Key focus this week: China's official PMI and Caixin Manufacturing PMI for October, US PCE Price Index for September and Non-Farm Payrolls report for October, Bank of Japan interest rate decision, Eurozone GDP preliminary estimate for the third quarter, Apple's smart unveiling with iOS 18.1, and financial reports from tech giants such as Apple, Google, Microsoft, etc
A summary of major financial events from October 28th to November 1st, all in Beijing time:
Key focus this week: China's official PMI and Caixin manufacturing PMI for October, US September PCE price index and October non-farm payrolls report, Bank of Japan interest rate decision, Eurozone preliminary GDP for the third quarter, Apple's smart iOS 18.1 debut, and financial reports from tech giants such as Apple, Google, and Microsoft.
Additionally, Hong Kong released its GDP for the third quarter, the US published October ISM manufacturing index, third-quarter GDP, and PCE price index annualized quarter-on-quarter initial values, the Eurozone released October CPI, and companies like McDonald's, Pfizer, Eli Lilly, Ford, Samsung, Li Auto, among others, announced their latest financial reports.
China's Official PMI and Caixin Manufacturing PMI for October
On Thursday (October 31st), the National Bureau of Statistics released the official PMI for October.
Last month's data showed that in September, the official manufacturing PMI rose to 49.8, staying below the boom-bust line for five consecutive months, while the non-manufacturing business activity index slightly dropped by 3 percentage points to 50.
Zhao Qinghe, senior statistician at the National Bureau of Statistics Service Industry Survey Center, interpreted the September manufacturing PMI data as follows:
By industry, the production and new order indices of industries such as pharmaceuticals, automobiles, electrical machinery and equipment, and computer communication electronic devices were all in the expansion zone, with production and demand being released relatively quickly; the production and new order indices of industries such as petroleum, coal, and other fuel processing, as well as black metal smelting and rolling processing, have been below the critical point for two consecutive months, indicating a slight slowdown in production and demand.
According to Guo Lei from GF Securities, September is traditionally a peak season for industries, with negative growth on a month-on-month basis only occurring twice in the past 20 years; similarly, the end of summer travel and the upcoming National Day holiday have led to the service industry being in the off-season in September.
Guo Lei believes that based on the September PMI data, orders performed weaker than production. Export orders declined month-on-month, but single-month fluctuations cannot represent export trends. Looking at the BCI data, the forward-looking sales index of enterprises has declined, indicating that companies are still cautious about the demand sideOn Friday (November 1st), S&P Global released the Caixin Manufacturing PMI for October.
The data released last month showed that due to weakening potential demand, China's manufacturing PMI fell to 49.3 in September, returning to contraction territory, marking the lowest level since August 2023.
Among them, the growth rate of new orders recorded the largest decline in two years, and export orders also contracted. The new order index for September manufacturing fell below the boom-bust line, marking the lowest value since October 2022, with the most significant decline seen in demand for investment goods.
Fed's Inflation and Employment Indicators Join Hands to "Stir Up the Market"
On Thursday (October 31st), the US Bureau of Economic Analysis released the September PCE Price Index year-on-year and month-on-month data.
The data released last month showed that the US core PCE price index rose by 0.1% month-on-month in August, hitting a new low since May, with expectations at 0.2% and the previous value at 0.2%; it rose by 2.7% year-on-year, reaching a new high since April, indicating a steady cooling of inflation, which is basically in line with market expectations.
However, the October CPI data released at the beginning of October exceeded expectations across the board, with the US CPI rising by 2.4% year-on-year in September, slightly slowing down from the previous value of 2.5%, but exceeding the expected value of 2.3%; the core CPI in September (excluding the volatile food and energy costs) rose by 3.3% year-on-year, slightly exceeding expectations and the previous value of 3.2%; it rose by 0.3% month-on-month, higher than the expected 0.2%, reaching the highest level since March.
Currently, economists generally expect that the year-on-year growth rate of the US PCE price index in September will slightly decrease from 2.2% to 2.1%, and the year-on-year growth rate of the core PCE price index will also fall by 0.1 percentage point to 2.6%, getting closer to the Fed's 2% inflation target.
On Friday (November 1st), the US Department of Labor released the October non-farm payrolls report.
Currently, the median expectation of economists surveyed by Bloomberg shows that the number of new non-farm jobs in October will halve from 254,000 to 120,000, and the unemployment rate will remain at 4.1%, indicating a significant cooling in the labor market.
The previously higher-than-expected inflation data, coupled with the strong performance of the US non-farm payrolls report in September, have sparked discussions on whether the Fed will reduce the rate cut at the November interest rate meeting or even pause the rate cut.
If this week's released PCE price index and non-farm data cool down as expected, it may reignite expectations of a significant rate cut.
In recent public speeches, Fed Chairman Powell once again emphasized the importance of the labor market.He expressed hope that the job market will no longer weaken at this time. Commentators believe that as the inflation rate is expected to rise to 2%, the Federal Reserve will not welcome further declines in job growth.
