November promises to be a dynamic month for the global economy, with high-stakes events lined up to influence market sentiment. Leading the headlines are the U.S. elections and the Federal Reserve’s policy meeting, both set for the first week. By then, we’ll know the next occupant of the White House and which party will control the House of Representatives, Senate, and key governorships. This political spectacle is likely to eclipse other financial releases, as the outcomes could reshape policy expectations and market direction.

Alongside the election, the Federal Open Market Committee (FOMC) will convene to decide on the trajectory of interest rates and broader monetary policy. But the focus isn’t solely on the U.S.; geopolitical tensions, global central bank meetings, and key economic data from around the world will also demand close attention this month.

Let’s dive into what we can expect from the global economy in November 2024!

Geopolitical Tensions

Geopolitical forces continue to reshape the global economic landscape with profound implications. In the Middle East, tensions are near a boiling point. Recent reports indicate that Iran may be preparing a response to Israel’s recent strikes, reportedly following internal discussions and a detailed assessment of the damage incurred. Should the Islamic Republic of Iran choose to retaliate, it could trigger a prolonged and far-reaching conflict in the region.

Meanwhile, on the Ukrainian front, the prospect of North Korean troops joining Russian forces adds a volatile layer. Reports suggest that up to 10,000 North Korean soldiers are poised for deployment to Ukraine, a development met with stern warnings from U.S. Secretary of Defense Lloyd Austin. Austin has underscored that if North Korean forces engage alongside Russian troops, Ukraine, supported by American and allied arms, will defend itself with lethal force.

Adding to these flashpoints is the global trade conflict, no longer limited to U.S.-China tensions. Trade wars are intensifying across multiple regions, challenging global supply chains and increasing uncertainty. As economic powerhouses maneuver for advantage, the broader questions of trade dynamics and new geopolitical alliances intensify. Where is the new world order heading?

USA – Election and Economy

November brings dual challenges for the United States, with both the elections and the Federal Reserve meeting taking center stage. On Tuesday, November 5, the nation heads to the polls for an election spanning three days, concluding on November 8. Early voting is already underway, and a significant portion of Americans have cast their ballots.

The U.S. election is undoubtedly the event of the month, and its outcome is likely to be the primary driver of market reactions. Currently, markets appear to be pricing in a Trump victory. For the U.S. stock market, a Republican win is generally perceived as favorable, as Republicans tend to support lower corporate taxes, benefiting businesses and investors. In contrast, a Democratic win could introduce higher costs and taxes, which may create headwinds for stock investors.

In the currency markets, both parties have shown interest in maintaining lower rates, though monetary policy remains firmly within the independent domain of the Federal Reserve. However, a Trump victory, associated with optimism around economic growth, could temporarily support the dollar. Still, as Republicans are more inclined toward lower interest rates than Democrats, this could exert downward pressure on the USD in the months ahead. Additionally, any delay in election results or contested votes could create political uncertainty, potentially weighing on the dollar further.

Economic Overview

On the economic front, following Friday’s U.S. employment data, attention now shifts to the upcoming Federal Reserve meeting on November 7. October’s nonfarm payrolls rose by only 12,000, a figure well below expectations. However, this softer growth is largely attributed to disruptions from Hurricanes Helene and Milton, as well as ongoing strikes, notably at Boeing. Despite the weaker payrolls, the unemployment rate, which stood steady at 4.1%, remains unaffected. This figure reflects the methodology of the household survey, which considers individuals affected by severe weather or strikes as employed. Still, downward revisions to prior months’ data suggest a trend of moderating job growth, also mirrored in the recent JOLTS report.

Adding to the economic picture, the Core Personal Consumption Expenditures (PCE) price index—the Fed’s preferred inflation measure—came in higher than expected for September, which could deter the Fed from aggressively lowering interest rates in the near term.

Overall, these mixed indicators highlight the ongoing resilience of the U.S. economy, even amid moderate employment growth and inflationary pressures. Given this backdrop, the Fed is anticipated to lower rates by 25 basis points to 4.50%-4.75% at its upcoming meeting, balancing the need to support economic growth without fueling inflation.

