Macroeconomics: The Day Ahead – 30 October 2020

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

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

• Very busy day for statistics as October draws to a close, likely to be  be overrun by month end, pandemic and politics; oil majors dominate  busy day for US corporate earnings; modest schedule of events
• French GDP and Consumer Spending underline sharp loss of momentum at  end of Q3, challenges ahead as lockdown measures imply weak Q4; likely  to repeat across all EU
• US Personal Income & PCE: pre-empted by Q3 GDP, also implies better  than expected outturn for PCE

EVENTS PREVIEW

As another tempestuous month ends and as the US presidential elections looms on Tuesday, today’s busy run of major data in Asia, Europe and the US is likely to be so much roadkill. Markets continue to grapple with dissonant influences, on the one hand the alarmingly rapid escalation in infection rates and an array of political & economic uncertainties, on the other better than expected earnings reports (though the ‘big tech’ results yesterday proved to be “not good enough”, above all the Apple iPhone sales), the promise of ultra-accommodative monetary policy for years to come (though this is equally a huge burden for investors seeking returns on low risk investments), and the hope that a vaccine and the evolution of treatments will allow the world to return to more ‘normal’ levels of personal and economic activity. But volatility looks likely to sustain higher levels near-term, with markets pinning their hopes above all on a non-contested outcome to the US elections, given that there is more than enough uncertainty in the world to contend with, without having a long protracted run of recounts and legal battles. There are the better than expected South Korea and Japan Industrial Production to digest, and the unsurprising sharp drop in the UK Lloyds Business Barometer (-18 vs. Sept -11). Ahead lie the deluge of provisional Q3 GDP readings from Europe, Hong Kong and Taiwan, Eurozone CPI and US Personal Income & PCE, Chicago PMI and final Michigan Sentiment. The events schedule is very light, though there will doubtless be the usual run of ECB speakers offering their post council meeting thoughts. Otherwise it will be another very busy day for corporate earnings, including US oil majors Chevron and Exxon Mobil, as well as the likes of Altria, Charter Communications, Colgate-Palmolive, Goodyear and Honeywell.

As previously noted, in terms of the week’s data, the advance Q3 GDP readings will likely tell us what is already been evident, the US economy did recover robustly in Q3, but to sustain that in to Q4 and into 2021 will require the elusive fiscal package. By contrast the bounce in Europe has proved to be rather short-lived and the ballooning infection rates, and the thus far seemingly ineffective measures to rein those in, will only serve to stall recovery momentum in Q4. The French GDP and Consumer Spending data serve to underline the point about a sharp loss of momentum into the end of Q3, with Consumer Spending much weaker than expected at -5.1% m/m, which takes most of the shine off the much better than expected 18.2% q/q (forecast 15.0% q/q) rebound in Q3 GDP. US Personal Income and PCE were largely pre-empted by the advance Q3 GDP report yesterday, which suggests that PCE should beat forecasts of a solid 1.0% m/m rise.

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