Top 5 Market Trends to Watch Next Week

Investors Look Ahead: Insights for the Coming Week

As the new week begins, investors anticipate fresh indicators regarding the potential scale of the next Federal Reserve rate cut, coinciding with the release of the latest US jobs report and comments from Fed Chair Jerome Powell. The final quarter of a tumultuous year for markets is now underway, and here’s what to expect.

1. US Jobs Report
   The Federal Reserve initiated its rate-cutting cycle with a significant 50 basis point reduction earlier this month, but the labor market remains a critical focus for investors assessing how swiftly the central bank may lower rates in the upcoming months. The Labor Department is set to unveil the October nonfarm payrolls report on Friday, with economists forecasting the addition of approximately 144,000 jobs. Investors are eager to determine if the employment data will bolster optimism for a soft-landing scenario where inflation is managed without severely hindering growth. Weaker-than-expected results could reignite recession concerns, while unexpectedly robust job gains might raise fears that the Fed will adopt a more cautious stance on rate cuts to avoid triggering inflation.

2. Powell’s Remarks
   Fed Chair Jerome Powell will deliver remarks on the economic outlook before the National Association for Business Economics on Monday. Analysts from Deutsche Bank predict that his comments will largely align with those made during his post-meeting press conference, emphasizing the confidence in combating inflation and acknowledging downside risks, particularly in the labor market. Additionally, several other Fed officials, including regional presidents, will share their perspectives throughout the week. Key reports to watch ahead of Friday’s jobs data include Tuesday’s JOLTS report and Wednesday’s ADP data, both providing insights into the labor market’s current state.

3. Fourth Quarter Begins
   The fourth quarter kicks off on Tuesday, following a rollercoaster few months in the markets. Recent volatility stemmed from the unwinding of the yen carry trade coinciding with recession fears triggered by a disappointing US jobs report. However, stocks have rebounded to reach record highs. The yen is poised for its strongest quarterly performance since the 2008 financial crisis, while benchmark global borrowing costs and oil prices have both declined nearly 15%. China is also ramping up its stimulus measures, setting the stage for potential market movements. The upcoming November US election between Donald Trump and Kamala Harris is likely to contribute to further volatility.

4. Eurozone Inflation
   On Tuesday, the Eurozone will release preliminary inflation data for September, which will be closely monitored as European Central Bank (ECB) officials deliberate on possible rate cuts in October. Economists expect the annual inflation rate to decrease to 1.9%, falling below the ECB’s 2% target for the first time since June 2021 due to lower energy prices, though a rise is anticipated as the year closes out. Investors are currently pricing in slightly over a 50% likelihood of a 25 basis-point rate cut next month, a change in sentiment from just a week ago as eurozone business activity unexpectedly contracted in September.

5. Oil Prices
   Oil prices experienced a slight increase on Friday but finished the week lower as investors weighed expectations for rising global supply against new stimulus from China, a major crude importer. For the week, Brent crude settled down approximately 3%, while crude futures dipped around 5%. The People’s Bank of China recently announced new stimulus measures aimed at boosting economic growth, targeting an approximate 5% increase for the year. However, concerns surrounding oversupply persist, particularly with reports indicating that OPEC+ intends to boost production by 180,000 barrels per day starting in December. Additionally, escalating tensions in the Middle East continue to raise the risk of supply disruptions, maintaining pressure on the oil market. Energy traders will be closely monitoring labor market data, as interest rate cuts generally stimulate economic activity and energy demand.