U.S. Markets:

• On Friday, on a daily basis, the Nasdaq index saw a decrease of 1.53%, the S&P 500 index dropped by 1.26%, and the Dow Jones index closed the day with a decline of 0.86%.
• The Dollar index ended the previous week with a 0.5% decrease, closing at a level of 106.2.
• The price per barrel of Brent crude oil, last week, closed at 92.3 USD, marking a 1.5% increase as geopolitical risks in the Middle East were monitored.

• The 10-year Treasury yield in the United States ended the previous week with a 30 basis point increase, reaching a level of 4.91%. On the other hand, the 2-year Treasury yield, which is more sensitive to changes in monetary policy, ended the week at 5.07%, with a 2 basis point increase.

European Markets:

• European stocks finished lower Friday, with the Stoxx Europe 600 Index SXXP, falling 1.36% to 433,73. The German DAXdropped 1.64% to 14,798,74, the French CAC 40 Index declined 1.52% to 6,816,22 and the FTSE 100 Index UKX fell 0.59% to 7,402.14.
• The yield on the 10-year UK Treasury bond yield rose 0.54 basis points to 4.65%, and the yield on the German 10-year bond declined 2.29 basis points to 2.89%.

Asian Markets:

• Asia-Pacific stocks dropped Friday. The Hang Seng Index weakened 0.7% to 17,172.13, while the Nikkei 225 Index dropped 0.5% to 32,315.99. The Shanghai Composite Index fell 0.5% to 31,259.36.
• The S&P/ASX 200 Benchmark Index in Australian stock market dropped 1.2% to 6,900.70.

• Federal Reserve Chairman Powell’s Impact

The impact of Federal Reserve Chairman Powell’s suggestion that additional evidence of sustained growth above the trend or a lack of loosening in the labor market might necessitate further tightening of monetary policy, along with rising geopolitical tensions in the Middle East, led to a decline in Wall Street indices in the United States on Friday.

• Cleveland Fed President Mester’s Perspective

 Cleveland Fed President Mester, independently of the decision made at the next meeting, expressed that if the economy develops as expected, interest rates would likely remain close to a holding point. She also stated that she expected interest rates to be kept at high levels for a long time.

Upcoming US Economic Indicators

• Federal Reserve Speeches and Economic Data

In the United States, various speeches by Federal Reserve members throughout the week, including Fed Chairman Powell’s speech on Wednesday, will be closely watched for potential new signals regarding monetary policy. Additionally, October’s S&P Global manufacturing and services sector preliminary PMI data will be followed as it provides signals about the current state of economic activity.

In September, the manufacturing PMI increased from 47.9 to 49.8, indicating a slowing of the contraction rate in the manufacturing sector. However, the services PMI decreased from 50.5 to 50.1, suggesting a slight slowdown in the services sector.

In October, it is expected that the manufacturing PMI will slightly decline from 49.8 to 49.4, while the services PMI will decrease from 50.1 to 49.9, indicating contraction in the services sector.

• Durable Goods Orders

On Thursday, preliminary data on durable goods orders for September will be announced. Durable goods orders increased by 0.1% in August after a 5.6% monthly decrease in July.

In September, durable goods orders are expected to increase by 1.5% on a monthly basis.

• GDP Growth and Inflation Indicators

The advance estimate of the third-quarter annualized GDP growth will also be released on Thursday. In the second quarter, the annualized quarterly GDP growth rate in the United States remained at 2.1%.

Furthermore, the annualized quarterly Personal Consumption Expenditure (PCE) price indices, including the core index closely monitored by the Fed as a key inflation indicator, will be released on the same day. In the second quarter, the annualized quarterly PCE price index remained at 2.5%, and the core PCE price index remained at 3.7%.

In the third quarter, it is expected that the annualized quarterly PCE price index will decrease from 2.5% to 2.1%, while the core PCE price index will decrease from 3.7% to 2.5%.

In September, the headline Consumer Price Index (CPI) slowed down from 0.6% to 0.4% on a monthly basis, exceeding expectations. On an annual basis, it remained at 3.7%, with expectations for a slight decrease to 3.6%. The core CPI, excluding food and energy prices, increased by 0.3% in September, reaching an annual rate of 4.1%, marking its lowest level since September 2021.