Market Outlook and Key Data to Watch

With the Fed meeting and elections at the forefront, predicting market reactions is challenging. Following a highly eventful first week, there’s still plenty of economic data scheduled for release that could influence sentiment. Key indicators to watch include Factory Orders on November 4, PMIs on the 5th, Inflation on the 13th, Retail Sales and Industrial Production on the 15th, and Housing data on the 19th and 21st.

Each of these releases will provide deeper insights into economic health across manufacturing, consumer spending, and housing—critical components in assessing the broader economic trajectory amid heightened uncertainty.

Eurozone in November

Recent data paints a mixed picture of the Eurozone economy, posing challenges for ECB policymakers. While the urgency for aggressive rate cuts has lessened somewhat, a 25-basis-point cut may still be on the table this year to support sluggish economic growth.

In October, the Eurozone’s Manufacturing PMI showed a modest increase to 45.9, slightly above both the previous reading (45.0) and expectations (45.1), though it remains in contraction. Meanwhile, the Services PMI came in at 51.2, just below forecasts (51.5) but still signaling expansion. These indicators suggest that while manufacturing is under pressure, the services sector continues to provide essential support to the Eurozone economy.

On the inflation front, October’s data showed moderate gains. Core CPI rose by 0.2% month-over-month, holding steady at an annual rate of 2.7%, while overall CPI climbed 0.3% month-over-month, bringing the year-over-year rate to 2.0% (up from 1.7% in September). The Harmonized Index of Consumer Prices (HICP), excluding energy and food, also saw a 0.2% monthly increase, maintaining a 2.7% annual rate. This steady inflation and stable labor market—evident in the Eurozone’s unemployment rate of 6.3%—may influence the ECB to adopt a cautious stance in future decisions.

However, Eurozone trade data highlighted potential risks. The non-seasonally adjusted trade balance fell sharply to €4.6 billion in August, well below the forecasted €17.8 billion, while the seasonally adjusted figure dropped to €11 billion from €15.5 billion in July. This decline suggests challenges in external demand and export performance, raising the likelihood of a rate cut from the ECB by year’s end.

European markets will also keep an eye on the US election, but domestic data remains critical. Early November brings PMI releases on the 4th and 6th, where slight improvements are anticipated. The ZEW Economic Sentiment Survey on November 12 is also expected to show a minor uptick in optimism ahead of the New Year. The release of Q3 GDP on November 14 may reflect better activity than Q2, and the November 19 inflation report should give a clearer view of price trends, which could shape the ECB’s December decision.

Overall, we expect slightly improved data for the Eurozone, potentially supporting its stock markets. The euro is also likely to recover some ground from October losses as conditions stabilize.

UK Economic Forecast – November 2024

British attention is largely focused on the first Labour government budget in 14 years, which, contrary to election promises and market expectations, disapointed markets, missed the growth prospects and increased government bond yields. Finance Minister Rachel Reeves presented the budget plan in late October, announcing substantial tax increases, borrowing, and spending—all of which raised concerns among businesses and stock markets. With economists now forecasting slower UK growth for 2025, Prime Minister Keir Starmer has responded to the market’s reaction by promising reforms to accelerate economic growth and modernize the public sector.

On the economic data front, recent figures reveal a mixed outlook. While the UK economy showed signs of cooling in September, lower inflation and a resilient labor market could support the Bank of England’s (BoE) anticipated rate cut. Key PMIs from September came in below expectations, reflecting a slowdown. The S&P Global/CIPS Services PMI fell to 52.4, missing the forecasted 52.8 and down from 53.7 in August. Manufacturing was also weaker, with the PMI slipping to 51.5 from 52.5 in the prior month.

These PMI figures suggest a potential deceleration in UK economic activity, casting doubt on growth momentum heading into the year’s final quarter. However, labor data shows some resilience. The unemployment rate edged down to 4.0% in August from 4.1% in July, surpassing market estimates, while the Average Earnings Index (including bonuses) rose by 3.8%, as expected, though slower than the previous month’s 4.1% increase.

