Asian markets open generally lower following weak economic data from China. Released over the weekend, the official China PMI manufacturing was unchanged at 49.8 in October, below expectation of 50.0. That's the third straight month of contractionary reading. The official PMI non-manufacturing also dropped to 53.1 and hit the lowest level since December 2008. Released today, the China Caixin PMI manufacturing rose to 48.3 versus expectation of 47.6 but stayed well below 50. Some economists noted that the manufacturing sector in China is still in contraction even though the pace stabilized. Some expected a modest rebound by the end of the year due to infrastructure investments but overall momentum would likely remain sluggish.
There are potentially a number of market moving events this week. RBA's meeting will be closely watched for hints of rate cut. The benign Q3 inflation reading released last week opened door for further monetary easing. But it's expected that RBA would maintain a wait-and-see approach for the moment. But the speculations are building up for one to two 25bps cut next year. And Aussie would likely experience much selling pressure if RBA adopts an easing bias in the statement. And in that case, AUD/USD would dive through prior low at 0.69.
BoE will have the second "Super Thursday" this week which sees release of monetary policy decision, meeting minutes plus the quarterly inflation report. No change in policy is expected and Ian McCafferty is also expected to maintain his vote for a rate hike. Nonetheless, the inflation report could contain downward revision in near term inflation forecast, and possibly growth forecast to next year too. There was some strength seen in Sterling late last week. And no news would be good news for the pound and would give it a lift in particular against Euro
Dollar was boosted last week as the FOMC statement specifically opened the door for December hike but the decision will remain very much data-dependent. In particular, Fed will need to see whether the recent slowdown in hiring is temporary. Thus, the upcoming non-farm payroll report on Friday would be closely watched by all. In addition, there will be ISM indices featured too.
Here are some highlights for the week:
- Monday: Swiss retail sales; UK PMI manufacturing;'; US ISM manufacturing
- Tuesday: RBA rate decision; UK PMI construction; US factory orders
- Wednesday: New Zealand employment; Australia retail sales, trade balance; Japan consumer confidence; UK PMI services; US ADP employment, trade balance, ISM non-manufacturing; Canada trade balance
- Thursday: Swiss CPI; EU economic forecasts; BoE rate decision; US jobless claims, non-farm productivity; Canada Ivey PMI
- Friday: Swiss foreign currency reserves; UK industrial and manufacturing productions, trade balance; Canada employment; US non-farm payroll.