Highlights
The ECB meeting (October 24) will be the most important event of the week.
During last meeting, the ECB adopted a very accommodative monetary policy stance. This led to important discussions notably on the resumption of the QE and on the forward guidance as these measures will remain until the EA inflation converges to the ECB target. Nothing new is expected?
This meeting will be the last for Mario Draghi. He will quit the ECB at the end of this month and be replaced by Christine Lagarde. Draghi has given to the ECB the soul and the instruments that are necessary for an independent and influential central bank (more details on Draghi’s impact on the ECB in the document).
Many corporate surveys for October will be released during the week. The French “climat des affaires” (23), the German Ifo (25), the Markit flash estimate (24) and CBR orders in the UK (21)
The current mood in developed countries is pessimistic and this will not reverse rapidly. The IMF forecasts was a synthetic view of this backdrop.
A Brexit deal would have had a positive impact but the Parliament has not allowed for it. BoJo has ask for a new delay until the end of next January. This increases uncertainty as we don’t know what will happen in the next three months. Do we converge to a new referendum ? Will Bojo force the Brexit before the end of next January ? Will there be general elections ? No one knows. Many would like to write the future but the recent past has shown that the foreseeable future is not predictable.
There are uncertainties also coming from the discussions between China and the US. Discussions, last week was mainly on agriculture as there is a necessity for the US to reverse the trend coming from the trade war. China now buys soybean in Brazil rather than in the US. This weakens Trump future presidential campaign. The risk associated with this negotiations’ failure is a source of supplementary weakness. The uncertainty for the future is still high and is a constraint for the economic activity.
Durable goods orders in the US for September (24).
These numbers have not been strong recently and could reflect a weakness in corporate investment in coming months.
Existing homes sales in the US for September (22)
This statistic is important as it reflects a kind of wealth effect. There are more house owners in the US than people having a large portfolio of risky assets. Movement in the real estate has therefore more impact on consumers’ behavior than the stock market can have. The existing home sales is for me the most important statistic that shows this wealth effect. Recent improvement was supportive for consumers’ expenditures.
The detailed document is available here
