US – Focus on data while Fed on hold
The Fed will likely keep rates unchanged at Wednesday’s meeting and, without new projections, our focus lies on the labour market data, consumer confidence and ISM manufacturing and services. The non-farm payroll (NFP) on Friday will be the most important print, and consensus forecasts 175k compared to the strong print of 336k last month. Consumer confidence and ISM services are set to fall, while ISM manufacturing is seen to stay unchanged. We think growth will slow materially from the high Q3 GDP print of 4.9% last week, whereby Bloomberg’s Nowcast currently estimates 1.1% for Q4.

Eurozone – ECB done amid bleak outlook
The ECB left its policy unchanged after ten consecutive meetings of hikes, emphasizing that rates are at sufficiently restrictive levels, while striking a cautious tone at the press conference. Monetary policy continues to transmit more forcefully than expected, as last week’s Bank Lending Survey confirmed, and PMIs fell again from 47.2 to 46.5. However, amid no discussions around PEPP and minimum reserves, BTPs and bank stocks reacted with relief. Consensus expects core inflation to fall from 4.5% to 4.2% this week, which will underscore that the ECB is done.

Earnings Season – Reflecting macro divergence
The earnings season so far mirrors the worsening of the economic outlook and gives macro investors cues as to where headline data releases may be heading in Q4. European companies are generally doing worse than US ones amid the Eurozone’s worse macro backdrop. Across sectors, industrials and consumer discretionary stocks are issuing the most profit warnings – most of which are in the UK. According to JPM, Q3 EPS growth fell -8% YoY in Europe, while growth still rose +12% YoY in the US.

Algebris Investments’ Global Credit Team