rate Decision in New Zealand: Japan’s Business NZ PMI (October):Germany: PPI (OCT):UK’s CPI Final (OCT):Prel (Q3) GDP Growth Rate in the UK :Production Manufacturing (SEP) UK:UK Industrial Production (SEP):The US Trade Balance (SEP):Chart of the Week: Michigan Consumer Sentiment Prel (NOV)Amazon (AMZN) Weekly
