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Week ahead: Brexit final stretch, US election countdown, Eurozone Q3 GDP

Suban Abdulla
·6 min read
Global markets will watch COVID-19 and renewed restrictions as the number of new global coronavirus cases continue to rise at rates not seen since the start of the pandemic in February and March. Photo: Getty
Global markets will watch COVID-19 and renewed restrictions as the number of new global coronavirus cases continue to rise at rates not seen since the start of the pandemic in February and March. Photo: Getty

Markets are gearing up for a barrage of key economic indicators in the final week of October.

Brexit negotiators are hopeful a trade deal will get done after a period of theatrics, which saw both sides signal an end to talks without resolving major gaps, including fisheries.

Across the pond, the US election race enters the final stretch with betting odds placing Joe Biden as twice as likely to win than Donald Trump, as the 3 November deadline looms.

The euro (GBPEUR=X) faces a challenge this week as the European Central Bank (ECB) is due to release its rates decision on Thursday and third quarter gross domestic product (GDP) data for the Eurozone on Friday.

China’s Communist Party leaders are also set to meet in Beijing from 26-29 October to agree on the next five-year economic plan for the country.

The number of new global coronavirus cases continues to rise at rates not seen since the start of COVID-19 in February and March. As of Friday, the World Health Organisation (WHO) reported that over 80 nations are facing an increase in infections.

Britain: Will the clock tick out on a Brexit deal?

It is yet to be seen whether a deal can be reached as Brexit talks resume once again. Photo: Getty
It is yet to be seen whether a deal can be reached as Brexit talks resume once again. Photo: Getty

After a week of sulking, the UK and EU have halted their stand-off. The pair have yet again resumed Brexit negotiations after EU’s chief negotiator Michel Barnier arrived at Downing Street on Friday.

Barnier promised to “intensify talks” saying that both sides share a "huge common responsibility." He also warned that "every day counts" ahead of a looming 31 December deadline.

French president Emmanuel Macron is said to be laying the brickwork for a delicate compromise on fisheries, to help the UK and EU agree a deal. Macron who has publicly taken a hard stance on the issue, told French fishermen to brace for a smaller catch after Brexit, Reuters reports.

It comes after, UK’s trade secretary Liz Truss announced on Friday that the government signed its trade deal with Japan, calling it a “historic moment.” A deal was agreed in principle in September this year.

Outside of Brexit, the Confederation of British Industry’s (CBI) realised sales reading is out on Tuesday, with mortgage approvals and net lending to individuals due on Thursday and Bank of England publishes its money and credit report for September also on Thursday.

Other key events: A host of Q3 results are out for UK banks with HSBC (HSBA.L) on Tuesday, Lloyds (LLOY.L) on Thursday and NatWest (NWG.L) on Friday.

Key company results:

  • BP (BP.L) — Interim (Tuesday)

  • Whitbread (WTB.L) and Bloomsbury (BMY.L) — Half-year (Tuesday)

  • GlaxoSmithKline (GSK.L) — Q3 (Wednesday)

  • BT (BT-A.L) — Half-year (Thursday)

US: Trump v Biden near finishing line, Q3 GDP data and US fiscal stimulus talks

Investors can expect a whirlwind week filled with twists and turns from the presidential candidates.  Photos: Brendan Smialowski and Jim Watson / AFP via Getty Images)
Investors can expect a whirlwind week filled with twists and turns from the presidential candidates. Photos: Brendan Smialowski and Jim Watson / AFP via Getty Images

In true American style, the final week of the month sees the US fight for the stage, with the 3 November election a few days away, release of Q3 GDP data and fiscal stimulus talks.

Markets and the dollar (GBPUSD=X) could see a volatile few days ahead of the election the following week.

First the spotlight shines on US president Donald Trump and Democratic opponent Joe Biden, who last week partook in the second and final US presidential TV debate in Nashville, Tennessee.

This week, investors can expect a whirlwind week filled with twists and turns from the presidential candidates who are no strangers to public digs and pulling out all the stops, especially the incumbent.

Biden remains on course to win the White House with betting odds at 67% compared to Trump’s 33%, data from betting exchange Smarkets showed. Meanwhile, state-by-state market data indicates a 317-221 win for the Democrats.

But, Trump is no stranger to a fight and he is likely to pull out all the stops in the final hour. The true question is can he pull out another shock victory?

America is also grappling with record new coronavirus infections amid everything. On Friday it recorded more than 85,000 new COVID-19 cases.

So, the focus goes to Nancy Pelosi and US treasury secretary Steve Mnuchin, and whether talks will result in a COVID-19 fiscal stimulus package. While, house speaker, Pelosi signalled that she and Mnuchin are “just about there” on the details of the relief plan, which could cost up to $1.9tn (£1.5tn) — talks have ended without resolve before.

Its worth noting that any agreement will have to be passed by the Republican majority Senate, which might be an issue with a fiercely opposed Mitch McConnell in charge a pre-election sign-off. If it gets struck down the issue will enter a waiting period ahead of the inauguration in January 2021 — with Trump either celebrating a second term or a possible inheritance in the event Biden wins.

On the economic calendar, GDP figures for Q3 are out on Thursday for the word’s biggest economy. The US economy contracted by 32.9% at the annualised rate in Q2. This time analysts expect the opposite number, with experts at ING expecting a record 34.5% annualised growth.

US personal spending data for September is on the slate for Friday, post-lockdown the country has witnessed a V-shaped recovery when it comes to retail spending. Consumer confidence also rebounded in September.

Key results: US tech giants Amazon (AMZN), Apple (AAPL) and Facebook (FB) are all releasing Q3 figures on Thursday.

Watch: Why tax rises may be inevitable in Britain

EU: Will ECB deliver more stimulus in December? Eurozone Q3 GDP data, German Ifo

The Eurozone kicks off the week with figures for its largest economy on the slate. German Ifo Business Climate Index — a leading economic indicator — is out on Monday.

The latest ECB meeting and press conference will be held on Thursday, with experts at ING expecting a “strongly dovish message” from president Christine Lagarde and “plenty of hints” about more quantitative easing (QE) in December.

There is also a bonanza of Q3 GDP releases with the region-wide, German, French and Italian data due on Friday, to see how the economies are faring amid the coronavirus pandemic.

Also on Friday, Spanish and German inflation numbers will be released.

Elsewhere: In Japan, new PM Yoshihide Suga is set to make his debut during his first major address to parliament on Monday. The Bank of Japan (BOJ) is also releasing its rates decision on Thursday. But, no change to BOJ’s policy set is expected as the Japanese economy has been less than resilient over the last few quarters. The most recent GDP numbers showed that the Japanese economy contracted 7.9% in Q2, with household spending contributing the largest part of the contraction. Meanwhile, services and manufacturing PMI figures have consistently remained in contraction territory at around 46.

Watch: What is a V-shaped economic recovery?