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Macro Week Ahead: US earnings in full swing, UK inflation may cool

Week of October 16th-October 20th

This week, global markets look forward to big ticket earnings such as Netflix, Tesla, Bank of America, P&G and Johnson and Johnson. We also have US retail sales, UK inflation and unemployment data and China GDP figures amongst others.

Here are the key macro highlights not to miss this week:

US earnings likely to see big numbers in Q3

US Q3 earnings have picked up steam, with Netflix expected to report a 7.7% year-on-year hike in revenue for the last quarter, up to about $8.536 billion, according to this forecast. If so, it would be in line with previous guidelines. The streaming giant is also looking relying on these earnings more than usual, as they would shed more light on whether its tighter account sharing policies and division of content tiers is paying off or not.

Coming to Tesla earnings, the company gives investors a bit of a sneak peek into its quarterly performance, by publishing its production and delivery numbers just a few days following the end of the quarter, much ahead of its official earnings release. For Q3, Tesla’s delivery numbers fell 6.7% from Q2, at around 435,059 units. However, investors are still hopeful about revenue and earnings-per-share growth (EPS), in line with Tesla’s previous performance.

Fed Chair Powell may shed more light on interest rates

The US Federal Reserve chair Jerome Powell is due to speak at the Economic Club of New York on Thursday, ahead of the Fed’s blackout period, starting on Saturday. The blackout period starts on the second Saturday before an FOMC meeting and ends on the Thursday following a meeting, during which the Fed limits FOMC participants from issuing public comments or interviews about policy outlook and the economy.

During this speech Powell is expected to provide more insight on what he would consider to be more “convincing evidence” about inflation slowing down, as well as the probability of a soft landing. Earlier in September, Powell had outlined that consumer spending was “robust”, which would mean that more would have to be done to get inflation back within the 2% target- hopefully we could also hear more about what these measures may be.

US retail sales likely to slow down

US month-on-month retail sales numbers for September are due to hit records on Tuesday and are likely to come in at 0.3%.* If so, this would be a slide down from August’s 0.6%. Not only that, but this may actually prove that consumer spending is slowing down somewhat and be part of the evidence Powell is looking for as proof of reducing inflation.

RBA meeting minutes may unveil Michelle Bullock’s strategy

Michelle Bullock, the first woman governor of the Reserve Bank of Australia, announced the RBA’s first interest rate decision under her tenure earlier in October. While rates were kept steady at 4.1% for the fourth consecutive month, Bullock warned that Australia was not “out of the inflation woods” yet. The minutes coming out on Tuesday could potentially provide more details on the further tightening hinted at, as well as Bullock’s overall strategy as governor.

UK unemployment rate to stay flat

The UK unemployment report for the three months ended June to August will be out on Tuesday and is expected to stay steady at 4.3%*, the same as May-July. This may point towards the UK economy steadying somewhat, even though growth is still sluggish, compared to other G7 nations.

China GDP expected to lag in Q3

Chinese year-on-year GDP numbers for Q3 are coming in on Wednesday and are expected to clock in at 4.4%*, down from Q2’s 6.3%. This could highlight China’s ongoing issues with slowing economic growth, driven by the long-term impacts of the decline of the real estate and property sector. The economy has also not really bounced back from the effects of the pandemic yet, especially since the wave of revenge spending anticipated following the re-opening of the economy didn’t take place quite as expected.

UK inflation might cool slightly in September

The UK year-on-year inflation print for September, out on Wednesday, is being highly anticipated, with expectations of inflation reducing from 6.7% in August, to 6.5%* in September. A drop in food and fuel prices, as well as accommodation and airfare is likely to contribute to this figure. If inflation does come down, this could also influence the Bank of England (BoE) to keep rates steady for another month at their next meeting in November

EU inflation rate expected to plummet in September

The EU year-on-year inflation report for September, due on Wednesday, is expected to fall steeply from 5.2% in August, to 4.3%*, likely due to falling energy prices and a more aggressive European Central Bank (ECB) monetary policy. The ECB, traditionally the more dovish of the major central banks, has really ramped up its monetary tightening policy in the last few months, as global inflation spiralled out of control.

*Analysts polled by Reuters/Refinitiv

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