In the coming week, the most important market events in the country will include the Friday structure of the inflation reading for September and the current account balance for August. On Tuesday, the Ministry of Finance will hold a bond sale auction. World markets will closely monitor news following the Hamas attack on Israel. The situation in the Middle East may cause a return to risk aversion. This week, the International Monetary Fund will publish new macroeconomic forecasts.
According to flash estimates, in September inflation dropped to single-digit levels (to 8.2% from 10.1% in August), which the president of the National Bank of Poland described at the last press conference as a “moderate” price increase. On Friday, the Central Statistical Office will provide details of the CPI reading for the previous month.
Inflation and trade balance
“From preliminary data, we already know that non-core components (food, fuels, energy) were responsible for 1.2 percentage points of the decline of 1.9 percentage points. In turn, core inflation, which, according to our estimates, regressed from 10.0 percent yoy to 8.5-8.6 percent, fell due to a mix of cyclical, weather-related factors (delayed entry of a new clothing and footwear collection) and discretionary factors (e.g. changes in access to free medicines). Determining which of them had the strongest impact will be important for determining the prospects for a further decline in inflation,” Santander economists point out.
According to the latest NBP forecasts, presented last week by President Glapiński, inflation is expected to reach 6-7% at the end of the year and reach 5% in mid-2024.
As for other macro data, the NBP will release on Friday at 14.00 current account balance for August. PKO BP economists expect another C/A surplus of just over EUR 500 million, compared to EUR 566 million in July, due to the continued improvement in Poland’s trade balance.
The Ministry of Finance organizes a bond auction
On Tuesday, the Ministry of Finance will hold the first of two debt sale auctions planned for October. The Ministry of Finance will offer for sale on October 10 bonds with a total value of PLN 5-9 billion, OK1025, WZ1128, WS0429, DS1033 and WS0447 series. The Ministry of Finance has not decided to issue securities based on the WIRON rate, although in the monthly supply plan the ministry informed that such a possibility was possible.
The Warsaw Stock Exchange will focus on the results of CCC on Wednesday, and on Thursday of Pepco.
Parliamentary elections in Poland
Before the election silence (valid from midnight on Friday to Saturday), the market may react to the results of the latest polls, in which PiS is leading with a few percent advantage (36% according to the aggregated results of polls collected by Politico), ahead of KO (30%) and Trzecia Droga and the Left (10 percent each) and the Confederation (9 percent).
On Sunday, October 15, Poles will choose the composition of the new Sejm and Senate. Polling stations will be open from: 7.00 – 21.00. Immediately after the end of voting, the results of the exit poll will appear in the media.
A week on markets around the world
From the beginning of the week, risk aversion may return to global markets due to the increase in geopolitical tension in the Middle East after the Hamas attack on Israel. The International Monetary Fund will publish new macro forecasts, and representatives of the American central bank have planned numerous speeches. The President of the European Central Bank will also speak. The third quarter earnings season is starting in the US.
Hamas attack on Israel
The beginning of the second week of October on world markets will be marked by the reaction to the increase in political and military tension in the Middle East over the weekend, after the largest attack on Israel by the terrorist organization Hamas in years. As a result, at least several hundred Israeli citizens died, and according to the Tel Aviv authorities, the counterattack on Hamas targets in the Gaza Strip and defensive operations resulted in casualties also numbering in the hundreds. The Israeli Security Cabinet decided on the night from Saturday to Sunday that the country was officially at war.
The increase in geopolitical risk may favor, in the short term, an increase in demand for assets traditionally considered safe, such as the US dollar or the recently heavily sold out Treasuries, as well as gold. Oil prices will also be in the spotlight. Before the weekend’s events, Israel and one of the main players on the oil market – Saudi Arabia – were close to establishing official diplomatic relations, which was also something the US administration wanted.
Even before the weekend’s events, Moody’s planned to publish the results of the cyclical review of Israel’s rating on Friday.
Central bank meetings
Against the background of the development of a new, potential conflict in the Middle East, the market will follow numerous planned speeches by representatives of the American Federal Reserve in the coming days, as well as the president of the ECB, Christine Lagarde (Tuesday and Friday). They will be analyzed in the context of the publication of descriptions of discussions from the last meetings of both central banks (Wednesday – Fed, Thursday – ECB).
The Fed left interest rates unchanged at its September meeting. unchanged at 5.25-5.50 percent. The bank’s communication accompanying the decision was interpreted as a “hawkish pause”, and subsequent data coming from the US confirmed the market’s belief that the Fed has not necessarily ended the cycle of rate increases.
The ECB, in turn, officially signaled in September, although the biggest hawks in the Governing Council disagree, that after the last rate increase by 25 basis points. (deposit rate 4.0%), they will continue to be kept unchanged (sufficiently restrictive) for a longer period of time. In the coming days, the final inflation readings from individual monetary union countries for September will be helpful in analyzing the current price processes in the euro zone.
International Monetary Fund meeting
The annual meetings of the World Bank group will be held from Monday to the end of the week in Marrakesh, Morocco. On this occasion, the International Monetary Fund will publish new macroeconomic and fiscal forecasts for the world’s major economies, including Poland, on Tuesday and Wednesday.
The calendar includes many interesting items from macro publications. In the CEE region, the Czech Republic and Hungary will publish CPI data, and minutes from the last meeting of the central bank will also be published on Lake Balaton.
The prospects for global (dis)inflation will be outlined by Friday’s inflation reading from China (for September), but a potentially stronger market reaction in this respect may be triggered by Thursday’s publication of the US CPI for September. The market expects a reading of 0.3%. mdm and 3.6 percent y/y vs. 0.6 and 3.7 percent a month earlier, and in base terms 0.3 percent. mdm (the same as the month before) and 4.1 percent y/y vs. 4.3 percent
“In light of the recent alarmingly rapid increase in US bond yields posing a risk to the stability of global markets, a surprise from these data on the lower side would be welcome,” Santander Bank economists comment.
On the stock exchanges, in addition to the reaction to the situation in Israel and its region, the beginning of the third quarter earnings season in the US will be in focus. Traditionally, large financial institutions will be among the first to publish reports: JPMorgan Chase, Citigroup, Wells Fargo, BlackRock (on Friday), as well as PepsiCo (Tuesday), Delta Airlines, and Dominos Pisa (Thursday).
The 2023 Nobel Prize in Economics will be awarded on Monday.
Main photo source: Reuters