Week Ahead: Economic Indicators (EU)

Hey, Traders!
For the November 4th week, here is a list of all of the major economic indicators being released during the EU Session, with a brief synopsis of what they represent and what to possibly expect from the markets in reaction.

Tuesday 5th November
04:30 ET
UK PMI
The Services Purchasing Managers’ Index (PMI) provides an estimate of service sector business activity for the preceding month by using information obtained from a representative sector survey incorporating transport and communication, financial intermediation, business services, personal services, computing and IT and hotels and restaurants. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) activity versus the previous month and the closer to 100 (zero) the faster is activity growing (contracting)
80% of the UK’s GDP is based on services.
The Composite PMI Index measures the activity level of purchasing managers in both sectors (manufacturing and services). A reading above 50 indicates expansion in the sector; a reading below 50 indicates contraction.
A higher than expected reading should be taken as positive/bullish for the GBP, while a lower than expected reading should be taken as negative/bearish for the GBP.

What to expect:
The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.
A higher than expected reading should be taken as positive/bullish for the GBP, while a lower than expected reading should be taken as negative/bearish for the GBP.

Wednesday 6th November
02:00 ET
German Industrial Orders
Manufacturers’ orders are a leading indicator for industrial production. The figures are calculated every month by the Federal Statistical Office and represent the value of all orders for the delivery of self-made products confirmed by industrial enterprises with 50 or more employees in the respective reporting period. 

What to expect:
Manufacturers’ orders data are keenly awaited by analysts each month. The data present a detailed breakdown by various sectors and a reading of the pulse of a major sector of the economy. Like the PPI, manufacturing orders data exclude construction, which is the preferred Eurostat measure.
A higher than expected reading should be taken as positive/bullish for the EUR, while a lower than expected reading should be taken as negative/bearish for the EUR.

03:55 ET
German Services PMI Final
The German Services Purchasing Managers’ Index (PMI) measures the activity level of purchasing managers in the services sector. The report is based on surveys of over 300 business executives in private sector services companies.
German Composite PMI
The Composite Purchasing Managers’ Index (PMI) provides an estimate of private sector output for the preceding month by combining information obtained from surveys of around 1,000 manufacturing and service sector companies. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) output versus the previous month and the closer to 100 (zero) the faster is output growing (contracting). The report also contains the final estimate of the services PMI.

What to expect:
A higher than expected reading should be taken as positive/bullish for the EUR, while a lower than expected reading should be taken as negative/bearish for the EUR.

Thursday 7th November
02:00 ET
German Industrial Production
Industrial production measures the physical output of the nation’s factories, mines and utilities. Data are collected from companies in the sector with fifty or more employees and include mining and quarrying, manufacturing, energy and, in contrast to its Eurozone counterpart, construction.

Investors want to keep their finger on the pulse of the economy because it usually dictates how various types of investments will perform. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers more subdued growth that will not lead to inflationary pressures. By tracking economic data such as industrial production, investors will know what the economic backdrop is for these markets and their portfolios.
What to expect:
This report has a big influence on market behaviour. In any given month, one can see whether capital goods or consumer goods are growing more rapidly. Are manufacturers still producing construction supplies and other materials? This detailed report shows which sectors of the economy are growing and which are not.

UK Halifax House Prices
The Halifax House Price Index (HPI) is the UK’s longest running monthly house price measure with data covering the whole country going back to January 1983. The index is based on the largest monthly sample of mortgage data, typically covering around 15,000 house purchases per month, and covers the whole calendar month.

Home values affect much in the economy – especially the housing and consumer sectors. Periods of rising home values encourage new construction while periods of soft home prices can damp housing starts. Changes in home values play key roles in consumer spending and in consumer financial health. During the first half of this decade sharply rising home prices boosted how much home equity households held. In turn, this increased consumers’ ability to spend, based on wealth effects and from being able to draw upon expanding home equity lines of credit.

What to expect:
A higher than expected reading should be taken as positive/bullish for the GBP, while a lower than expected reading should be taken as negative/bearish for the GBP.

07:00 ET
BoE Bank Rate
The Bank of England’s monetary policy committee members vote on where to set the rate.
What to expect:
The Pound might rally if the BoE is showing an inclination to raise interest rates. How much the pound might move depends on if the Foreign Exchange Markets have taken these hikes into consideration. If they have taken it into consideration then the Dollar movement may be minimal.
The relationship between stock prices and the BoE interest rate is quite direct when rates rise or hinted that they will be. Higher rates might dampen inflation pressures, but rate hikes also increase the cost of doing business and could cut profit margins.
Investors might flee the long bonds if rates rise as it could confirm that inflation is on the rise and they may instead chase the shorter-term securities. As the sale of bonds accelerates their yields will rise, once investors grow confident that the monetary policy is working and inflation appears steady, they switch to buying bonds again to lock in the highest yield possible.