THE world’s biggest economy is entering a marathon week that spans a presidential election, a meeting of the Federal Reserve and the latest snapshot of the coronavirus-hit labor market.
All have the potential to roil markets with the main event being Tuesday when Americans decide whether to re-elect President Donald Trump or back Democrat Joe Biden.
Biden is leading in the polls, having pledged to ramp up government spending to pay for extending virus unemployment benefits and investing in projects such as infrastructure and green energy. The bill will be covered by higher debt and taxes on the wealthy and companies.
Trump, meanwhile, wants to spend the next four years cutting taxes and regulations, while continuing to battle China over its trade and technology practices.Whoever wins, much will depend on the vote for representatives in Congress. Pundits are increasingly predicting a "blue sweep” in which Democrats secure the White House and both congressional chambers.
That could bode well for large additional fiscal stimulus measures, which have gotten held up in stalemates between the Trump administration and Democratic leaders in Congress in the past few months, contributing to concerns about a slowdown in some parts of the economy.
Easier fiscal policy would be welcomed by the Fed, whose policy makers begin their regular meeting a day later than normal, on Wednesday, to account for the election. They will deliver a statement at 2 p.m. Washington time on Thursday followed 30 minutes later by Chair Jerome Powell’s press conference.
The central bankers are widely expected to hold fire on any additional stimulus measures in the midst of the election. Powell may though leave the door open to adjusting Fed bond purchases at a later meeting, perhaps as soon as December.
The U.S. economic data calendar won’t give any respite. A manufacturing gauge will kick off the week showing a continued recovery in that sector.
Friday’s jobs report is expected to show another tick down in the unemployment rate, though tepid payroll gains may show a plateauing of the workforce recovery.
What Bloomberg’s Economists Say...
"The fate of the next round of fiscal measures remains highly uncertain going into the next year, as economic data continue to surprise to the upside. Yet macro stability obscures deepening pain at the micro level. Upbeat financial conditions are centered among higher-income households, while the deepening pain for lower-income households -- those most likely to have been affected by the crisis -- requires immediate fiscal action.”
Europe, Middle East, Africa
The Bank of England looks set to unveil a fresh round of bond purchases to help the economy through another wave of virus infections and restrictions.
The BOE on Thursday is expected to increase bond purchases by 100 billion pounds, bringing the central bank’s asset-purchase target to 845 billion pounds, almost double the level at the start of the year. Policy makers, led by Andrew Bailey, are also expected to cut their forecasts for growth in 2020 and 2021.
Final PMI readings for the euro area and the U.K. earlier in the week are likely to reinforce a dire outlook for the economy.
Elsewhere in the region, central banks in Norway, Poland and the Czech Republic are forecast to hold interest rates.
Data on Thursday will probably show inflation in quickened in Turkey last month. The central bank has raised its price-growth projections for the end of the year after a series of interest-rate decisions failed to bolster a lira weakened by policy steps and international spats.
On Friday, Russia also reports October inflation, revealing how much the ruble’s plunge has set back the central bank’s efforts to control price growth. In South Africa, data may show the central bank continued to wind down purchases of state debt in the secondary market.
Week Ahead for EMEA Asia
South Korea’s full month trade figures for October kick off the week early with the latest gauge of the strength of demand in the global economy. PMIs from across the region on Monday will give further clarity on how the supply side of the equation is faring.
RBA Expected to Deliver Further Policy Easing
Australia’s central bank is expected to add another dose of stimulus when it meets on Tuesday, though economists aren’t sure what the actual policy mix will look like. The RBA will get a chance to expand on its thinking and revise forecasts when it releases its quarterly statement on monetary policy on Friday. Malaysia will also set policy Tuesday.
Indonesia releases third quarter GDP data on Thursday. China releases October trade data on Saturday.
For more, read Bloomberg Economics’ full Week Ahead for AsiaLatin America
Chile was just shaking off last year’s massive civil unrest when the pandemic struck and is now embarking on the fraught process of drafting a new constitution. The September economic activity report out Monday may show the best results since March.
Tuesday brings the minutes of last week’s central bank meetings in Brazil and Colombia: While both opted to keep key rates at record lows as expected, the dovish tone to Brazil’s post-decision statement did turn heads.
Brazil’s industrial production report out Wednesday may see positive monthly and annual readings for the first time since last October.
Consumer price reports from Colombia, Chile and Brazil round out the week. Nowhere is inflation yet a concern even if Brazil’s annual rate proves to have doubled since May.
Week Ahead for Latin America, Canada
The monthly employment report is due Friday. After five straight months of monster job gains, Canada’s labor market rebound probably slowed down sharply in October as authorities began locking down parts of the economy again amid a second wave of Covid-19 cases. - Bloomberg