- Key World economies look ahead to flash October PMIs
- Last ECB meeting with Draghi at the helm
- China’s growth slows, Korean trade plunges
Europe – German PMIs will overshadow Draghi’s farewell
This week is really about Thursday when it comes to macroeconomics. The global economy IS at the brink of recession despite what many stock markets indices are showing. Our global PMI composite was lower than in September only once – in July of 2012, but as we know in the hindsight, a massive monetary stimulus was enough to revive a still young economic cycle. Fast forward to present and we have another monetary effort but the cycle is very mature and trade tensions do not help. Traders hope that PMIs in Europe, especially Germany, improve. The prints will overshadow the ECB meeting – the last one with Draghi at the helm. The post-meeting conference will be important to the extent Draghi reveals preference bias of the Board but we doubt he will be willing to discuss this.
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The global economy hasn’t been closer to recession since 2012. Source: Macrobond, XTB Research
Key economic event this week: German PMIs (Thursday, 8:30am BST), ECB post-meeting conference (Thursday, 1:30pm BST)
US – could Trade Deal revive the US economy?
The US economy remains in a peculiar state where the unemployment rate is the lowest in 50 years and at the same time business surveys are diving hard, reflecting weaker global demand and strong US dollar. One of these sides will eventually prevail. Retail sales data in the past week was on the weak side but y/y growth remains OK. This week we will be looking forward to flash Markit PMIs (Thursday) and flash consumer sentiment (Friday). There’s a lot of optimism regarding the Phase One trade deal but we really doubt this could have a lot of impact unless tariffs are removed (or at least reduced) – something that looks unlikely at this stage.
US500 remains close to all-time highs. Will macroeconomic reports justify this? Source: xStation5
Key economic event this week: US flash October PMIs (Thursday, 2:45pm BST)
Asia – growth in China slows, trade remains troubling
The highlight of the past week was Q3 GDP print in China that showed a slowdown to 6%. However, with the Chinese data so “smoothed” that wasn’t really a big market mover. On the other hand, trade data is worth tracking and here the data remains very weak. Japanese exports was -5.2% y/y in September but it pales in comparison to flash Korean trade data for October, showing exports at -19.5% (pulled down by less trade with China and Japan) and imports at -20%. Since trade is at the heart of this slowdown hopes for a swift recovery will need to wait.
South Korea is trade powerhouse in Asia. Therefore this chart, showing tumbling exports, should be taken seriously. Source: Bloomberg
Key economic event this week: flash October PMI in Japan (Thursday, 1:30am BST)
