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Key events to watch in the week ahead: 30 October – 5 November 2023

What are some of the key events to watch next week?

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This week’s overview

It was another down week for global equities, with the overarching theme still revolving around elevated US Treasury yields, while US big tech earnings failed to impress. Market participants are expecting more than just top and bottom-line beat, with signs of caution around companies’ outlook casting doubts on whether recent earnings momentum can be sustained ahead.

The Nasdaq has fallen into correction territory, as the VIX hovers near its seven-month high. Gold prices managed to shrug off higher bond yields, hanging back below the key psychological US$2,000 level, while on the other hand, oil prices were down for the week, bringing a retest of its Ichimoku cloud on the daily chart.

Heading into the new week, here are five things to note.

US 3Q 2023 earnings season: McDonald’s, Pfizer, AMD, Airbnb, Qualcomm, Starbucks, Apple

The earnings season will continue next week with notable earning releases from McDonald's, Pfizer, Advanced Micro Devices (AMD), Qualcomm, Starbucks and Apple. As of 26 October 2023, 47% of S&P 500 companies have released their financial results, with 78% of them beating earnings expectations.

While this rate of outperformance is above both the 5-year average (77%) and 10-year average (74%), attention is also on the companies’ outlook to determine whether earnings momentum can be sustained ahead.

Earnings Call (in SGT) Source: Refinitiv

31 October 2023 (Tuesday, 11am SGT): Bank of Japan (BoJ) interest rate decision

Wide consensus is for the BoJ to keep short-term interest rate target unchanged at -0.1%, but focus is on whether the central bank will deliver further tweaks to its yield curve control policy (currently at a 1% upper limit) or any other policy adjustment, given the recent rise in Japan’s 10-year government bond yields to its decade high.

With upside surprises in Japan’s core inflation for the third straight month, along with a >20% gain in oil prices since its July meeting, upcoming inflation forecasts are expected to be revised higher.

Hence, attention will also be on whether an upward revision in the inflation forecasts may meet policymakers’ condition of ‘sustainable inflation’ for a policy pivot, although BoJ doves may still tap on the absence of an upward build in wage pressures to argue their case for more wait-and-see.

Japan's average cash earnings and inflation % YoY Source: Refinitiv

2 November 2023 (Thursday, 2am SGT): Federal Reserve (Fed) interest rate decision

At its meeting in September, the Fed decided to maintain the target range for the Fed Funds rate at 5.25%-5.50% and retained its tightening bias.

“The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.”

In recent weeks, several Fed Speakers, including Fed Chair Powell, have sounded more cautious and noted that the rise in longer-term bond yields and tighter financial conditions have reduced the need for further monetary policy tightening.

As such, the market is widely expecting the Federal Open Market Committee (FOMC) to keep the Fed Funds target rate unchanged at 5.25%-5.50% in November. The more cautious shift in tone noted in recent Fed Speak will likely be reflected in softened forward guidance, with the Fed also expected to acknowledge the run of strong economic data.

Fed Funds rate Source: Refinitiv

2 November 2023 (Thursday, 8pm SGT): Bank of England (BoE) interest rate decision

The BoE is expected to keep interest rate unchanged at the upcoming meeting, continuing with the pause in its monetary policy tightening cycle from the September 2023 meeting. Thus far, policymakers have raised rates 14 consecutive times since December 2021, with cumulative 500 basis-point of tightening.

While September UK inflation (headline 6.7%, core 6.1%) is still more than three-fold that of the central bank’s 2% target, the moderating trend in pricing pressures, softer wage growth and still-weak economic conditions may provide reasons for more wait-and-see from policymakers.

Nevertheless, the message that interest rates will stay high-for-longer is likely to be emphasised and market expectations have also been very much aligned, pricing for rate cuts only in September 2024 onwards.

BoE Bank Rate Source: Refinitiv

3 November 2023 (Friday, 8.30pm SGT): US non-farm payrolls

In a speech at the Economic Club of New York Fed last week, Fed Chair Jerome Powell noted that while labour market conditions remained tight, many indicators suggest that the labour market is cooling.

The Fed Chair's comments came just a fortnight after the September Non-Farm Payrolls report showed the US economy added an eye-popping 336k new jobs, almost twice as many as the 170k forecast.

This month, the market is looking for the US economy to add 145,000 jobs in October, while the unemployment rate is expected to remain stable at 3.8%. US wage growth is expected to increase by 0.3% MoM from 0.2% in September, which would see the annual rate fall to 4% from 4.2%.

US non-farm payrolls (3-month rolling average) Source: Refinitiv

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