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In the upcoming week, the key event is the US FOMC, though we and the consensus do not expect any key decisions to be taken. Though a strengthening of forward guidance is still possible, virtually nobody expects anything of import to be announced until the Dec meeting. In the upcoming week we also have five more central bank meetings in addition to the FOMC: Japan, New Zealand, India, Hungary and Israel. In Hungary we, in line with consensus, expect a 20bps cut to 3.40% in the policy rate. In India consensus expects a 25bps hike in the repo rate to 7.75%.

On the data front, US IP, retail sales and pending home sales are worth a look, but the key release will be the ISM survey at the end of the week, together with manufacturing PMIs around the world. US consumer confidence is worth a look, given the potential impact from the recent fiscal tensions.

A few other selected data releases are worth some attention. For example the latest Turkish trade numbers are relevant in the context of large external deficits in that country. Japanese wage data are interesting given the BoJ attempt to change inflation expectations. Finally, the Korean trade data will be the first hard data released globally for the month of October.

Monday, Oct 28

• Israel MPC: GS and consensus have policy rate unchanged. The housing boom continues to be a constraint on further monetary easing and a rate cut will arguable only have a limited impact on the exchange rate at this point.
• Australia RBA Governor speaks
• US IP (Sep): Consensus +0.4%, previous +0.4%
• US Pending Home Sales (Sep): Consensus -0.2%, previous -1.6%
• Japan Retail Sales (Sep): Cconsensus +1.8%yoy, previous +1.1%yoy
• Japan Household Spending (Sep): Consensus +0.5%yoy, previous -1.6%yoy
• Japan Unemployment Rate (Sep): Consensus 4.0%, previous 4.1%
• South Korea CA Balance (Sep): previous $+6.8bn
• Also interesting: Italy Business Confidence (Oct), Ukraine CA Balance (Q3)

Tuesday, Oct 29

• India MPC: consensus expects a hike of 25bps in repo and reverse repo rates to 7.75% and 6.75% respectively and has cash reserve ratio unchanged at 4.00%.
• Hungary MPC: Consensus expect a cut of 20bps to 3.40% in the policy rate
• US Consumer Confidence (Oct): Consensus 75.0, previous 79.7
• US PPI (Sep): Consensus +0.2%, previous +0.3%
• US Retail Sales (Sep): Consensus +0.1%, previous +0.2%
• US S&P Case Shiller Home Price Index (Aug): consensus +0.5%, previous +0.6%
• Japan IP (Sep): Consensus +1.8%mom, previous -0.9%mom
• Germany GFK Consumer Survey (Nov): previous +7.1
• France Consumer Confidence (Oct): previous 85
• South Korea IP (Sep): Previous +3.3%yoy
• Also interesting: UK Consumer Credit (Sep) and Mortgage Approvals (Sep)

Wednesday, Oct 30

• US FOMC: GS and consensus expect no change in monetary policy tools
• New Zealand MPC: Consensus have policy rate unchanged at 2.50%.
• US ADP Employment Change (Oct): consensus 160K, previous 166K
• US CPI (Sep): Consensus +0.2%, previous +0.1%
• Euro Area Consumer Confidence (Oct, final): consensus -14.5, previous -14.5 (flash)
• Germany Harmonized CPI (Oct, flash): previous +1.6%yoy
• Germany Unemployment Change (Oct): consensus flat, previous +25K
• Brazil IGP-M Inflation (Oct): GS +5.40%yoy, consensus +5.32%yoy, previous +4.40%yoy
• Also interesting: Ukraine GDP (Q3, prelim.), Spain GDP (Q3) and CPI (Oct, flash)

