Market Trends and Economic Focus

Last week, the US election significantly influenced market trends, but this week, investors are likely to shift their attention towards economic fundamentals. A key event on the horizon is the release of the US Consumer Price Index (CPI), which is expected to play a crucial role in shaping market sentiment. In Europe, the second estimate of the third-quarter GDP will provide further insights into the region’s economic performance. Additionally, a series of economic data releases from China will be closely monitored to evaluate the effectiveness of the government’s stimulus measures in revitalizing the world’s second-largest economy.

Europe

According to preliminary flash data released by Eurostat, the seasonally adjusted GDP in the euro area saw a growth of 0.4% in the third quarter compared to the previous quarter, a notable increase from 0.2% in the second quarter. This marks the strongest growth rate in two years, with Germany’s economy expanding by 0.2%, successfully avoiding a recession. France and Spain also reported positive growth, suggesting that lower interest rates and the upcoming Paris Olympics may be contributing factors to this economic upturn. The second estimate of GDP is expected to align closely with this initial figure.

In Germany, the ZEW Economic Sentiment Index for November is anticipated to provide further insights into the largest economy in Europe. Recent data indicated an improvement in the German economy during October, with business activity and factory orders exceeding expectations. The ZEW index rose to 13.1 in October, up from 3.6 in September, largely due to expectations of lower interest rates. The consensus forecast suggests that German economic sentiment will continue to recover, possibly reaching 13.2. However, the recent US election outcomes may dampen business confidence. Moreover, Germany will also publish the final Consumer Price Index (CPI) for October, which is likely to confirm the flash data indicating a 2% year-on-year increase. Meanwhile, inflation in the eurozone rose to 2.4% in October, up from 1.8% in September, driven by increasing service prices.

In the UK, the employment data for September will be closely scrutinized, as the labor market remains tight. The unemployment rate fell to 4% in the three months ending in August, marking the lowest level since January. However, it is expected to rise slightly to 4.1% in the three months ending in October. During the same period, wage growth slowed to 3.8%, the lowest since November 2020. Inflation-adjusted earnings growth was only 0.9%, which could help alleviate some inflationary pressures.

United States

Following the US presidential election, attention is now focused on whether Republicans will control both the House and Senate, allowing the Trump administration to implement its proposed policies, which include global tariffs and tax cuts. This political landscape may contribute to increased volatility in global markets.

Economically, October’s US inflation data will be critical in shaping market trends and may provide hints regarding the Federal Reserve’s future rate strategies. The headline CPI for September was reported at 2.4% year-on-year, the lowest since February 2021, while core inflation experienced a slight increase to 3.3%, up from 3.2% the previous month. The consensus forecasts suggest that headline inflation may remain steady at 2.4% for October. Last week, the Federal Reserve executed its second rate cut of the year, albeit at a reduced pace of 0.25%. Trump’s policy agenda could heighten inflationary risks, potentially prompting the Fed to pause its easing cycle. However, Fed Chair Jerome Powell emphasized that the bank will focus solely on economic trajectories, without allowing political factors to influence their decisions.

Additionally, the Producer Price Index (PPI) serves as another significant inflation indicator for investors to assess economic conditions. The PPI increased by 1.8% year-on-year in September, marking its lowest level in seven months.

Asia-Pacific

In the Asia-Pacific region, China is set to release critical economic data for October, including statistics on new home prices, industrial production, retail sales, and fixed asset investment. Data from September indicated that China’s economy had improved beyond expectations. With further stimulus measures being announced, the Chinese economy could witness additional recovery from a prolonged period of sluggish growth. The consensus suggests that these key indicators may show continued improvement in October, with retail sales expected to rise by 3.8% year-on-year, an increase from 3.2% in September. However, US-China trade tensions could escalate further if Trump follows through on his tariff commitments.