Macroeconomics: The Day Ahead for 22 October

Today’s data run is unlikely to generate much market reaction, but a raft of ECB and BoE speakers, the IMF’s latest World Economic Forecasts update, and a busy run of corporate earnings will garner plenty of attention. Statistically there is just the UK PSNB budget data and Canada’s PPI. Corporate earnings highlights include: Enagas and Saab in Europe, while the US looks to GE, GM, Kimberly-Clark, Philip Morris, Seagate, Texas Instruments and Verizon. For much of this year, the various supranational forecasting institutions have been upgrading forecasts for global growth, and some major economies, but today’s IMF forecasts may see a marginal downgrade to global growth forecasts from July’s 3.2% y/y for 2024 and 3.3% for 2025. While the UK may see an upward revision, the Eurozone may see a downgrade, while it has already said that it is lowering its US 2024 GDP forecast by 0.1 ppt 2.6%. Much will ultimately depend on whether it incorporates any boost from the latest round of stimulus measures in China. Of some note too will be its adjustments to global trade growth, probably lower, and inflation. Markets remain in any case rather more focussed on election risks in the US and Japan, rate divergence between the US and the rest of the G7 that has prompted the sharp turnaround in US yields, a myriad of geopolitical risks, and the Q3 earnings season around the world. Yesterday’s run of Fed speakers served to reinforce a slower glide path lower for US rates, with some speakers more inclined to emphasize the need to be cautious and gradual given that the economy continues to expand and the labour market is normalizing, while others such as Daly clearly wanting to dispel the idea that the Fed might pause, above all to prevent labour market normalization morphing into outright contraction in labour demand. These are in truth nuanced differences, contingent on perceptions about the balance of risks between inflation and employment.