Weekly Trading Update
Week of October 24
The Conservative Party is scrambling to find a new Prime Minister by the end of the week, while earnings from Apple and a rate decision from the ECB will take centre stage outside of Blighty.
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The week in review
Stocks started the week with renewed optimism, but it waned as the days passed and more data became available.
- Liz Truss became the shortest-serving resident at No. 10 after resigning as Prime Minister on Thursday. The outcome helped support market confidence, but the pound turned back down slightly amid the uncertainty with GBP/USD hovering near 1.13.
- Reports circulated that Apple would cut back on its iPhone 14 production, citing demand re-evaluation weeks before starting to ship, and before reporting Q3 earnings next week.
- Germany's ZEW current conditions dropped 11.7 points to an August 2020 low, despite expectations slightly rising.
- Crude price improved into the end of the week on reports that China would be shortening its quarantine period as the Chinese Communist Party Congress comes to a close over the weekend. China also unexpectedly delayed the release of its GDP figures until after Congress, citing covid restrictions.
TOP EVENTS IN The week ahead
UK back in focus
The Conservative party will hold leadership elections in the coming week in hopes of keeping the expected budget on track for release at the end of the month on Halloween.
The election isn't expected to call on party members since it appears Tory leaders are concerned that Boris Johnson might make a comeback.
The leading candidates to succeed Liz Truss are Rishi Sunak and Anne Mordaunt, with the former having already won the Parliamentary vote in the last election. A Sunak win can be expected to reassure markets as it would likely also imply Hunt would stay on as Chancellor. Good news could carry the FTSE back to the 7k handle.
Interest rate decisions
There are three major central banks holding rate decisions next week. First is the BOC on Wednesday, expected to hike rates by another 75bps. USD/CAD will face fierce resistance at 1.40, whereas on the other side, 1.37 is support.
On Thursday it is the ECB’s turn. The European Central bank is expected to hike by the same amount. EUR/USD struggles to get through 0.9880, with 0.9665 on the cards.
On Friday, the Bank of Japan is expected to keep policy unchanged but there will be an increased focus on commentary from Governor Kuroda. The weakness in the yen has prompted two direct interventions by the BOJ and rumours of coordinated action with the Fed to stabilize the currency.
USD/JPY just crossed 150.00 to make a 32-year high with little in the way of support above 145.00.
China data, US and European GDPs
The delayed GDP figures from China are expected to be released on Monday, with investors a little apprehensive about whether expectations will be met, given they aren't being made public until after the CCP Congress concludes.
The US provides its advanced Q3 GDP reading, expected to show growth of 2.5% and break the series of negative reports from earlier in the year. Then France and Germany provide flash GDP figures as well as monthly inflation data, expected to affirm the stagflation narrative. Both countries are forecast to report negative quarterly GDP and an increase in CPI.
Other data, earnings
Tuesday has German Ifo Business Climate; Wednesday sees Australian inflation and US New Home Sales; Thursday, the US releases durable goods orders figures; Friday has US personal income and spending.
A jam-packed earnings calendar sees reports from the likes of Apple, Microsoft, Google, HSBC, Meta and Exxon.
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