LONDON, Oct 9 (Reuters) – The IMF-World Bank meetings take place in Bangkok against a backdrop of high energy costs and rising central bank rates, while the latest US and China data, Wall Street earnings and turbulent bond markets point to a packed week ahead.
Here’s all you need to know about what’s coming up in financial markets by Tatiana Bautzer and Lewis Krauskopf in New York, Rocky Swift in Tokyo, and Marc Jones and Dhara Ranasinghe in London.
1/ IMF’S ASIA GETAWAY
The IMF and World Bank annual meetings go on tour to Bangkok next week with three themes front and centre: growth, debt and geopolitics.
Market focus is on Tuesday’s updated IMF World Economic Outlook given the Iran war has already forced two cuts to its global GDP forecast this year. IMF chief Kristalina Georgieva has signalled it won’t make easy reading given sky-high energy prices, record public debt and tetchy bond markets.
Fractured and fractious geopolitics, including conflicts in the Middle East and Ukraine, will feature prominently, as will how to regulate AI given an arms race between the US and China.
Senegal’s recently announced debt rework plan is likely to get attention from IMF crisis watchers too, although they will have more than half an eye on whether France is dragging the euro zone back in that direction as well.
2/ A TEST FOR RATE BETS
A fresh look at US inflation on Wednesday will be among the last key data released before the Federal Reserve decides whether to hike interest rates again to contain high prices.
The September consumer price index is set to show a 0.6% rise on a monthly basis. The core measure, excluding volatile energy and food components, is estimated to increase just 0.2%, according to a Reuters poll.
Thursday’s producer price numbers will further flesh out the inflation picture. Retail sales data is also out that day.
Core CPI for August rose at its fastest pace in four months, helping cement the Fed’s first rate hike since 2023.
Bets on another hike when the Fed meets in late October have fallen back. A hot CPI report could change that.
3/ WHICH WAY TO WALL STREET?
It’s the start of the Q3 US earnings season and who better to kick things off than the banks?
Four of the six largest US lenders, JPMorgan Chase, Goldman Sachs, Citigroup and Wells Fargo, report on Tuesday, followed a day after by Morgan Stanley and Bank of America.
Earnings are expected to rise up to 20% relative to last year. Still, the surge in Treasury yields to multi-decade highs has hurt shares – the KBW Bank Index is down around 13% from its peak in August.
Investors will be looking for signs that the recent spike in government borrowing costs may curb dealmaking and lending growth, as well as pressure funding costs across the industry.
4/ MADE IN CHINA
Chinese data on Wednesday will show whether AI-related exports are still propping up an economy hobbled by anaemic demand at home.
Overseas shipments from the world’s second-largest economy have logged double-digit growth for four straight months on surging global demand for AI goods, electric vehicles, solar cells and lithium-ion batteries. But a prolonged property slump has kept domestic consumption in the doldrums.
Exports are forecast to have jumped 25.3% year-on-year in September in dollar terms, according to a Reuters poll, up from 25% in August. Imports are projected to show 23.5% growth versus 28.2% previously.
Separate figures the same day are expected to show continuing price pressures related to the Iran war. The producer price index is forecast to have risen to 4.4% in September from 3.8% the previous period, while consumer inflation may have edged up to 1.1% from 0.8%.
5/ TO CATCH A FALLING KNIFE
Surging government borrowing costs are clearly luring some investors back to bonds as evidenced by the strong demand at the latest US and Japanese auctions.
But do you really want to catch a falling knife?
That’s the question for traders in the coming week as the bond selloff shows few signs of abating.
US and French bond yields have hit fresh 24-year highs and market volatility is high.
The French-German 10-year bond yield spread, at around 136 basis points, was below 100 bps a month ago. The speed and scale of the rise in the French risk premium is hurting Italian peers, the euro and European shares.
It’s also led to some finger-pointing at the role of hedge funds – that fast-money group that has stepped up its presence in systemically important bond markets of late.
(Graphics by Kripa Jayaram; Compiled by Dhara Ranasinghe; Editing by Jamie Freed)
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