Take Five: Rate cuts and politics, say no more
Oct 4 (Reuters) -It's a packed week ahead with U.S. inflation data, the start of Q3 earnings, a French budget and possibly a big rate cut from New Zealand.
Investors are also on edge as Middle East tensions escalate, while Japan's new Prime Minister Shigeru Ishiba is in the spotlight.
Here's all you need to know about the week ahead in global markets from Lewis Krauskopf in New York, Yoruk Bahceli in Amsterdam, Karin Strohecker and Amanda Cooper in London and Kevin Buckland in Tokyo.
1/ ONE YEAR OF WAR
One year on from Hamas' Oct. 7 attack on Israel and the region looks on the brink of a sprawling war that could potentially reshape the oil-rich Middle East.
The conflict, which has killed more than 42,000 people, the vast majority in Gaza, is spreading. Israeli troops are now in neighbouring Lebanon, home to Iran-backed Hezbollah; Iran launched a large scale missile attack on Israel earlier this week.
Global markets have remained broadly unfazed. Oil prices, the main conduit for tremors further afield, have jumped about 8% this week, but soft demand and ample supply globally have kept a lid on gains. A further escalation between Iran and Israel could change that, especially if Israel strikes Iran's oil facilities, an option that U.S. President Joe Biden said was under discussion.
The scars of the conflict are visible on Israel's economy, which has suffered a number of sovereign downgrades and seen its default insurance spike and bonds slide.
2/ BUSY TIMES
U.S. third-quarter earnings season is about to kick into gear, posing a test for a stock market near record highs and trading at elevated valuations.
JPMorgan Chase JPM.N, Wells Fargo WFC.N and BlackRock BLK.N report on Friday. Other results earlier in the week include PepsiCo PEP.O and Delta Air Lines DAL.N. S&P 500 companies overall are expected to have increased Q3 earnings by 5.3% from a year earlier, according to LSEG IBES.
Thursday's September U.S. consumer price index, meanwhile, will be closely watched for signs that inflation is moderating.
Investors are already anticipating hefty rate cuts, after the Federal Reserve kicked off its easing cycle last month.
Elsewhere, investors will seek to gauge the economic fallout from a dockworker strike as U.S. East Coast and Gulf Coast ports reopened on Thursday.
3/ A RECKONING
France's new government presents its long-awaited budget to parliament on Thursday. It's planning a 60-billion-euro belt-tightening drive, around 2% of GDP, next year.
It reckons spending cuts and tax hikes should bring the deficit, seen rising to 6.1% this year in the latest upward revision, to 5% by end-2025. The target date for reaching the euro zone's 3% deficit limit is also being pushed back to 2029 from 2027.
That's bad news just ahead of rating reviews kicking off with Fitch next Friday.
Markets are not impressed. Having eased slightly, the extra premium France pays for its 10-year debt over Germany's widened back to just under 80 bps, near its highest since August.
Ultimately, what may matter more is whether Prime Minister Michel Barnier can pass the budget, given a divided parliament that has investors questioning how long his government will last.
4/ FEELING SHEEPISH
A reluctant joiner to global easing, the Reserve Bank of New Zealand is catching up fast.
It meets on Oct. 9 and traders reckon the central bank could follow the Fed's example and cut rates by half a point.
The RBNZ cut rates by 25 bps to 5.25% in August, a year ahead of its own projections.
Markets price in a drop below 3% by end-2025. This will still be above where traders think U.S. and euro area rates will be.
Shorter-term investors are neutral towards the kiwi, but hedge funds have lapped it up this year.
Positioning and potentially higher rates than others might insulate New Zealand's currency. So could the return of so-called carry trades and in this case, essentially a bearish bet on the yen in favour of bullish ones on high-yielders such as the kiwi.
5/ POLL POSITIONING
When Shigeru Ishiba surprised markets by winning the contest to become Japan's prime minister, investors rushed to re-position themselves for higher interest rates.
