Everything is ready to make the last week of October extremely volatile, not a good news for a long-term investor but may be the best time for a short-term trader. This week may show that the U.S. economy, the largest in the world, is shrinking and it may make sense to bet on fear and uncertainty when all economic data from consumer spending, manufacturing sector, and housing market are projected to be disappointing.
Paulson on the Radar
U.S. Treasury is likely to unveil new plan to prevent credit crisis from deepening by injecting capital in a wider range of firms such as regional banks and insurers. Any announcement, regardless of the final impact, would certainly create volatility across all financial markets.
FOMC Rate Decision
Federal Open Market Committee is to set interest rate on Wednesday and it seems that anything less than half a percent cut would make the market disappointed. A report from the Commerce Department at the same day may show that orders for durable goods declined in September reflecting that manufacturing are scaling back in response to weak demand.
GDP and Personal Consumption
Thursday is probably the most important day of the week when the U.S third quarter GDP will be released along with Personal Consumption data. Analysts want to see how bad the economy was hit before the credit crisis started to be intensified. Personal Consumption, which accounts for two thirds of the economy, is estimated to decline as much as 1.2 percent annually but a significant surprise on upside, which some analysts see it possible, could bring some relief to the market.
Inflation in Euro-area
Data may show that inflationary pressures have eased as the economy cools across the Europe. Any decline in CPI and PPI could be encouraging especially at this time when central banks around the world have inevitably focused on gross than price stability. However be ready for the German Retail Sales on Friday which is expected to show that the consumers are increasingly cutting back on spending.
Crude oil continued to fall last week on economic outlook even after the OPEC’s decision for a 1.5 Mb/day cut in production. Earning season continues in this week and any guidance from major oil companies, such as ExxonMobil and Royal Dutch Shell, could work as a proxy for the market to anticipate that how dip the recession might be.