FAANG & Central Banks!
In the week ahead, central banks in Europe, Canada, and Japan will have a monetary policy meeting. On the earnings front, tech giants such as Microsoft, Apple, Meta, Alphabet, and Amazon will be at the center of attention. On the geopolitical front, tensions in Ukraine, chaos in the UK government, and the ongoing revolution in Iran will be the most important subjects to be followed.
1- PMI day – Monday
EU, some European countries, the UK, and the United States will publish their purchasing manager index numbers. Given the weakness seen in both Service and manufacturing sectors, Eurozone Composite October PMI is expected to have declined. Same in the UK, the October Services PMI in the UK is expected to contract to 49.6. In the US, manufacturing PMI is due to decline to 51.1, while the service sector is expected to have serious warnings with a sharp decline to 45. The effect of these expected data will be nothing but more weakness in stock markets.
2- Bank of Canada – Wednesday
The Bank of Canada policymakers are expected to raise the rates further, but at a slower pace than before. Inflation started to slow down, economic indicators have clearly softened in recent months, Employment declined and September monthly GDP data point to a clear slowing in the pace of growth, therefore it is normal to see the slowdown in tightening measures to study the results of the decisions made so far. However, the expected 50-basis point rate hike decision will put the Canadian dollar in a weaker position.
3- European Central Bank- Thursday
Unlike BoC, the European Central Bank is expected to continue with its forceful pace of monetary tightening. Inflation in Eurozone has still no sign of softening, therefore, even if the economy in Eurozone potentially already contracting, to return inflation closer to its 2% target, there is no way for ECB to increase the interest rates by at least another 75 bps to 1.50%. It is also expected that policymakers start to plan to reduce the size of the European Central Bank’s balance sheet. These expected monetary policies are supposed to help the Euro to regain some of its early losses.
4- Bank of Japan – Friday
BoJ’s Interest Rate Decision, Statement, and Conference will be held on Friday. Even if the 20-year government bond yield rose to a new high and challenged the central bank’s ultra-easy policies and BoJ conducted emergency bond-buying operations for a second time, still, we are not expected to see any changes in the monetary policies, which are supposed to support the stock markets and hold the pressures on Yen, especially against Euro.
5- US Personal Income & Spending – Friday
Before Friday’s data, we are expecting to see consumer confidence remain under pressure and decline to 104.1. However, since the average income also was increasing in line with inflation, we expect to see continued resiliency in spending and forecast real personal consumption expenditures even rose by 0.1%, and the PCE price index in September compared with October, is expected to decline by 0.1%. These data mean that economic conditions are in line with the Central Bank’s predictions, which is positive news for US stock markets.
6- Earnings of the week
Google, Visa, 3M, Spotify, and Coca-Cola will report their Q3 earnings on Tuesday. On Wednesday Microsoft, Facebook, Boing, CME Group and Ford motors will release their earnings. On Thursday, Apple, Amazon, Mastercard, McDonald’s, Honeywell, and Intell will be in the spotlight. Exxon Mobil and Chevron also are the most known companies to publish their earnings on Friday.
