Next week's overseas market highlights: US and European PMI readings could reshape the rate hike landscape, while Meta and Tesla release their latest earnings.
US and European purchasing managers' index data will offer insight into business sentiment and provide further clues on the possible timing and pace of future rate hikes.
Canada and the UK will release inflation figures. Central banks in South Korea, Indonesia, and the Philippines will hold meetings, with currency fluctuations and rising energy prices complicating their decisions.
Markets will continue to monitor the Middle East situation and oil price trends. As earnings season enters its second week, results from star stocks such as Meta and Tesla could stir volatility.
Earnings Season Welcomes Star Stocks
October PMI data will be released next Friday, October 23, showing recent activity in the US services and manufacturing sectors. Recent data indicated that US September inflation came in higher than expected, with the economy showing strength. However, the Federal Reserve is not expected to raise rates again later this month. According to London Stock Exchange Group data, money markets see only a 15% chance of a 25-basis-point hike on October 28. A December hike, however, is fully priced in, with three total 25-basis-point increases expected over the next 12 months.
Other notable indicators include weekly jobless claims and the final reading of the University of Michigan's October consumer confidence index. The trajectory of US Treasury yields will remain in focus in the coming week. While long-term bond yields have recently pulled back from multi-year highs, concerns are growing about the sustainability of debt-financed artificial intelligence investment. Worries over rising energy prices persist as well.
"Market participants will be aware that we have another good jobless claims number, strong retail sales, and uncomfortably high PPI inflation. The market may use this as a platform to rebuild higher yields in the coming weeks," said Padhraic Garvey, a rates strategist at ING, in a research note.
As earnings season enters its second week, companies including Meta Platforms, Tesla, Netflix, Procter & Gamble, American Express, General Aviation, 3M, and General Motors will all release quarterly reports.
Crude Oil and Gold
International oil prices fluctuated higher, with producers facing higher freight costs and risk premiums for shipping through the Strait of Hormuz, increasing uncertainty over future regional supply. The front-month WTI crude contract rose 10.41% for the week to $101.41 per barrel, while the front-month Brent contract gained 4.91% to $109.86 per barrel.
Industry data showed that Iranian attacks on oil tankers have significantly reduced oil flows. In the week ending October 13, average daily flows through the Strait of Hormuz dropped from a baseline of 17.15 million barrels to 11.62 million barrels. Meanwhile, Ukrainian drone strikes on Russian refineries further constrained fuel supply. In the week ending October 9, US crude inventories fell by 8.56 million barrels.
The risk of further escalation in the Middle East remains. According to CCTV News, US President Trump said in an interview at the White House that to ensure Iran cannot obtain nuclear weapons, the US may launch another strike on Iranian nuclear facilities, including the underground nuclear site at Fordow.
Precious metals weakened, with COMEX gold futures for October delivery falling 0.75% for the week to $4,159.50 per ounce, and COMEX silver futures dropping 6.06% to $56.99 per ounce. Federal Reserve Chairman Kevin Warsh expressed optimism this week about the strength of the US economy but did not reveal whether he believes further rate hikes are needed or when they might occur.
"Warsh did not introduce any new policy in his IMF speech, leaving market pricing unchanged and creating room for gold to rebound further in the short term," said independent financial market analyst Nicos Sabouras.
Last month, PPI recorded its largest increase in four and a half years, the latest sign that inflation is broadening beyond energy products. The data followed Wednesday's consumer price report, which showed prices accelerated in September. Although gold is typically viewed as an inflation hedge, higher interest rates tend to reduce the appeal of low-yield metals.
"The pullback in yields and the dollar will pave the way for gold to rise back above $5,000 per ounce in 2027," ANZ analysts said in a report.
Bank of England Rate Hike Imminent
European Central Bank President Christine Lagarde said this week at the IMF and World Bank annual meetings that high inflation in the eurozone caused by elevated energy prices has not yet affected the overall economy. ECB officials are determining the extent to which indirect effects are transmitting through the economy. The key data for the eurozone in the coming week will be October PMI, measuring recent services and manufacturing activity in France, Germany, and the eurozone.
"Given the improvement in sentiment over the past few months, we expect the data to pull back slightly," analysts at German financial institution LBBW said in a report. "On its own, this could further drive the recent positive momentum in bonds."
On October 12 local time, UK Prime Minister Burnham, speaking in the House of Commons, called for a closer relationship between the UK and the EU, stressing that maintaining the existing relationship is no longer sufficient for the UK's needs and that refusing to explore new cooperation possibilities would constitute a "significant dereliction of duty." Burnham said that reaching an agreement conducive to promoting economic growth is in the UK's interest, and he will work to advance related negotiations over the next five weeks. He believes the UK should discuss its long-term relationship with the EU with an open attitude to promote economic growth, manage immigration, uphold shared values, and safeguard security.
In the coming week, the UK will release a series of economic indicators, including employment data and September consumer price inflation figures. Investors are increasingly anticipating whether the Bank of England will raise rates at its next meeting on November 5. Money markets see a 93% chance of a 25-basis-point hike then, with the market fully pricing in at least four 25-basis-point increases over the next year.
"Bank of England Monetary Policy Committee members appear to be forming some consensus that the current situation requires some policy tightening, but less than expected. If CPI and wage forecasts are close to target, this could strengthen the conviction of MPC members to take this path at the next meeting," said Sandra Horsfield, an economist at Investec, in a report.
Next Week's Highlights
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