Macroeconomics: The Day Ahead – 1 November 2020

Good Morning: The Long & the Short of it and The Bigger Picture

Written by Marc Ostwald, ADMISI’s Global Strategist & Chief Economist



A new week gets under way with the usual raft of Manufacturing PMIs, which in contrast to Wednesday’s Services PMIs will likely confirm that the sector recovery remains robust, even if the pace of expansion is starting to “normalize”, whatever “normal” in a Covid-19 world is meant to mean. Governments are above all at pains to ensure that this, and the resource and agricultural sector can continue to operate at relatively “normal” levels, as long as health security measures are observed. The week as a whole is clearly dominated by tomorrow’s US presidential and congressional elections, with markets hoping for an outcome that is clear enough to avoid recounts and legal battles. Otherwise there are plenty more corporate earnings in the US, Europe and Asia, along with the Fed and BoE meeting. The FOMC meeting is not expected to see any changes in policy measures, though the fact that additional fiscal measures have not materialized, and the escalating level of infection rates would more than justify further policy action, even if a number of FOMC members have made it clear that they are sceptical about the efficacy of more monetary stimulus to counter the effects of the pandemic, even if the FOMC mantra this year has been about acting pre-emptively. As for the BoE, a further £100 Bln of QE is expected, and there will doubtless be the hint of more policy action given that the latest ‘lockdown’ measures will hit the UK economy hard (and most of Europe too), a rate cut is for the time being off the table, and until such time as the numerous complex technical issues can be overcome.  In terms of the US data, Auto Sales and Friday’s labour data will be the main items, with Auto Sales expected to start levelling out at a respectable 16.5 Mln SAAR pace vs. September’s 16.3 Mln, below but still far off the 2019 average pace of 16.85 Mln. The consensus looks for a somewhat slower pace of Payrolls growth at 610K vs. September’s 661K, with much depending on how the stronger labour demand evident in the Claims data and surveys is offset by rising permanent layoffs as Congress failed to replace the Payroll Protection Programme (PPP) and the assumption that census related hiring will likely tail off, along with the fact that the seasonal adjustment assumes a strong level of holiday (Thanksgiving) related hiring, which may prove to be sluggish.


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