Financial Market Forecast for October 27-31

Major commodities including gold, silver and crude oil resumed their downward trend, while the U.S. gained some of its losses back from earlier this month. This week the main events will revolve around the before last FOMC meeting for the year and the U.S. GDP for the third quarter first estimate. These two events could bring back a lot of volatility to the financial markets especially if they will come off the current market expectations.  In the U.S. core PCE, durable goods, pending home sales consumer confidence and consumer sentiment reports will also be released. In Europe, ECB stress tests results, German business climate, the flash CPI and unemployment report will come out.  China’s manufacturing PMI and BOJ’s rate decision will be on this week’s agenda. Finally, Canada’s GDP will also be published.  So let’s break down the economic outlook for the week of October 27th to October 31st:

(All times GMT):

Sunday, October 26th

12:00 – ECB Stress Test Results: The ECB will release its bank stress test. This will show which banks passed, which failed, and estimates for new capital requirements. The stress test results will be released for 130 banks, including estimates for new capital requirements;

Monday, October 27th

09:00 – German Ifo Business Climate Index: This index consists of the developments (on a monthly basis) in the manufacturers, builders, wholesalers, and retailers in Germany as of October. In the last report regarding September 2014, the business climate index declined to 104.7 – the current estimates are that the index will inch down to 104.6;

09:00 – Euro Area Monetary Development: This monthly report will pertain to the developments of the M3, M1 and loans to private sector in the Euro area as of September 2014. In the previous August report, the annual growth rate for M3 rose to 2%; M1 also increased to 5.8%. Finally, the annual growth rate of loans to private sector declined to -0.9%. This news suggests the EU inflation is slowly picking up as the growth rate of M1 increased, and loans continue to shrink but at a slower pace;  the current estimates are that M3 rose again to 2.2%;

15:00 – U.S Pending Home Sales: This report shows the changes in pending home sales in the U.S during September; in the previous update for August, pending home sales index decreased by 1% (month-over-month). This report is another signal for the changes of the U.S housing market; if the index bounces back, it may positively impact the U.S dollar;

Tuesday, October 28th

13:30 – U.S Core Durable Goods: This monthly report regarding September will indicate the developments in U.S demand for commodities including oil and gas. As of August 2014, new orders of manufactured durable goods declined to $244.7 billion – a 18.4% drop compared to July; if this report shows growth in new orders, then it could pull up the USD;

15:00 – U.S Consumer Confidence: According to the last report for September, the consumer confidence index fell to 86, which suggests the consumer spending is slowing down. The current estimates are for a modest gain so the index picked up to 87.4;

Wednesday, October 29th

19:00 – FOMC Meeting and Press Conference: This will be the penultimate meeting for the year. The current expectations are that the FOMC will keep its policy on track and end QE3 and eliminate the last $15 billion a month purchase program. The recent interview of Bullard raised the possibility of the FOMC holding off the last taper. But this scenario, for now, seems very unlikely. One other issue to look for is whether the FOMC will drop the “considerable time” phrase from its statement. In this meeting, there isn’t a press conference so it’s more likely that the FOMC will hold off any major changes until the last meeting of the year. If the tone of the press remains slightly more hawkish, this could drag down gold and silver prices;

21:15 –BOC Governor Poloz Speaks: The Governor is due to testify, along with Senior Deputy Governor Carolyn Wilkins, before the Senate Standing Committee on Banking, Trade, and Commerce, in Ottawa;

15:30 – U.S Crude Oil Stockpiles Weekly Report: The Energy Information Administration will publish its weekly update on the U.S oil and petroleum stockpiles for the week ending on October 24th;

Thursday, October 30th

Tentative – Germany’s Preliminary CPI: In the last CPI report for September 2014, the CPI remained flat. This time the expectations are for the CPI to inch down by 0.1%;

13:30 – First U.S GDP 3Q 2014 Estimate: This will be the first estimate of U.S’s third quarter 2014 real GDP growth. The first estimate tends to have the strongest impact on the financial market. In the last estimate the U.S GDP grew by 4.6% in the second quarter of 2014. If the US gross domestic product doesn’t pick up, this could negatively affect not only the US dollar but also commodities prices; the current estimates are for the GDP to grow by 3.1%;

13:30 – U.S. Jobless Claims Weekly Report:  This weekly report will refer to the changes in the initial jobless claims for the week ending on October 24th; in the last report the jobless claims picked up to 283K;

14:00 –FOMC Chair Yellen Speaks: Janet Yellen is expected to deliver opening remarks at the Board of Governors of the Federal Reserve System’s National Summit on Diversity in the Economics Profession, in Washington DC;

15:30 – EIA U.S. Natural Gas Storage: The EIA weekly report of the U.S. natural gas market will refer to the latest shifts in natural gas production, storage, consumption and prices as of October 24th;

00:30 – Australia PPI: In the last PPI report for the second quarter, the PPI inched down by 0.1%;

Friday, October 31st

Tentative – Japan’s rate decision and press conference: In the forthcoming Japanese monetary policy meeting, BOJ members will announce of any shifts to the bank’s current asset purchase program. This decision may impact the Japanese yen;

06 – BOJ’s Outlook Report: This is a biannual report that is released on April and October. It sums up Bank of Japan’s forecast for the Japanese economy; based on this outlook, it could provide some indication about the future steps of BOJ;

07:00 – Germany’s Retail Sales: In the latest report for September 2014, retail sales rose by 2.5%; this month’s estimates are for a drop of 0.8%;

10:00 – EU CPI Flash Estimate: This index estimates the yearly consumer price index of the Euro Area. According to the previous estimate for September, the annual CPI remained flat at 0.3%. The core CPI edged down to 0.7%. In either case, it’s well below the ECB’s target inflation of 2%. If the inflation rate doesn’t puck up, this could indicate the EU economy isn’t improving. The current estimates are for the inflation to edge up to 0.4% and the core CPI to rise to 0.8%;

10:00 – EU Unemployment Rate: Last month’s update presented that the rate of unemployment didn’t change at 11.5%. This figure suggests the labor market in the Euro Area isn’t progressing;

13:30 – Canada’s GDP by Industry: This monthly report presents the changes in major industrial sectors for August 2014. In the last update regarding July 2014, the real gross domestic product remained flat; the current expectations are for the GDP to remain unchanged again;

13:30 – U.S. core PCE: The personal consumption expenditures index is another measure the FOMC follows to assess the progress of the inflation. In the last update, the price index of the PCE rose by 0.5% and the core PCE (excluding food and energy) edged up again by 0.1%. On an annual rate, the core PCE rose by only 1.5%;

14:55 – UoM Consumer Sentiment (revised): University of Michigan will publish its revised consumer sentiment monthly report; this survey could provide information regarding the changes in U.S consumers’ sentiment; according to the recent update, the sentiment index increased again to 84.6;

02:00 – China Manufacturing PMI: As of August, the Manufacturing PMI remained flat at 51.1 – i.e. China’s manufacturing sectors are growing at a slow pace. Analysts estimate China’s PMI didn’t change in the past quarter again;

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