Thursday, Oct 31

• Japan MPC: GS and consensus expects no change in monetary policy stance. We also expect a small upward revision to growth in the published bi-annual outlook report
• Japan Total Cash Wages (Sep). GS -0.6%yoy, consensus -0.3%yoy, previous -0.9%yoy
• US Initial Jobless Claims: consensus 340K, previous 350K
• US Chicago PMI (Oct): GS 55.0, consensus 55.0, previous 55.7
• Euro Area Harmonized CPI (Oct, flash): GS +1.1%yoy, consensus +1.1%yoy, previous +1.1%yoy
• UK GFK Consumer Confidence (Oct): consensus -8, previous -10
• South Africa Trade Balance (Sep): consensus ZAR-16.0bn, previous ZAR-19.1bn
• Turkey Trade Balance (Sep): consensus $-7.30bn, previous $-7.02bn
• Thailand CA Balance (Sep): previous $+1.3bn
• Taiwan GDP Advance (Q3): consensus +2.5%yoy, previous +2.5%yoy
• South Korea CPI (Oct): Consensus +1.0%yoy, previous +0.8%yoy
• Also interesting: Australia Building Approvals (Sep) and Private Sector Credit (Sep), France Consumer Spending (Sep), Hungary Trade Balance (Aug, final), Switzerland FX Reserves (Q3)

Friday, Nov 1

• US Fed Speakers: Bullard (FOMC voter), Kocherlakota (non-voter), Lacker
• US ISM Survey (Oct): Consensus 55.0, previous 56.2
• US Motor Vehicles Sales (Oct)
• China PMI (Oct): Previous 51.5yoy
• UK Manufacturing PMI (Oct): consensus 56.4, previous 56.7
• Brazil Trade Balance (Oct): Consensus $+1.35bn mom, previous $+2.15bn mom
• Sweden Manufacturing PMI (Oct): consensus 54.5, previous 56.0
• Czech Republic Manufacturing PMI
• Switzerland Manufacturing PMI (Oct)
• Indonesia Trade Balance (Sep): consensus $-48mn yoy, previous $+132mn yoy
• Thailand CPI (Oct): GS +1.4%yoy, consensus +1.5%yoy, previous +1.4%yoy
• Also interesting: Mexico Workers Remittances (Sep), Peru CPI (Oct), South Korea Trade Balance (Oct), Russia Manufacturing PMI (Oct)

And from SocGen, a summary of the key investor issues:

NO FED TAPER … BUT BETTER DATA

We expect to see no change from the 28-29 October FOMC. Better data, however, will be a reminder to markets that Fed taper is delayed, not cancelled. We look for a 0.7% mom gain in September industrial production and while the headline retail sales number is likely to clock in at a fairly moderate 0.2% mom, ex-autos we look for 0.9%. We put the odds of a December tapering announcement at 5%, January at 30% and March at 60%.

BOJ HOPING FED WILL TAPER SOONER…

The BoJ presents new growth and inflation forecasts at this week’s meeting and our expectation is that there will be little change. Recent yen appreciation, however, presents a challenge to the BoJ. The BoJ is already purchasing around 70% of JGB issuance and the concern is that this is close to the limit of what is feasible. No doubt, the BoJ is hoping that the Fed will taper sooner rather than later, allowing the yen to resume a depreciation path. At that time, the BoJ could hope that even a small increase in its asset purchases (most likely to be ETFs) could have a greater impact. This week, however, we expect the BoJ to remain on hold and  keep its powder dry.

…RBI THAT IT WON’T!

The delay of Fed tapering has allowed the INR to stage an appreciation of 10% against the US dollar from recent lows. This is helpful to the RBI, facing a near stagflation situation of runaway inflation and slowing growth. We expect the RBI to take this window of opportunity and hike rate 25bp on Tuesday (and perhaps even 50bp). Our expectation that the Fed will taper in Q1 means that any respite for the INR is likely to prove short-lived. Moreover, weak domestic data will mark an additional headwind. Ultimately, it is up to the government to implement desperately needed supply side reforms. The hope is that after the spring 2014 general election, the next government will indeed deliver.

CHINA POLICY TIGHTENING CREEPING BACK

< p>We expect the official manufacturing PMI to decline to 50.8 from 51.1 in September. Interestingly, policy appears to be shifting back to risk management; the PBoC has withdrawn liquidity for two weeks and big cities are tightening restrictions on the property market again.