BOJ Expected to "Stay Put"
On Thursday (October 31), the Bank of Japan announced its latest interest rate decision, expecting to maintain the policy rate level in the range of 0.15% to 0.25%.
Currently, Wall Street generally expects the next rate hike to be in December or January, with about 53% of people expecting a rate hike in December, and the number of people expecting a rate hike in January jumping from 19% to 32%.
Recently, BOJ Governor Haruhiko Kuroda hinted to the media that there will be no rate hike at the November meeting, stating that there is still enough time to formulate policies. He said:
"We need to consider comprehensively, not only focusing on the depreciation of the yen, but also carefully studying the impact of the U.S. economic trends on Japanese inflation - which may be related to the U.S. presidential election."
At 2:30 pm on the same day, Kuroda will hold a monetary policy press conference, with the market focusing on how the inflation forecast for the 2024 fiscal year will be adjusted, and Kuroda's statements on rate hikes and their influencing factors.
Apple AI Officially Unveiled! What Impact on Financial Reports?
On Monday (October 28), Apple will officially release Apple Intelligence and iOS 18.1.
According to well-known tech journalist Mark Gurman, iOS 18.1 with Apple AI functionality will be officially released on October 28. Sources familiar with the matter told the media that Apple also plans to simultaneously launch a series of Mac computer products equipped with M4 chips to better support AI functions.
The Apple Intelligence introduced in iOS 18.1 will be open to users of the iPhone 16 series and iPhone 15 Pro series. Specific features introduced will include a writing tool suite that supports text proofreading and rewriting, photo cleanup in Photos, notification summaries, and enhanced Siri features.
However, after trying out the Apple Intelligence in the iOS 18.1 version, Gurman believes that its functionality has not met people's expectations, and consumers may be disappointed.
TF International Securities analyst Ming-Chi Kuo also stated that some market participants optimistically expect that Apple Intelligence may significantly increase iPhone shipments, but Apple's recent order cuts indicate that this optimistic expectation may not be realized in the short termAccording to Guo Mingchi's estimation, iPhone 16 orders will decrease by about 10 million units in the next three quarters, which may indicate that the flagship phone shipments have not significantly increased due to AI functions.
Some analysts believe that the first batch of Apple AI functions officially launched next week may not be attractive enough for users to spend a lot of money to upgrade to a new phone, but the next batch of AI functions in the latest developer beta version may excite users even more, as these functions are more in line with the interesting descriptions at WWDC.
On Friday (November 1) at 2:00 AM, Apple will also announce its Q4 fiscal year 2024 financial report.
The Q3 financial report showed that Apple achieved operating revenue of $85.78 billion in the third quarter, an increase of about 4.9% year-on-year; net profit was $21.45 billion, an increase of about 7.9% year-on-year.
By business segment, Apple's quarterly iPhone sales revenue decreased from $39.67 billion in the same period of the previous fiscal year to $39.3 billion, a slight decrease; wearable, home, and accessories product sales revenue decreased from $8.28 billion to $8.1 billion; service revenue increased from $21.21 billion to $24.21 billion, with a growth rate of over 14%.
Q3 performance marks Apple's revenue and profit exceeding expectations for six consecutive quarters, service revenue hitting a new high for six consecutive quarters, but iPhone sales revenue in Greater China exceeded expectations, with Cook expressing long-term confidence in the Chinese market.
Wall Street expects Apple's Q4 revenue to increase by 3.2% year-on-year to $84.4 billion compared to the same period last year, expecting iPhone sales revenue in the fourth fiscal quarter to grow after two consecutive quarters of decline.
Previously, Apple executives stated in a release that artificial intelligence will be another reason for people to buy new iPhones, and it is expected that Apple's total revenue growth in the fourth fiscal quarter will be similar to the third quarter, with service revenue recording double-digit percentage growth.
Can the tech giants' financial reports sustain momentum?
As the US stock earnings season reaches its peak, in addition to Apple this week, the market is also focusing on the latest financial reports of tech "star stocks" Google, Microsoft, Meta, and Amazon.
Related data shows that the average earnings of the Mag 7 in the second quarter of the US stock market increased by 35.2%, with AI-centered capital expenditures continuing to expand. Wall Street expects the average earnings of the Mag 7 this quarter to increase by 16.2% year-on-year and revenue to increase by 13.6% year-on-year.
