Market Focus Shifts to Key Economic Data After Election Week Volatility

After a week dominated by the US presidential election, investors are turning their attention back to critical economic data from major global economies, including the US, Europe, and China. This data will provide new insights into inflation, economic growth, and geopolitical tensions, influencing market trends in the coming weeks.

EU Economic Growth Signals Positive Outlook
In Europe, the second estimate for Q3 GDP is expected to confirm positive growth, with the initial data showing a 0.4% increase in the euro area—up from 0.2% in Q2. This marks the strongest growth in two years, driven by a resilient German economy and growth in France and Spain. Lower interest rates and the upcoming Paris Olympics are seen as contributing factors. The ZEW Economic Sentiment Index for Germany is also expected to rise, reflecting improving business confidence due to anticipated lower interest rates.

Inflation data for October will also be in focus, with eurozone inflation rising to 2.4% from 1.8% in September, largely due to higher service prices. In Germany, the CPI for October is expected to show a year-on-year increase of 2%, aligning with earlier data.

UK Employment and Inflation Trends
In the UK, September employment data will be key, with the unemployment rate expected to rise slightly to 4.1% in October. Wage growth, which slowed to 3.8% in August, will also be scrutinized as it may help alleviate inflationary pressures. Overall, while the UK economy is still facing tight labour conditions, a modest increase in unemployment and stagnant wage growth could ease inflation concerns.

US Inflation Data and Political Uncertainty
In the US, the spotlight will be on October’s inflation figures, particularly the Consumer Price Index (CPI), which could offer insights into the Federal Reserve’s future rate policy. While CPI in September was reported at 2.4% year-on-year, market watchers expect October to show similar results. Core inflation, however, slightly increased to 3.3%, signaling persistent price pressures.

Additionally, the Producer Price Index (PPI) will be closely watched for further signs of inflationary trends. With the US presidential election outcome still stirring market uncertainty, the potential impact of Trump’s policy agenda, particularly on tariffs and tax cuts, could drive volatility in the coming months.

China’s Economic Data to Show Recovery Signs
In Asia, China will release a batch of key economic data for October, including figures on industrial production, new home prices, retail sales, and fixed asset investment. Early signs of improvement, especially in retail sales (forecasted to rise 3.8% year-on-year), suggest that stimulus measures may be having a positive effect on China’s economy. However, ongoing US-China trade tensions could influence both economic performance and market sentiment if Trump follows through on tariff promises.

Global Outlook: Economic Data to Guide Market Sentiment
As investors pivot back to economic fundamentals, market sentiment in the coming week will be shaped by the latest GDP, inflation, and trade data from key economies. The US and China’s inflation trends, along with Europe’s growth figures, will likely dictate market performance in the near term, as well as the broader economic trajectory for the rest of 2024.