ECB LENDING SURVEY TO SHOW SLOW REPAIR

The ECB’s quarterly bank lending survey (Wednesday) is set to confirm an only very gradual improvement of the financial fragmentation still plaguing the periphery. As we detailed last week in our new Focus Banking Union report, we see significant potential wins from banking union. Last week, the ECB presented the comprehensive assessment that will pave the way for the Single Supervisory Mechanism (SSM) to come into effect in November 2014. An effective European Banking Union requires that the Single Resolution Mechanism (SRM) also be in place. The hope is to have this in place before the current legislative period ends as the European Parliament heads to elections in May 2014

Source: Goldman, SocGen

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Just as it is easy being a weatherman in San Diego (“the weather will be… nice. Back to you“), so the same inductive analysis can be applied to another week of stocks in Bernanke’s centrally planned market: “stocks will be… up.” Sure enough, as we enter October’s last week where the key events will be the conclusion of the S&P earnings season and the October FOMC announcement (not much prop bets on a surprise tapering announcement this time), overnight futures have experienced the latest off the gates, JPY momentum ignition driven melt up.

There was not much in terms of newsflow: in China SHIBOR rates continued to creep up, albeit more slowly, with the O/N and 1 Week rates barely changed, however the 2 Week Shibor got the bulk of the upward brunt rising 53.4 bps as concerns about when the PBOC will proceed with another reverse repo liquidity injection mount. The lack of enthusiasm was evident in the SHCOMP which was up 0.04% following last week’s drubbing even if the Baltic Dry, which has now entered a bear market, indicates more liquidity driven pain may be in stock. Elsewhere in Japan, on the one year anniversary of Abenomics, where the only “improvements” are the plunging Yen and purchasing power, soaring energy and food input costs, and of course, a rising Nikkei225 offset by stagnant and declining wages,  the Nikkei rose on the follow through of Friday’s US meltup and was up 2.19% nearly offsetting all of Friday’s 2.75% losses.

Not much news out of Europe either, where the only notable development was Italian business confidence which rose to 97.3 on expectations of a 96.0 print, a two year high. At the same time the 1Y1Y Eonia jumped to as much as 39.14 bps from 37.5 bps as the ECB’s excess liquidity continued to drop and touched its lower level since December 2011. At this point – and with the EURUSD at an export-busting 2 years high as well – it will soon be incumbent on Draghi to start jawboning for more liquidity and a lower Euro as happened early in the  year.

On the US docket, we have the NAR’s pre-adjustment pending home sales data, as well as September’s delayed Industrial production. On the micro side, about a quarter of the S&P 500’s market cap are due to report this week including a number of heavy weights such as Exxon Mobil, Berkshire Hathaway, Chevron, General Motors and ConocoPhillips, with Apple set to print after the close today.

Market Recap from Bloomberg and RanSquawk

• Treasuries steady before week’s auctions begin with $32b 2Y notes today, FOMC two-day policy meeting begins tomorrow; 10Y yields have held near 2.50% level after last week’s weak payrolls data pushed Fed taper expectations to at least March 2014.
• 2Y notes to be sold today yield 0.325% in WI trading; drew 0.348% in September. June’s stopout of 0.43%, which came amid expectations for  imminent taper announcement, was highest since May 2011
• The Bank of Japan will continue to buy bonds until it achieves its 2% inflation target as the country’s monetary and fiscal policies are at a critical point for ending deflation, Deputy Governor Iwata said yesterday
• Japan’s Abe warned he wouldn’t permit China to use force to resolve territorial spats, as the renewed presence of Chinese aircraft near disputed islands led its neighbor to dispatch fighter jets
• China’s yuan traded within 0.1% of its 20-year high on speculation the PBOC is allowing the currency to strengthen to curb inflation
• Britain risks repeating the debt-fueled binge that led to the credit crisis as the government relies on a hair-of-the- dog remedy for the economy, said former Financial Services Authority Chairman Adair Turner
• The troubled roll-out of the Obama administration’s health- care overhaul faced mounting problems when a key computer service failed yesterday, two days after the government said its insurance exchange website would take another month to function smoothly
• Sovereign yields mostly higher, EU peripheral spreads tighten. Nikkei +2.2%, leading Asian equities higher; European stocks mostly higher, U.S. equity-index futures rise. WTI crude, gold and copper gain

Deutsche Bank’s Jim Reid concludes the overnight round up:

We’re set for a deluge of another kind this week as data blows in from all corners as we enter the last few days of the month and play catch-up from the US shutdown. Payrolls won’t come out on the first of the month though (which it usually would this Friday) and has been delayed a week. Outside of the data, we also have a Fed meeting that should be relatively uneventful but there’s always scope for the nuance of the statement to change. Indeed, the statement will be all there is this month in the absence of a post-meeting press conference from Bernanke.