• Personal Income and Spending, Jobless Claims

On Thursday, other economic indicators, such as personal income, personal spending and weekly initial jobless claims for September, will also be closely monitored.

Expectations are for a 0.4% increase in personal incomes on a monthly basis and a slight uptick in personal spending from 0.4% to 0.5%.

The latest weekly initial jobless claims, despite expectations of a slight increase, had dropped from 211,000 to 198,000, reaching the lowest levels since January. Moreover, these figures remained well below historical averages, indicating ongoing tightness in the labor market.

• Real Estate Market Focus

The real estate market will also be in focus this Thursday, with data on new home sales for September and pending home sales in September.

New home sales declined by 8.7% in August after a 7.1% monthly decrease in July. Pending home sales for August exceeded expectations with a significant decline of 8.7%, indicating the impact of tighter financial conditions and rising mortgage interest rates.

It is expected that new home sales will recover with a 1.5% increase in September, while pending home sales will decline by 2.7%.

• Consumer Sentiment Index

The final University of Michigan consumer sentiment index for October will be published on Friday. The preliminary University of Michigan consumer sentiment index decreased from 68.1 to 63 in October, marking the lowest level in the last five months.

• Bank of Canada Meeting

Wednesday is also significant as the Bank of Canada is set to hold a meeting. In their September meeting, the Bank kept its policy rate steady at 5%, which was in line with expectations and marked the highest level since 2001. The Bank’s decision was based on clear signs of a significant economic slowdown, and they signaled that future rate decisions would be determined by the latest data.

It is expected that the Bank will keep the policy rate unchanged at 5% in this week’s meeting.

• September’s Unexpected ECB Rate Hike

The ECB’s last meeting in September took a surprising turn when they decided to increase interest rates by 25 basis points. This move came as a shock to many as the expectation was to keep rates stable. The decision statement emphasized the continuing decline in inflation but also projected that inflation would remain high for a significant period, as long as borrowing costs remained suitably restrictive.

• New ECB Macroeconomic Projections

The ECB also released new macroeconomic projections in which they raised their expectations for headline inflation for the next two years. However, this was accompanied by a reduction in their growth forecasts. This raised expectations for a further assessment of monetary policy.

• Lagarde’s Statements on Inflation and Interest Rates

Post the interest rate decision, ECB President Lagarde was vocal in her determination to bring inflation down to the targeted 2%. She pointed out that the current interest rates would play a role in achieving this goal. However, she stressed that they wouldn’t claim that interest rates had reached their peak. Lagarde underlined that decisions on interest rates would be entirely data-driven, and the extent and duration of tightening would depend on this data.

• ECB Interest Rate Decision and Lagarde’s Speech

This week in the European financial landscape, all eyes are on the European Central Bank (ECB) as they prepare to announce their latest interest rate decision. Additionally, ECB President Lagarde is set to deliver a significant speech on the same day.

• Market Expectations

Currently, there is a widespread anticipation that the ECB will keep interest rates unchanged in the upcoming meeting. This expectation is in line with the ECB’s mission to stabilize and stimulate the European economy.

• Preliminary PMI Data for Manufacturing and Service Sectors

The preliminary PMI data for October will provide insights into the performance of the manufacturing and service sectors in Germany and across Europe. In September, as the ECB persisted with rate hikes, manufacturing PMIs in the region remained below the 50-point threshold for growth, reflecting tightening financial conditions and reduced demand. However, variations were seen in different countries. Germany and the UK experienced a minor slowdown in the pace of contraction, while France and the Eurozone saw a slight acceleration in the contraction rate in their manufacturing sectors. For the service sector, similar trends were observed.

• Consumer Confidence Indicators

Consumer confidence indicators are another area of interest. On Tuesday, the preliminary consumer confidence data for the Eurozone in October and the GfK consumer confidence data for November in Germany will be revealed. The data is expected to reflect the effects of the ECB’s rate hikes, which have negatively impacted sentiment in the region.

