Rather than fretting about the Federal Reserve’s tapering plans, investors will be focused on Congress next week, where a looming and potentially costly government shutdown sits in the crosshairs.
Here’s a summary of what to watch for:
Looming government shutdown:
Zero hour is here for the first of two contentious debates in Washington. Congressional leaders in both houses are expected to work through the weekend and into Monday to come to agreement over stopgap funding for the US federal government.
The Republican controlled House has demanded that the budget removes funding for President Barack Obama’s signature health care law, which the Democrat led Senate has balked at.
If a deal is not reached by Monday evening, the government will begin to shutdown at the start of Tuesday, October 1.
The typically top-billed event of any month in US economics takes a back seat to the budget. On Friday, the labour department will release its non-farm payrolls report. Economists expect the US added 180,000 new jobs during the month while the unemployment rate holds steady at 7.3 per cent.
There are several other key bits of economic data next week in the US, including September auto sales, manufacturing PMI, construction spending and factory orders.
Central bank decisions:
The European Central Bank, Reserve Bank of Australia and Bank of Japan will announce changes to stimulus measures throughout the week.
While the BoJ is forecast to ease its policy programme further, the Frankfurt-based ECB will likely leave its benchmark interest rate unchanged at 0.5 per cent.
There are a flurry of economic reports expected next week, including several updates on the recovery underway in the Eurozone. EU-area and German unemployment data will be released on Tuesday, along with manufacturing data for the region.
The Chinese manufacturing sector is expected to show some improvement in September, while Japanese manufacturer sentiment is seen rising to its highest level in three years.
Japanese sales tax decision:
Japanese Prime Minister Shinzo Abe is expected to announce his decision to increase the country’s sales tax rate next year.
Several economists have called for a delay in the move, which would increase the tax to 8 per cent from 5 per cent and possibly blunt the rise in consumer spending.