(Reuters) -Political turmoil in France and Japan looms large over markets as U.S. banks kick off the latest earnings season, while the government shutdown drags on and policymakers gather in Washington for the IMF and World Bank annual meetings.
Here’s your week ahead from Rae Wee in Singapore, Lewis Krauskopf in New York, and Dhara Ranasinghe, Amanda Cooper and Karin Strohecker in London.
1/BANKS KICK OFF US EARNINGS SEASON
Major U.S. banks report financial results in the coming week as the third-quarter earnings season kicks into high gear with investors counting on solid profits to support record-high stock prices.
JPMorgan Chase, Citigroup, Wells Fargo and Goldman Sachs are due to report as well as asset manager BlackRock.
Overall, S&P 500 companies are expected to post an 8.8% rise in third-quarter earnings year-on-year, according to LSEG IBES. Financial sector earnings are expected to increase almost 13%.
With closely watched economic reports being delayed due to the government shutdown that started on October 1, corporate reports are taking on added significance. Reports on consumer and producer prices and retail sales are among those scheduled for the coming week that could be pushed out if the shutdown is still in effect.
2/ A NEW SICK MAN
The euro zone has a new ‘sick man’: France – hard to ignore being the bloc’s second biggest economy, a key architect of the euro and home to three globally systemic banks.
It has one of the biggest budget deficits in Europe and a weak economy. A political crisis makes improvements impossible.
Sebastien Lecornu, France’s fifth prime minister in two years, resigned on Monday, and time is running out to get the 2026 budget through a fractured parliament. Latest developments are more positive: French President Emmanuel Macron is to appoint a new prime minister later on Friday, reducing the risk of fresh snap elections to break the impasse.
French bonds and stocks have recovered slightly. Still, the prognosis remains grim. If the Socialists run the next government, a possibility, rolling back a key pension reform could be part of the deal.
This could swell the deficit by 3 billion euros ($3.5 billion) in 2027, say analysts. And, that won’t sit well with Brussels, ratings agencies and bond vigilantes.
3/CHANGE OF GUARD
Sanae Takaichi, leader of the Liberal Democratic Party, looked set to become Japan’s first female premier in a parliament vote that was expected on October 15. But the date will be likely pushed back after junior coalition partner Komeito pulled its support, breaking their 26-year-old alliance.
Komeito has been at odds with the hardline conservative Takaichi, known for her expansionist fiscal and monetary agenda.
The uncertainty is set to stoke worries about the outlook for one of the world’s most indebted countries.
Japanese markets have already had a whirlwind few sessions, with stocks surging and the yen and long-dated government bonds sliding as investors bet on a revival in big spending and loose monetary policy.
4/LET’S GET TOGETHER
Policymakers head to Washington for the annual International Monetary Fund and World Bank meeting featuring Group of Seven and G20 finance ministers and central bank governors gathering on the sidelines and the release of the Fund’s World Economic Outlook on Tuesday, among other reports.
Away from the set pieces, there’s no shortage of hot topics to discuss – where the fiscal-fuelled rally will leave government debt burdens, the economic effects from Trump’s trade policy, the push to use Russian frozen assets to fund Ukraine, a Middle East in flux and the impact of stablecoins.
Meanwhile on the sidelines, Argentina’s President Javier Milei will meet Trump in the Oval Office as final details of Washington’s $20 billion lifeline for Buenos Aires are eagerly anticipated.
5/SILVER LININGS
Gold has dominated the headlines, with its 50% annual gain to above a record $4,000 an ounce, beating even stellar performers like the S&P 500 and bitcoin.
Zoom in on the precious metals complex and gold is a laggard. Silver has risen 70% to a record $51 an ounce, beating its previous high in 1980, when a bid by the Hunt brothers – two Texan oil billionaires – to corner the market failed, causing the price to collapse.
Silver often enjoys something of a halo effect from gold, drawing in funds from investors that want an alternative to the dollar, or a real asset to hold.
But it also has industrial use and an anticipated deficit of physical metal has boosted the price. It has always been more volatile, outpacing gains in gold on the way up, only to fall faster and harder on the way down.
($1 = 0.8638 euros)
(Graphics by Pasit Kongkunakornkul, compiled by Karin Strohecker; Editing by Emelia Sithole-Matarise)
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