Top Global Macro Event Risk This Week: China Industrial Profits; US Inflation in PCE Deflator; India and Turkey GDP

Top Global Macro Event Risk This Week: China Industrial Profits; US Inflation in PCE Deflator; India and Turkey GDP

Talking Points:

• Liquidity will be stifled over the coming week with the US market a notable gap owing to the Thanksgiving holiday closure
• Broader macro themes seem to have lost a significant amount of weight as far as dictating market trends, which shifts the focus to acute and local impacts from key events
• China’s economic course via industrial profits, the Fed’s favorite inflation indicator and key emerging market 3Q GDP releases are top event risk this week

Given the market’s disconnected activity relative to the common systemic themes of rate forecasts and earnings, expectations for the impact potential of scheduled event risk should be modified. Though we are looking at the US markets going offline for Thanksgiving on Thursday, there is still quite a significant range of meaningful event risk from the US and other major regions ahead. Nevertheless, we will be fighting underlying issues like the expectations for one of the lowest weeks of volume of the year and a sense of ‘stretched’ conditions from the likes of the US indices and dollar.

Chart of S&P 500 Average Weekly Performance and Volume for Past 100 and  75 Years (Daily)

Source: TradingView, John Kicklighter

 

Nevertheless, there are unresolved macro issues in the backdrop and events that can readily stir these themes to life. First up is the ongoing debate around the health of the second largest economy in the world: China. Through the end of this past week, the Shanghai Composite recorded its second biggest daily drop in 18 months (after the October 9th post-holiday stimulus reopen). Through the veil of skepticism that surrounds official data from China, the Wednesday morning report of China’s industrial profits for October will carry more weight as an update that has more international accounting practices to check against.

In the hierarchy of top Chinese releases for market impact, this isn’t the top spot; but it isn’t very far from the peak. For scenarios, a weaker reading with the context of stimulus and expectations of US pressure with a Trump revival of trade wars is likely to generate a stronger response everything else set equal.

Chart of Shanghai Composite and FXI China Large Cap ETF with Correlation (Daily)

Source: TradingView, John Kicklighter

 

Another top fundamental event scheduled for release Wednesday is the US PCE deflator for the month of October. While most market participants – and media – prefer the earlier CPI release, the Fed’s preferred measure of inflation is the monthly PCE reading. Over the past few weeks, expectations for Fed cuts out through end of year 2025 has significantly dropped from their peak in July. Through the month of November, the probability that the Fed may not actually ease for a third consecutive meeting has gained tangible traction.

A 25 bps cut is the most probable outcome next month, but this reading could materially change the needle on that speculation. That said, even as the possibility of rate speculation shift presents itself, the threshold for a meaningful volatility response will be substantially higher given that this indicator crosses the wires just before the US holiday drain. The potential for volatility is there – though not the highest probability – but follow through would require a remarkably deviation from forecasts.

Chart of Implied FOMC Rate at End of 2025 from Futures Vs FOMC Forecasts (Daily)

Source: TradingView, FOMC Summary of Economic Projections, John Kicklighter

 

What should we be looking at for market movement around and after the US holiday liquidity drain over the coming week? Either the market moving impact needs to be particularly high or the distance from the influence of the dominant developed economy needs to be distinct. That said, updates like Eurozone CPI, Japanese industrial production and German unemployment will carry higher thresholds to real market movement. Pulling a little further away from this epicenter of developed world distraction, there are a number of emerging market GDP releases due through Friday’s session.

Setting aside Switzerland’s 3Q GDP release Friday and its Canadian equivalent Thursday, India and Turkey – that’s the 5th and 17th largest economies by GDP respectively – will report their respective economic updates on Friday. These readings will not necessarily offer a clear reflection on the global compass setting, but they could very well influence the broader emerging market segment and certainly localized Indian and Turkish assets.

Table of Major Global Macro Events Scheduled for Week

Source: John Kicklighter, StoneX

 

-- Written by John Kicklighter, Global Head of Content