Asian equities have started the week on the front foot. The strong close to US trading on Friday, where the S&P500 forged another record high, is helping sentiment this morning. The Nikkei (+1.8%) is erasing most of it’s losses from last Friday when it closed down 2.75%. We’re also seeing firmer sentiment across the Hang Seng (+0.5%) and KOSPI (+0.4%). Elsewhere Chinese interbank rates continue to climb, rising to 5.03% today or an increase of 40bp, but still remain well below the spike seen in June. Chinese A-shares are underperforming again this morning (-0.6%). On a longer time scale, Chinese A-shares are one of the only major Asian equity markets, together with India, which are still trading in negative territory on a YTD basis.
Continuing with China, as we mentioned on Friday, there has been increasing chatter of wide-spread financial and economic reforms being explored in advance of next month’s 3rd plenary meeting of the Chinese government, and this was repeated by both government officials and domestic media over the weekend. In the FX market, both USDJPY and AUDUSD are higher to start the week, the former helped by BoJ deputy governor Iwata who reiterated the central bank’s commitment to achieve its inflation targets. As we go to print, US 10yr yields are a touch higher (+1bp) at 2.52% reflecting the stronger risk sentiment to start the week.

This week’s unusually heavy US data docket starts with September industrial production and pending home sales later today. This will be followed tomorrow by September retail sales, PPI and the conference board’s consumer confidence index for October. While we won’t be getting payrolls this week, the ADP employment report on Wednesday will provide an important indicator of hiring activity. The September CPI report and FOMC’s  post-meeting policy statement are also scheduled for Wednesday. Delving deep into the latter half of the week, initial jobless claims and the Chicago PMI for October will be the  main focus on Thursday. The latter may show the extent of slowdown in manufacturing activity as a result of the government shutdown, as may the ISM manufacturing report for October which is due on Friday. Fed officials will exit blackout the day after the FOMC meeting when Bullard, Kocherlakota and Lacker are due to speak at various forums. On the micro side, about a quarter of the S&P 500’s market cap are due to report this week including a number of heavy weights such as Apple, Exxon Mobil, Berkshire Hathaway, Chevron, General Motors and ConocoPhillips. More than US$90bn of 2s/5s/7s treasury supply is scheduled across the week.

Something to also look out for this week is the re-opening of congressional budget talks in the US via the convening of the bipartisan House-Senate budget committee on Wednesday. The committee is due to report back to Congress by December 13th on a budget resolution. Democrats are seeking  to boost spen
ding higher than the $967 billion sequestration level that goes into effect early in 2014. Senate Majority Leader Harry Reid and other top Democratic leaders refuse to trade sequestration cuts, for cuts to other spending programs, such as Medicare or Medicaid — unless Republicans agree to raise revenue.

In Europe, we have a lighter data schedule this week. French consumer confidence and retail sales are due out tomorrow, followed up by Spanish Q3 GDP (where a gain is expected by the market in Q3 after 9 consecutive falls) and German unemployment on Wednesday. Eurozone unemployment and inflation data are due on Thursday. In Germany, Merkel’s CDU bloc will continue talks with the Social Democrats with the aim of forming a coalition government. The bond market will also see new supply in the form of Italian 10yr linkers (today) and new 5/10yrs (Wednesday) throughout the week. About one-fifth of the Stoxx600 will report earnings this week including a number of the large financial institutions such as UBS, Barclays and RBS. We may hear more about the potential for a split of RBS between a good bank and a bad bank which have been widely discussed by the financial media during recent weeks. Staying in the UK, a speech from the BoE’s Mark Carney is scheduled for Thursday.

In Asia, China’s official manufacturing PMI reading is the major data release (Fri) together with the final HSBC manufacturing PMI the same day. Consensus is expecting the official PMI to increase by 0.1pt to 51.2. In Japan, the BoJ’s monetary policy meeting is scheduled for Thursday. Data releases include employment, retail sales (Tues) and industrial production (Wed). So a fairly busy week.

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