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Besides the Q3 GDP releases from US and UK, the week will also be filled with manufacturing data and more Q3 earnings reports.
A stronger US Q3 GDP expected
We are less than two weeks away from the next Fed FOMC meeting and less than three weeks away from the highly anticipated US Presidential elections. There have certainly been strong Fed hike expectations brewing, unabated by pockets of disappointing high frequency data. Although we have already seen many of these high frequency indicators, the first estimate of the US Q3 GDP due Friday, 28 October 2016, may still create a ripple in markets. A modest improvement in growth has been expected at 2.5% QoQ, up from 1.4% QoQ in Q2.
Should growth exceed expectations, the ensuing rally in the dollar will be quite a sight. The dollar index was last seen firmly breaking above 98.000 level, reminiscing of the levels seen ahead of the previous hike into the end of 2015. The current probability assigned to a November and December hike sits at 17.1% and 67.6% respectively and December remains the most likely period for the next hike.
Q3 earnings reports to keep up the momentum?
Q3 earnings reporting have also reached somewhat of a terminal velocity, streaming in by the pocketful. We have seen good results thus far from banks and a couple of technology companies that have supported the S&P 500 index rally. The week ahead will reveal some of the hot favourites including Apple Inc. Twitter Inc. and Amazon.com Inc.
Specifically for Apple, a Bloomberg poll of analysts shows 81.5% calling for buy, reinforcing the strong confidence in Apple ahead of their earnings reporting. Looking at the consumer goods sector, 16 of the total 62 companies that has reported thus far presented a spectacular record with 81% of companies exceeding analysts’ expectations. The share, which has been doing relatively well since Samsung took a dive due to its latest Note 7 woes, could receive another boost from revealing another “revolutionary product” in their “Hello Again” keynote on Thursday.
A slew of PMI data is also expected to come in on Monday. Belonging to the forward looking set of indicators, the US and Eurozone flash PMI will shed light on the manufacturing sector at the start of October. No change has been expected for US PMI which was last seen at 51.5 in September. Although we are not expecting a strong reaction by the markets, the data provided will be an interesting outlook into the final quarter of 2016.