Inflation data, meanwhile, showed a significant decline. The UK Consumer Price Index (CPI) was flat in September, bringing the annual inflation rate down to 1.7%—notably below the 2.2% in August and lower than market expectations of 1.9%. This inflation moderation indicates easing price pressures across both producer and consumer sectors, although core output figures remain stable, suggesting underlying inflation is steady. With inflation cooling faster than anticipated, the BoE is likely to feel more confident about lowering interest rates at its upcoming meeting on November 7.

Beyond the BoE meeting, several key data releases in November will offer further insights into the UK economy. These include labor data on the 12th, GDP and trade data on the 15th, inflation on the 20th, and retail sales on the 22nd. Given expectations for a BoE rate cut, the GBP may face continued pressure, though stock markets could benefit from lower inflation and interest rates.

Japan and Political Uncertainties

October concluded with a political shock in Japan, as the ruling Liberal Democratic Party (LDP) lost its long-standing majority in the lower house for the first time since 2012. The Constitutional Democratic Party, the largest opposition, gained significant ground, though it may still struggle to form a government. With the upcoming U.S. election and heightened domestic political uncertainties, Japan faces a pivotal moment. The November 11 premiership vote will determine whether Prime Minister Ishiba retains power, which could provide more clarity on Japan’s political direction.

If Ishiba remains in office, it could align the government and the central bank on dovish, supportive policies—a stance that may weigh on the yen while lending modest support to Japanese stock markets. Until the political landscape is clearer, however, market uncertainty will likely pressure both the yen and equity markets.

On the monetary front, the Bank of Japan (BoJ) held interest rates steady at 0.25% in October, as expected. Following the decision, BoJ Governor Ueda commented, “As for the timing of the next rate hike, we have no preset ideas,” signaling a cautious stance on tightening.

Japan’s Tokyo CPI inflation came in hotter than anticipated at 1.8%, though it showed some moderation from September’s 2.0% rate. This cooling may suggest that inflationary pressures are easing. Meanwhile, economic activity data indicated positive momentum in October, a trend expected to continue into November. If the economic outlook remains strong and inflationary pressures stabilize, the BoJ could consider a potential rate hike in December.

Despite political uncertainties, the overall outlook points to better economic activity in Japan, with the December BoJ meeting likely to lean toward the possibility of tightening monetary policy.

China

Since late September, China’s authorities have significantly ramped up policy stimulus to boost consumer spending, stimulate demand, and support the economy in meeting the government’s 2024 growth target of around 5%. Yet, consumption remains a concern, as persistent deflationary pressures discourage spending.

In October, economic data showed modest expansion, with China’s Composite PMI inching up to 50.8 from 50.4. The Manufacturing PMI also rose to 50.1, just above the forecast of 49.8, marking its first reading above 50—the breakeven growth threshold—since April. The Non-Manufacturing PMI registered at 50.2, slightly under the expected 50.4, but still in expansion territory. These figures signal a gradual recovery, as both the manufacturing and services sectors contribute to mild growth. Although China’s economic performance remains moderate, forward-looking PMI components suggest the potential for temporary improvement in the second half of the year.

Despite these incremental gains, third-quarter growth slowed, marking the economy’s slowest expansion since early 2023. Although retail sales provided a positive surprise, hinting at consumer resilience, the steepest drop in new home prices since 2015 highlights ongoing challenges in the property sector.

On the monetary policy side, the People’s Bank of China (PBOC) implemented a larger-than-expected reduction to its benchmark Loan Prime Rate (LPR). The one-year LPR was cut from 3.35% to 3.10%, while the five-year LPR, which affects mortgage rates, dropped from 3.85% to 3.60%, further than the anticipated 3.65% cut. This latest reduction following July’s cut reflects the PBOC’s focus on stimulating lending to counterbalance economic headwinds.

Looking at November, we expect a slight improvement in economic data, spurred by year-end sales. Key indicators—including trade data, retail sales, and inflation—are likely to show modest gains, supporting both the Chinese yuan and domestic stock markets.