Market movers ahead
We expect the health of the manufacturing sector to take centre stage in the coming week, with the release of PMI data in the US and Europe and figures for industrial production in China in September. The German PMI in particular may attract negative attention, pulled down partly by the Volkswagen (DE:VOWG) scandal. There is also a risk of a further fall in the PMI stateside but we still consider the US economy robust.
In China, focus will be on the Q3 GDP numbers, which we believe will probably show a continued slowdown but it is worth stressing that the data are associated with some uncertainty.
The ECB meets on Thursday but we expect it to keep its powder dry. We still expect the ECB to expand its QE programme but not until the December meeting.
Global macro and market themes
In our view, the latest risk rally will fade as global growth is stalling.
Weak global growth is bearish for the USD versus the GBP, EUR and bullish core fixed income. Investors with an FX mandate should focus on RV such as short EUR/GBP and long EUR/SEK, which we have in our FX Trading Portfolio.
Expectations of ECB QE and less selling from emerging market reserve managers are bullish for core European fixed income.
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