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Fundamental Analysis of the Europe and United States Stock Markets for October 31, 2022 –


What can we expect from the Federal Reserve this week?

As far as the FOMC meeting is concerned, we don’t think there will be any surprises, and they will increase their benchmark interest rates by 75 basis points, as expected by almost all analysts. However, and given that the dot plot of FOMC members will not be available on occasion, we believe that the subsequent press conference by Fed Chairman, Jerome Powell, will serve to clear investors’ doubts about upcoming rate hikes. can.

Some weaker-than-expected macroeconomic data in the US prompted investors with the possibility that the Fed would reduce December rate hikes to 50 basis points instead of 75 basis points.

In fact, we believe that the release of these weak macro data (PMI Manufacturing, Consumer Confidence) has contributed to the gains that have been seen in both the European and US indices in recent weeks.

However, inflation and its core are well above the Fed’s 2% target, and for this reason, we believe that Powell will maintain his fiery tone and signal that the central bank will continue to raise rates consistently, and for this reason, they will continue to raise rates until inflation falls. Will keep it high ,

If, moreover, Powell reiterated the Fed’s intention to raise rates by 75 basis points in December, that confirmation could come as a “jug of cold water” to investors. We will find out on Wednesday when the two-day FOMC meeting will end.

macro agenda of the day

Note that the macroeconomic agenda of the week is particularly intense. Thus, today, investors will have access to the publication of preliminary readings of the CPI for October in the euro zone, as well as preliminary readings of GDP for 3Q2022 for both the euro zone and Italy. In addition, retail sales for both Germany and Spain will be published for the month of September. In the afternoon, the Chicago PMI and Dallas Manufacturing Index in the US will be published.

Tomorrow, Tuesday, the first day of the FOMC meeting, investors will have the final reading for manufacturing activity indices for the manufacturing sector for October, PMI for both the UK and US. The same index will also be published in the US, but will be produced by the Institute for Supply Management (ISM) in the same month. Always relevant data on job offers (JOLTS) for September will provide us with more insight into the strength of the US labor market.

On Wednesday, in addition to the FOMC results, investors will have the publication of the final readings for October of the activity indices for the euro zone and its main economies, Germany, France, Italy and Spain, confirming the contraction of your initial gains. Reading. In addition, investors will rely on the publication of private employment data for October prepared by payroll processor ADP, which will confirm the good health of the US labor market.

On Thursday we highlight the Governing Council meeting of the Bank of England (BOE), which is expected to continue raising its interest rates by 75 basis points, following in the footsteps of the Fed and ECB. To reduce inflation and its underlying, which also remains high in the country. In addition, investors will have final readings for October of activity indices for the services sector, PMI services, the United Kingdom and the United States, in addition to the non-manufacturing ISM for the same month, which are more relevant. for their greater relative weight in GDP.

To end the week, it should be noted that on Friday, investors will have access to US non-farm employment data for the month of October, and updated unemployment rates, as well as final data on services sector activity indices for October, PMI. Services of the Euro Zone and its major economies.

This is all drawn in the middle of trading results season on both sides of the Atlantic, and which will have a wider and wider representation over the course of the week, as we see daily in our day’s events section.

An intense week with all kinds of context for investors, and which could lay the foundation for the future development of equity indices in the coming weeks, pending mid-term elections in the US.

Estimates for 31 October 2022

To begin with, we expect European equity indices to open flat or slightly higher today in light of Friday’s strong gains on Wall Street, which continued this morning in major Asian markets. Next, the macroeconomic data is indicated, and the quarterly results to be published will steer the markets in one direction or another, which, along with the opening of Wall Street, will determine the direction of the session’s closing.

This article was written by Juan Jose Fernández Figares for LinkSecurities.

To see all the economic events of the day, we recommend that you visit our economic calendar.

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