UPCOMING EVENTS:

• Monday: US ISM Manufacturing PMI.
• Tuesday: RBA Policy Announcement.
• Wednesday: RBNZ Policy Announcement, US
  ISM Services PMI.
• Friday: US NFP Report.

Last week was a messy one in terms of
market movements.

We saw some losses in equities, some gains in fixed income
and some choppy price action in forex. The major event last week was the BoE
intervention in the long-dated gilts market to stop the massive sell-off
following the new government’s expansionary fiscal policy announcements.

The
BoE also delayed its planned gilt sales until the end of October. The
intervention gave some relief to the markets and the sell-off in gilts and the
pound reversed some of the losses. This is more of a short-term fix and doesn’t
change much the future outlook.

Monday:
The latest ISM Manufacturing PMI is expected to show a little dip to 52.3 from
the prior 52.8 with forecasts ranging between 51.0 and 53.7. Needless to say, that
the manufacturing sector is expected to keep on contracting going forward amid
tighter monetary conditions and slowing growth with a recession by now almost a
done deal. The market will focus more on the prices paid component, which has
shown notable cooling and may trigger some relief rally in case of another dip.

Tuesday: The Reserve Bank of Australia is expected to
hike rates by 50 bps bringing the cash rate to 2.85%. The central bank is
expected to keep on its tightening path to bring inflation back to their 2-3%
range target. Australia’s first ever monthly CPI report showed inflation being
still more than double the RBA’s target, which doesn’t signal any pivot coming
from them in the near future.

Wednesday:
The Reserve Bank of New Zealand is expected to hike by 50 bps and bring the
cash rate to 3.50%. The central bank is expected to keep increasing rates and
maintaining the current pace of tightening, while also acknowledging that the
tightening cycle is “very mature”.

The ISM Services PMI is expected to show a
dip to 56.0 from the prior 56.9.

The Services sector has been showing more
strength compared to its Manufacturing counterpart, which is generally a
classic pattern, and the prices paid component, while cooling a bit, kept on
remaining elevated by historical standards.

We saw how services were a big
contributor in the Core CPI increase despite the Fed’s tightening and this may
mean that the Fed needs to inflict more pain if it wants to achieve its goal.

Friday:
We end the week with the US Labour Market report. The headline figure is
expected to show 250K added jobs from the prior 315K with estimates ranging
between 175K and 350K.

The unemployment rate is expected to remain unchanged at
3.7% with forecasts between 3.6% and 3.8%.

The Fed is expected to deliver
another 75 bps hike at its November meeting and it will need a poor (not
slightly poor) jobs report to reprice expectations to a lighter 50 bps increase
(the CPI report will be more important for the Fed’s decision anyway). The
market will also focus on the average hourly earnings figure and a
higher-than-expected print should be taken bad by the market.

This article was written by Giuseppe
Dellamotta.