In the Eurozone, due to the impact of the ECB’s interest rate hikes, consumer confidence fell from -16 to -17.8 in September, reaching its lowest level since March. According to the preliminary data, it is expected to decrease further to -18.2 in October.

In Germany, the GfK consumer confidence data for October dropped from -25.6 to -26.5 due to elevated inflation, leading to increased savings tendencies, marking the lowest level since April. For November, it is expected to decline further to -26.8.

• IFO Business Climate Index

Wednesday will also see the release of the IFO Business Climate Index for October, offering insights into the perspectives of firms involved in various sectors such as manufacturing, construction, wholesale, and retail trade. This index has been on a declining trend, reaching its lowest level in October. The sub-indices for current conditions and expectations have seen varying changes, with firms’ optimism about the coming months showing a slight increase.

Looking into details, the current conditions index fell from 89 to 88.7, reaching its lowest level since August 2020, while the expectations index increased slightly from 82.7 to 82.9, indicating that firms’ pessimism about the coming months had diminished to some extent. The index is expected to rise slightly to 85.9 in October.

• Central Bank of Russia’s Interest Rate Decision

Friday will bring attention to the Central Bank of Russia’s interest rate decision. In their September meeting, the Bank increased the policy rate by 100 basis points to 13%, surprising market expectations. The decision was attributed to domestic demand exceeding production capacity, resulting in increased import demand and a depreciating Russian ruble, which led to high inflation. The Bank emphasized that tight monetary policy conditions would continue, and future rate hikes would be assessed based on the data.

It is anticipated that the Bank will further raise the policy rate by 100 basis points to 14% in this week’s meeting.

This week, in the Asian economic calendar, investors also have Russian industrial production, Japanese PMIs, and CPI figures on the agenda.

U.S. Economic Events:

1. Federal Reserve Speeches and Data: Federal Reserve members’ speeches and S&P Global PMI data will offer insights into monetary policy and economic activity.
2. Manufacturing and Services PMI: In September, manufacturing PMI improved, but services PMI showed a slight slowdown. October is expected to see a dip in both sectors, indicating service sector contraction.
3. Durable Goods Orders: Preliminary September data on durable goods orders is due, with expectations of a 1.5% monthly increase after August’s 0.1% rise.
4. GDP Growth and Inflation: Third-quarter GDP estimates and Personal Consumption Expenditure (PCE) price indices, monitored by the Fed, will be released, with a decrease in inflation anticipated.
5. Income, Spending, and Jobless Claims: Economic indicators for September include personal income, spending, and weekly jobless claims, providing insights into consumer and labor market health.
6. Real Estate Focus: Data on September’s new and pending home sales will be in focus, with new home sales expected to recover and pending sales to decline.
7. Consumer Sentiment: The final University of Michigan consumer sentiment index for October follows a preliminary decrease, indicating lower consumer confidence.
8. Bank of Canada Meeting: The Bank of Canada’s meeting is significant, with an expected policy rate hold at 5% following their September decision based on economic slowdown signs.

European Economic Events:

1. ECB’s Interest Rate Decision and Lagarde’s Speech: Market attention centers on the ECB’s interest rate decision and President Lagarde’s speech, with expectations leaning toward rate stability.
2. Preliminary PMI Data: The PMI data for manufacturing and services sectors in October provides insights, reflecting variations across countries due to the ECB’s previous rate hikes.
3. Consumer Confidence: Upcoming data on consumer confidence in the Eurozone and Germany will reveal the sentiment’s impact from the ECB’s rate decisions.
4. IFO Business Climate Index: The IFO index will offer insights into firms’ perspectives across sectors, showing declining trends and variations in sub-indices.

Asian Economic Events:

1. Central Bank of Russia’s Rate Decision: The Central Bank of Russia’s interest rate decision for this week is eagerly awaited. The central bank is expected to continue its tight monetary policy approach, potentially raising the policy rate by another 100 basis points to 14%.
2. Other Asian Economic Indicators: Additionally, investors will keep a close eye on Russian industrial production, Japanese Purchasing Managers’ Indexes, and  Consumer Price Index figures as part of the Asian economic calendar for the week.