A potential US government shutdown from 17 November is a key topic of discussion this week as political consensus has so far been hard to achieve. Government budget deadlines and shutdowns can typically cause short-term market volatility, but only a prolonged crisis may be more meaningful for the US economy and markets. For now, it seems the markets expect a resolution, given the lack of significant swings in equity and bond prices.
In the US, inflation and durable goods orders are key data points this week. Markets would welcome a fall in inflation, which is projected to decelerate more meaningfully, as it helps the case for not increasing rates again. However, core inflation, which strips out volatile components such as good and energy, is likely to have remained roughly unchanged and fairly elevated, though past the peak too. Surprises in durable goods orders may increase volatility.
China retail sales and industrial production are also out this week. If these reports confirm that a recovery in China is underway or that at least the worst is over, sentiment may improve towards Chinese/Asian equities as well as global manufacturing and industrial sectors connected to China.
Germany’s ZEW survey, which measures the sentiment of German institutional investors, is expected to turn positive this week, suggesting investors feel the worst is behind them.
UK inflation and retail sales may confirm the continuation of the current trend of weak growth, with the pace of increase in consumer prices moderating more visibly, though remaining fairly elevated.
Past performance is not a reliable indicator of future returns.
Data as of 10/11/2023. The Yield and P/E figures for stock markets respectively use 12m forward dividends and earnings divided by the index’s last price. For bond markets, the yield to maturity is used.
Source: Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). Bloomberg or Bloomberg’s licensors own all proprietary rights in the Bloomberg Indices. Bloomberg does not approve or endorse this material or guarantee the accuracy or completeness of any information herein, nor does Bloomberg make any warranty, express or implied, as to the results to be obtained therefrom, and, to the maximum extent allowed by law, Bloomberg shall not have any liability or responsibility for injury or damages arising in connection therewith Note: Past performance is not a reliable indicator of future returns.
