Its a good life

Stock indexes with a week to go and definitely tempting fate look like they will have another decent month. It may be that we have had the Santa Rally come a little early this year. All roads point north, apparently. Next week, the Fed will likely cut interest rates by another 25 basis points. Trump confirmed yesterday that he will meet Xi in a couple of weeks. Earnings season so far has not provided too many nasty shocks. Indeed, industrial conglomerates such as Honeywell reported strong earnings. When delivering the results, the CEO Kapur referred to Increased orders across our business segments, which pushed the company’s total backlog to another record high. Weaker-than-expected results from Tesla did little to dent the party. It is noticeable that some of the froth has left the momentum trades of the past few months, the price of gold has fallen 5% in the last few days, and some AI-related names are stalling. Bitcoin has dropped around 10% from its peak.

There are a couple of data points today that have the potential to dent the mood, maybe. S&P Global releases the October Flash PMIs for Manufacturing and Services; one of the most likely to impact market sentiment is, obviously, the US readings. Consensus estimates are for some weakness from the September a 51.7 reading for the Manufacturing PMI and a 53.5 for the Services PMI. This compares with readings of 52 and 54.2 in the previous month. But the readings are expected to report continued expansion.

The other is the first piece of Government data since the start of the Government shutdown, which is now the 2nd-longest in history. Today, we finally receive the September Consumer Price Index, which is needed to calculate inflation-adjusted benefit payments. Although the data may be considered a little out of date, given that it’s coming out later in the month than usual, it’s unlikely to influence the Fed’s decision next week. However, economists do expect headline inflation to rise above 3%.

Not much good news is coming from the UK at present as we continue to wait to see what Ms Reeves has in store for us. Yesterday’s CBI business optimism index showed little optimism, and the latest GfK Consumer Confidence index likewise showed little consumer confidence. Having said that, this morning’s retail sales report was better than forecast. Later today, we get our own S&P Global flash PMIs, forecasts are for the Composite of Manufacturing and Services to remain just above expansion at 50.1. With slightly better-than-forecast inflation data this week, hopes that the Bank of England will be minded to cut rates, maybe not at their November 6th meeting but possibly in December, have increased. Stock futures are pointing to a positive start again today.