Top Things to Watch

This week we will receive insights regarding the magnitude of the forthcoming Federal Reserve (FED) rate cut with the release of the latest US jobs report.

The labor market is a critical area of focus for assessing how swiftly the FED will implement further rate cuts in the upcoming months.

Today, Chairman Powell will address the National Association for Business Economics, and analysts will meticulously analyze his statements for further rationale behind the September rate cut and any signs regarding the economic outlook.

This quarter will be influenced by the upcoming US presidential election in November, bringing increased market volatility irrespective of the winning candidate.

These are the week events that might affect the markets:

OCTOBER 1st to 4th

China: National Day Holliday (Golden Week)

The National Day is a public holiday on October 1st, which is extended by an additional 4-5 days, creating a weeklong public holiday known as National Golden Week.

During this time, people in China typically travel for tourism with their family and friends creating lucrative opportunities for e-commerce companies worldwide to boost their businesses.

The spending during Golden Week is often used as an indicator of the economy, and analysts anticipate a surge in spending that will send a positive signal about the potential of China's consumption market. The strength of China's holiday spending rebound will also provide insight into the potential and resilience of the country's consumption, which is a critical factor for economic recovery momentum.

OCTOBER 1st

EUROZONE: CPI September YoY

The flash September Consumer Price Index (CPI) is a key data to support European Central Bank (ECB) officials' decision on an interest rate cut in October.

If economist's predictions are confirmed, the annual rate of inflation will come down to 1,9% dropping below the ECB’s 2% target for the first time since June 2021. For the moment, investors are now pricing in a slightly more than 50% chance of a 25 basis-point October rate cut hence last week euro zone business activity report showed an unexpected contraction in September.

The market is run by emotions and traders are fearing that the ECB might be behind the curve.

US: JOLTs Job Openings

JOLTS stands for Job Openings and Labor Turnover and is a survey that counts job vacancies and separations, including the number of workers voluntarily quitting employment. The number of vacancies is a widely followed indicator of labor demand, while the quits rate is partly a function of employment demand. Both indicators can be used to gauge labor turnover.

Although the most important job indicator - the October Nonfarm Payrolls report - will only be coming out on Friday, this survey will give some signs on what numbers to expect.

OCTOBER 2nd

US: Crude Oil Inventories

The Energy Information Administration (EIA) reports on Crude Oil Inventories tracks the weekly fluctuations in the volume of commercial crude oil stored by U.S. companies.

The inventory levels play a significant role in determining the prices of petroleum products, which can subsequently affect inflation rates.

Last week oil prices fluctuated as investors assessed the implications of anticipated higher global supply against new stimulus measures from China, the leading crude importer. As China's central bank unveiled on Friday additional stimulus initiatives oil prices rose (as well as other commodities prices).

However, there are some concerns regarding oil potential oversupply as the Organization of the Petroleum Exporting Countries and its allies (OPEC+) announced an intent to raise production by 180,000 barrels per day each month starting in December. Conversely, ongoing tensions in the Middle East heighten the risk of supply disruptions, continuing to support the oil market.

If you are an energy trader you should closely monitor this data in addition to the labor market outlook hence a reductions in interest rates generally stimulates economic activity and increases energy demand.

OCTOBER 4th

U.S. Nonfarm Payrolls

This is the event of the week!

Numbers will reveal whether the economy has created additional jobs, which would support the soft-landing narrative , where the Fed manages to control inflation without severely hindering growth. Disappointing data could reignite concerns about a potential recession, while unexpectedly robust job growth may raise apprehensions that the Fed will not reduce rates as aggressively as anticipated, in an effort to prevent an inflation resurgence.

The labor data will provide insights into what the FED will do at its upcoming November 6-7 meeting. Investors are currently split between a 25 or 50 basis points reduction rate probability.