According to Visible Alpha, [this is the focus of the upcoming tech giant financial report season](https://wallstreetcn.com/articles/3730595?keyword=%E7%A7%91%E6%8A%80%E5%B7%A8%E5%A4%B4%E8%B4%A2%E6%8A%A5%E5%AD%A3%E5%8F%88%E8%A6%81%E6%9D%A5%E4%BA%86%EF%BC%8C%E8%BF%99%E4%B8%80%E6%AC%A1%E7%84%A6%E7%82%B9%E4%BE%9D%E6%97%A7%E6%98%AF%EF%BC%9A%E8%8B%B1%E4%BC%9F%E8%BE%BE%E5%92Capital expenditure is expected to increase by 56% year-on-year to over $60 billion for the four tech giants Microsoft, Alphabet, Meta, and Amazon in the third quarter, according to Wall Street. It is further projected to see double-digit growth again in the fourth quarter, pushing total spending for the year to around $231 billion, up about 49% from 2023.
With the US election day approaching, the flurry of earnings reports from large tech stocks may exacerbate volatility in the US stock market. Sun Wu, Chief Financial Market Analyst at Mitsubishi UFJ Bank (China) Co., Ltd., believes that the US stock earnings season will be a test, with tech stocks needing to break through valuation bottlenecks with their performance. Despite the apparent prosperity of the US stock market, there are hidden risks of polarization. As the US election draws near, policy divergences are intensifying market volatility.
Other Important Data, Meetings, and Events
- On Wednesday (October 30), the Eurozone will release the initial values of GDP year-on-year and quarter-on-quarter for the third quarter.
Economists expect the Eurozone's GDP year-on-year growth rate for the third quarter to rise from 0.6% to 0.8%, while the quarter-on-quarter rate is expected to remain at 0.2%, indicating signs of steady economic recovery.
Data released last quarter showed that economic growth in the Eurozone slowed in the second quarter, with investment continuing to weigh on the economy despite trade and government spending boosting growth. Private consumption, seen as a key pillar of the Eurozone's recovery, also failed to take off.
- On Wednesday (October 30), the US will release the initial values of GDP year-on-year and quarter-on-quarter for the third quarter.
Currently, Wall Street expects the US economy to have an annualized growth rate of 3.0% in the third quarter, unchanged from the second quarter. Some analysts suggest that this is not only above the average growth level, but also the Atlanta Fed's GDPNow model estimates a growth rate of 3.4%, making the likelihood of an unexpected increase greater than that of a decrease, potentially amplifying the possibility of a "soft landing" for the US economy.
- On Sunday (November 3), the US will switch to winter time.
As the US switches to winter time, trading hours in the US and Canadian financial markets and the release of economic data will be delayed by one hour compared to summer time. European countries switched to winter time last Sunday.
November 6 (Monday) will be the first trading day for US stocks after switching to winter time, with trading hours changing to 22:30 to 05:00 the next day from Monday to Friday.
IPO Opportunities
In the week of October 28 to November 1, there was 1 new stock subscription and 1 new stock listing in the A-share market, and 3 new stock listings in the US stock market.
A total of 24 new funds were issued that week (A and C classes combined), including 5 bond funds, 4 hybrid funds, 2 equity funds, and 13 index funds
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A summary of major financial events from October 28th to November 1st, all in Beijing time:
Key focus this week: China's official PMI and Caixin Manufacturing PMI for October, US September PCE Price Index and October Non-Farm Payrolls report, Bank of Japan interest rate decision, Eurozone preliminary GDP for the third quarter, Apple's smart iOS 18.1 debut, financial reports from tech giants such as Apple, Google, Microsoft, etc.
In addition, Hong Kong released its GDP for the third quarter, the US announced October ISM Manufacturing Index, third-quarter GDP, and PCE Price Index annualized quarterly and monthly initial values, Eurozone released October CPI, and financial reports from companies like McDonald's, Pfizer, Lilly, Ford, Samsung, Li Auto, etc.
China's Official PMI and Caixin Manufacturing PMI for October
On Thursday (October 31st), the National Bureau of Statistics released the official PMI for October.
Last month's data showed that in September, the official manufacturing PMI rose to 49.8, staying below the boom-bust line for five consecutive months, while the non-manufacturing business activity index fell slightly by 3 percentage points to 50.
Zhao Qinghe, senior statistician at the National Bureau of Statistics Service Industry Survey Center, interpreted the September manufacturing PMI data as follows:
By industry, the production and new orders indices of industries such as pharmaceuticals, automobiles, electrical machinery and equipment, and computer communication electronic equipment are all in the expansion zone, with production and demand being released relatively quickly; the production and new orders indices of industries such as petroleum, coal, and other fuel processing, as well as black metal smelting and rolling processing, have been below the critical point for two consecutive months, indicating a slight slowdown in production and demand.
According to Guo Lei from GF Securities, September is traditionally a peak season for industries, with negative month-on-month growth in September only occurring in two out of the past 20 years; similarly, the end of summer travel and the upcoming National Day holiday have led to the service industry being in the off-season in September.
Guo Lei believes that based on the September PMI data, orders performed weaker than production. Export orders declined month-on-month, but single-month fluctuations cannot represent export trends. Looking at the BCI data, the forward-looking sales index of enterprises has declined, indicating that companies are still cautious about the demand side