Preview of financial markets: October 5th-9th

The coming week is relatively quiet, which is typical following the NFP release. The week kicks off on Monday with services PMI data from the Eurozone, the UK, and the US.

Tuesday features a speech by Bank of Japan Governor Ueda at the National Securities Conference in Tokyo, alongside Australia's Westpac consumer sentiment report.

Wednesday brings Japan's average cash earnings year-over-year figures and leading indicators. Over in the US, attention will turn to the FOMC meeting minutes, with unemployment claims data due on Thursday.

Friday rounds out the week with Canada's employment change and unemployment rate figures, while the US releases the preliminary University of Michigan consumer sentiment and inflation expectations surveys.

Several FOMC members are also scheduled to speak at various points during the week.

For the US, the consensus for the final services PMI stands at 58.7, unchanged from the prior reading. The ISM services PMI is forecast at 55.1, down slightly from 55.4 previously. September's services figures are still projected to show expansion, though at a more moderate pace compared to last month's robust result.

Recent regional Fed surveys indicate softer business conditions, and the nearly four-point surge in new orders seen in August will be challenging to replicate. The employment component may also soften following September payroll data, which revealed relatively modest job creation in service-providing industries.

Attention is likely to center on the prices paid component, which is anticipated to stay elevated. The latest ISM manufacturing report pointed to ongoing pressure on input costs, and regional surveys have also signaled firmer price measures across the services sector.

That being said, higher input prices should not be taken as a direct signal for where consumer inflation is headed. The services prices measure has historically served as a more reliable indicator of core inflation trends than its manufacturing counterpart, but higher costs do not always translate fully into higher consumer prices.

Recent business commentary suggests many companies are resisting price increases by absorbing some of the cost through narrower margins, according to Wells Fargo analysts.

In Australia, consumer sentiment is expected to stay deeply negative after the September report showed a sharp 5.2% drop to 84.4. The decline was driven by renewed pressure on households from higher fuel costs and growing worries about an imminent interest rate rise. Weakness in the housing market has also contributed to consumer unease.

Several developments during the survey period reinforced these concerns. The RBA raised the cash rate by 25 basis points to 4.6% during the survey week, while average national petrol prices climbed above $2.36 per liter. With global supply disruptions showing little sign of easing, fuel costs remain a major worry.

The September FOMC minutes are likely to provide limited insight into the Fed's rate trajectory, given the absence of explicit forward guidance. Policymakers remained primarily focused on inflation, with 15 participants seeing upside risks to core PCE, while the labor market was broadly viewed as near full employment.

The Summary of Economic Projections (SEP) indicated a median expectation for one more rate hike in 2026, followed by a hold through 2027, though opinions were split. Since the meeting, softer inflation and a weak jobs report have shifted expectations in a more dovish direction.

Recent comments from some FOMC members have pointed to less urgency for further hikes, although these developments occurred after the meeting and thus will not be reflected in the minutes. The key question is whether this sentiment was already evident during the September discussions.

In Canada, the consensus for employment change is 9,000, compared to the previous -41,700, while the unemployment rate is expected to rise from 6.4% to 6.5%. The September jobs report will provide the first full-month snapshot of labor market conditions since US Section 338 tariffs took effect on August 22nd.

RBC analysts expect employment to have increased by only 5,000, suggesting that tariffs may have merely stalled labor market progress rather than reversing it. They also anticipate the unemployment rate to hold steady at 6.4%, while recent population revisions are likely to make headline employment figures more volatile.

With most Canadian exports to the US still tariff-free, the impact is expected to remain concentrated in the more exposed provinces. Despite the trade headwinds, solid domestic demand and recent GDP growth are expected to support a gradual labor market recovery through 2026.