A week on and the landscape looks different, as Ishiba back-flipped not just on monetary policy, but on prior market-unfriendly support for higher corporate and capital gains taxes.
It's perhaps not surprising for a hawk to hide his talons with a snap election looming on Oct. 27.
Even so, Ishiba was unabashedly blunt, saying after a meeting with the Bank of Japan - whose independence Ishiba has pledged to honour - that the economy is not ready for further rate hikes.
The yen, which had been surging, slid past 147 to a six-week trough by Thursday. Japanese stocks rebounded from their steepest slide since early August.
Check back in a month from now for any further policy flip-flops.
Q3 earnings seen positive for most S&P 500 sectors https://reut.rs/3Bv5SNg
Oil price wary amid prospects of war escalation https://reut.rs/3zM4k0O
France's budget gap seen coming in double the EU's limit https://reut.rs/4eRTyoJ
Japan PM's policy flip-flop https://reut.rs/4dzuD86
New Zealand's inflation and interest rate https://reut.rs/4eLyfFc
Graphics by Kripa Jayaram, Pasit Kongkunakornkul, Vineet Sachdev; Compiled by Dhara Ranasinghe; Editing by Sonali Paul
Mga Kaugnay na Asset
Pinakabagong Balita
Disclaimer: Ang mga kabilang sa XM Group ay nagbibigay lang ng serbisyo sa pagpapatupad at pag-access sa aming Online Trading Facility, kung saan pinapahintulutan nito ang pagtingin at/o paggamit sa nilalaman na makikita sa website o sa pamamagitan nito, at walang layuning palitan o palawigin ito, at hindi din ito papalitan o papalawigin. Ang naturang pag-access at paggamit ay palaging alinsunod sa: (i) Mga Tuntunin at Kundisyon; (ii) Mga Babala sa Risk; at (iii) Kabuuang Disclaimer. Kaya naman ang naturang nilalaman ay ituturing na pangkalahatang impormasyon lamang. Mangyaring isaalang-alang na ang mga nilalaman ng aming Online Trading Facility ay hindi paglikom, o alok, para magsagawa ng anumang transaksyon sa mga pinansyal na market. Ang pag-trade sa alinmang pinansyal na market ay nagtataglay ng mataas na lebel ng risk sa iyong kapital.
Lahat ng materyales na nakalathala sa aming Online Trading Facility ay nakalaan para sa layuning edukasyonal/pang-impormasyon lamang at hindi naglalaman – at hindi dapat ituring bilang naglalaman – ng payo at rekomendasyon na pangpinansyal, tungkol sa buwis sa pag-i-invest, o pang-trade, o tala ng aming presyo sa pag-trade, o alok para sa, o paglikom ng, transaksyon sa alinmang pinansyal na instrument o hindi ginustong pinansyal na promosyon.
Sa anumang nilalaman na galing sa ikatlong partido, pati na ang mga nilalaman na inihanda ng XM, ang mga naturang opinyon, balita, pananaliksik, pag-analisa, presyo, ibang impormasyon o link sa ibang mga site na makikita sa website na ito ay ibibigay tulad ng nandoon, bilang pangkalahatang komentaryo sa market at hindi ito nagtataglay ng payo sa pag-i-invest. Kung ang alinmang nilalaman nito ay itinuring bilang pananaliksik sa pag-i-invest, kailangan mong isaalang-alang at tanggapin na hindi ito inilaan at inihanda alinsunod sa mga legal na pangangailangan na idinisenyo para maisulong ang pagsasarili ng pananaliksik sa pag-i-invest, at dahil dito ituturing ito na komunikasyon sa marketing sa ilalim ng mga kaugnay na batas at regulasyon. Mangyaring siguruhin na nabasa at naintindihan mo ang aming Notipikasyon sa Hindi Independyenteng Pananaliksik sa Pag-i-invest at Babala sa Risk na may kinalaman sa impormasyong nakalagay sa itaas, na maa-access dito.
