Markets turn cautious ahead of uncertain weekend

A look at the day ahead in European and global markets from Tom Westbrook

Friday’s session brought a cautious mood to markets ahead of a flurry of data and an uncomfortable weekend.

China’s finance minister has called a fiscal policy briefing for Saturday amid high expectations and jittery trading. Investors and, starting Thursday, Swedish furniture store IKEA want tax incentives to revive the economy.

Markets expect Beijing to announce 2 to 3 trillion yuan ($280-420 billion) in new spending and worry about whether it will deliver – after a similar disappointment at policymakers’ briefing earlier this week – Chinese shares fell Friday.

On the geopolitical front, Israel is mulling a response to an Iranian missile attack, and a retaliatory strike on oil or military targets would likely draw a strong reaction from financial markets.

Investors in Asia were taking chips off the table.

Chinese stocks are set for a weekly decline as further details on promises to support the economy have so far been disappointing.

Hong Kong markets were closed for a holiday on Friday, leaving the Hang Seng with its biggest weekly drop in two years as investors pared one of its strongest-ever rallies. Gold crawled higher.

Monthly UK GDP data is available in the European session, and while it’s hard to really gauge growth from the monthly figures, signs of strength in the services sector could lead investors to lower interest rate cut expectations.

Markets are pricing in around a 3/4 chance of a 25 basis point rate cut in November, while views from the Bank of England are also divided.

Rate cuts should come gradually, BoE chief economist Huw Pill told the Institute of Chartered Accountants in England and Wales last week, a day after governor Andrew Bailey was quoted in The Guardian as saying the central bank could move aggressively.

Among US gains, JP Morgan, BNY and Wells Fargo are due ahead of the open. Tesla stock could be reacting to the long-awaited showcase of an autonomous taxi in Los Angeles, which came with fanfare but few details on timing. Production won’t begin until 2026.

US producer price data is also available and will inform expectations for the Federal Reserve’s preferred measure of PCE later in the month. Slightly stronger-than-expected inflation in September has, for now, quashed market expectations of anything more than a 25bp rate cut at the Fed’s November meeting.

Key developments that could influence markets on Friday:

– British monthly GDP

The story continues

– US PPI

– JP Morgan, Wells Fargo earnings

(By Tom Westbrook; Editing by Edmund Klamann)