Emma Wall, chief investment strategist, Hargreaves Lansdown: “US and European equity market futures are up ahead of the open this morning – despite a rocky outlook for the US economy this week. The S&P 500 traded flat to Friday, but alongside the tech focused NASDAQ, is pointing up in pre-market trading. Asia markets are up at the start of the week thanks to US dollar weakness and optimistic Chinese factory data which showed the first gain in profits in four months and factory deflation – the price of goods leaving the floor for sale – improving.
Green shoots for the Chinese economy may not be enough to hold markets higher this week however, if a US economic shutdown cannot be averted. President Donald Trump is due to receive congress colleagues at the White House today to discuss the issue – as the government is due to run out of money on Wednesday if a new funding deal cannot be agreed. The proposed deal will secure funding to mid-November. Failure to do so will put additional pressure on the US dollar, which has traded at multi-year lows in recent weeks.
It is a big week for economic twitchers. As well as a US shutdown to avoid, jobs data is due Friday which will be an early signal for the path of ongoing rate cuts from the Fed, which cut rates earlier this month. Fed chair Jerome Powell indicated that markets could expect two more cuts this calendar year – but that this was not a certainty. A strong jobs market, and stubborn inflation would suggest the Fed instead holds rates where they are – with a likely weighting towards jobs data in decision making. Investors should be mindful that the inflationary impact of tariffs is not yet fully felt in the numbers, and further tax hikes – such as the 100% pharmaceuticals levy announced last week – are likely to add pricing pressures.
Also, due this week are global manufacturing PMI results, which last month showed much improved data, suggesting gentle expansion in the sector – up from 49.7 to 50.9. Above 50 indicates positive momentum for the sector.”
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