The FTSE 100 is trading lower by approximately 25 points this morning as a potentially major week for the markets begins. The pound is slightly softer too and remains below the 1.22 handle against the US dollar.
Domestic or international news to take precedence?
The week ahead lies jam-packed with potentially major economic news from both within the UK and abroad, with several scheduled events having the potential to drive the markets going forward. From a domestic point of view there is the set of surveys amongst purchasing managers regarding the economic conditions seen in October, which is seen by many as a leading indicator of the overall health of the economy. The manufacturing PMI sets the ball rolling tomorrow before we have the construction equivalent the following day, after which arguably the biggest release of the three arrives on Thursday when the Services PMI is published.
Uptick in inflation to impact BoE decision making?
Later on Thursday we also get the conclusion of the latest Bank of England meeting to set monetary policy which, in part due to the stronger PMI readings in the past couple of months, is expected to be announced as unchanged. The quarterly inflation report from the central bank is also released simultaneously at midday, with any indication of upward pressure on prices having the potential to cause an unwanted headache for Governor Carney and the MPC at a point in time when contractionary policies are deemed highly undesirable. The future of Mr. Carney himself will also become clearer this week with the Canadian expected to announce whether his term will run the full eight years or he’ll opt out early after five, which could see him leave the post in 2018 during the negotiation period on the terms of Brexit.
Miners sensitive to Asia-Pacific data
Due to the large weighting of mining stocks on the FTSE 100 whilst traders in London are asleep tonight, there could be some major events unfolding that could lead to an interesting open on Tuesday. First off we have the latest Chinese manufacturing data for October out, with the official figures scheduled for release at 1am and the private Caixin reading out 45 minutes later. Before Europe re-opens in the morning there are also two central bank rate decisions from Australia and Japan and whilst neither is expected to make any major tangible alterations to their policy, with these events the devil can be in the detail and they represent fairly substantial potential event risks. Ahead of this the sector has got off to a fairly solid start with Antofagasta (LON:ANTO), Anglo American (LON:AAL) and Glencore (LON:GLEN) all rising so far today.
Fed to stand pat?
Despite Federal Reserve Chair Janet Yellen’s protestations, many market participants believe the US central bank highly unlikely to raise rates this week largely due to the proximity of the presidential election. In addition, the absence of a press conference following the decision - seen by some as a prerequisite to any major policy changes as it would allow Chair Yellen to elaborate and explain in more detail any moves - has led to a consensus view that the US central bank will wait until December rather than acting this Wednesday. Before the meeting concludes there’s US manufacturing data out and Friday sees the most widely followed jobs report released. The non-farm employment change is expected to come in around 175k for this month and if it does match forecasts, this would represent a fifth consecutive strong reading of 150k+ after the aberration seen in May’s numbers.
With all these events occurring this week plus the ongoing will-they-won’t-they saga surrounding a production cut from OPEC, there is sure to be a lot to keep traders busy as we enter what has historically been the best six-month period of the year for the stock market.