A mixed week across asset classes saw the UST yield curve bear-steepen, the 10-year closed 5bps higher at 0.70%. The main highlights came towards the end of the week when we heard that Trump had tested positive for Covid-19, coupled with a broadly worse-than-expected US employment report. Despite the dip on Friday the S&P 500 was up 1.52%; however, the equity index witnessed its worst monthly performance since March, having fallen 3.8%. Clearly the employment sector is in need of further support, which could come if the House and Senate pass the proposed USD 2.2tn Democratic aid package; at this stage it looks unlikely. This will play a key role for markets this week, as will Trump’s health, as the election is only a month away and Biden is currently leading in the national polls.
Asian bourses, European equity markets have started the week on the front foot following reports that Trump is likely to be discharged from hospital as soon as today. A big week for UST auctions this week will see a total USD110bn of issuance made up of: USD52bn three-year paper, USD 35bn 10-year bonds and USD23bn on the 30-years. Following UK PM Johnson’s comments that the UK can “more than live with” a no-deal Brexit if no agreements are made on fishing rights and state aid, any further rhetoric, ahead of the European summit next week, will be key for markets. Moreover, the EU has taken legal action against the UK over changes to the Internal Market Bill. Elsewhere, we expect a quiet week in Asia as a number of nations are celebrating Golden Week.
Later today and through to the 7th, Chicago Fed President Evans will speak on “Global Reset? Economics, Business and Policy in the Pandemic” at the National Association for Business Economics (NABE). We will also hear from Atlanta Fed President Raphael Bostic at the Fintech South event on regulating financial technology. In terms of data we had the Markit UK services PMI reading which surprised to the upside at 56.1, while the EuroArea reading, although still in contraction territory, improved in September to 48. Later we will have the US ISM and Markit service readings. A busy day tomorrow kicks-off with the RBA policy decision and Japan hosts the Quad group in Tokyo to discuss China’s influence in the Indo-pacific region. The IMF’s MD Kristalina Georgieva will give us a preview of the IMF’s key issues which will be outlined next week, when the organisation meets with the World Bank. The Fed’s Powell and ECB’s Lane will deliver keynote addresses at the NABE conference. We will also hear from Philadelphia Fed President Harker at the Global Interdependence Centre and Atlanta Fed President Bostic on “An Inclusive Recovery.” Also of interest will be Bank of Mexico Governor Alejandro Diaz de Leon’s discussion of the global economy with Dallas Fed President Kaplan and the ECB’s Lagarde’s key points at The Bridge Forum Dialogue. Meanwhile, German Chancellor Merkel will be speaking at a German industry event in Berlin. The US trade balance and German factory orders will also be released on Tuesday.
Wednesday’s highlights include the US Vice Presidential debate in Salt Lake City which will see VP Pence go head-to-head with Biden’s running mate, Kamala Harris, and the release of the FOMC minutes from September’s meeting. As South Korea’s looking to restart nuclear talks between the US and North Korea, Pompeo is due to visit South Korea. “Racism and the Economy” will be discussed by Fed Presidents Bostic (Atlanta), Kashkari (Minneapolis) and Rosengren (Boston), while Chicago Fed President Evans discusses the outlook for the US economy. On Wednesday and Thursday the IMF will release chapters of its World Economic Outlook: one on mitigating climate change and one on the economic impact of the great lockdown. UK house prices and German industrial production, could be of interest on Wednesday. On Thursday we’ll hear from the BoE’s Bailey, ECB Executive Board member Schnabel and Governing Council member Pablo Hernandez de Cos at the Single Resolution Board conference. The ECB’s minutes from September’s policy meeting, and OPEC’s World oil output report could also be of interest. A fairly quiet day in terms of key data will see US initial jobless claims, Bloomberg consumer comfort, UK RICS house prices and China’s Caixin service PMI readings. With little scheduled on the event-side for Friday, data prints include France, Italy and UK industrial production prints and Japan's household spending reading.