Take Five: Clearing the backlog

(Reuters) -The task of clearing the huge backlog of shutdown-delayed U.S. data begins, the world’s most valuable company Nvidia publishes its results and new inflation numbers will keep Europe’s central banks on their toes. 

Over in Asia, new Japanese Prime Minister Sanae Takaichi’s fiscal policy is taking shape, and Chile holds an election in Latin America where pollsters are predicting another step to the right.

Here’s your market week ahead from Dhara Ranasinghe and Amanda Cooper in London, Kevin Buckland in Tokyo and Lewis Krauskopf and Rodrigo Campos in New York.

1/CLEARING THE BACKLOG

U.S. government number crunchers begin the task of shovelling out the backlog of data not released during Washington’s unprecedented 43-day shutdown.

Traders will be getting the non-farm payrolls report for September on Thursday, the U.S. Bureau of Labor Statistics has announced. The original release was planned for October 3, shortly after the shutdown began.

Private data that has been published has suggested the labour market continues to weaken. That supports the case for a December Federal Reserve rate cut. Officials are warning, though, that some data may have been lost forever, meaning the economic fog might take time to clear.     

2/AI CATCHING

Nvidia’s quarterly report on Wednesday will be a critical test for the high-flying AI trade that has started to make some spluttering noises in recent weeks.

The semiconductor giant became the world’s first $5 trillion company last month. It has lost a bit since, but with a staggering 8% weighting in the S&P 500 and major clout in many global indexes, it can easily sway markets on its own. 

The AI bellwether’s forecasts and the broader industry perspective will have ramifications for the wider tech ecosystem. It is going to either ease or feed those nagging investor concerns that this is already the next big bubble.

3/LEVERS OF POWER

After initially suggesting it would leave monetary policy largely to its central bank, Japan’s new government is now signalling a more hands-on approach.

Prime Minister Sanae Takaichi is looking to loosen the fiscal reins and urging the Bank of Japan to go slow on raising rates, while new Finance Minister Satsuki Katayama has argued inflation is yet to sustainably hit the BoJ’s 2% target.

The bank still looks primed for a hike in December, although Governor Kazuo Ueda has been cautious about pulling the trigger. Consumer price data due on November 21 should offer clues, but it could well be the crumpled yen that holds the key.

    If its weakness affects politically sensitive food and energy prices, Takaichi may have no choice but to accept some speedy rate hikes.

4/HAPPY PLACE

It must be nice to be the European Central Bank right now. President Christine Lagarde says it is "in a good place" with interest rates and money markets having switched to autopilot, pricing in no move at all next year. 

The coming week brings a raft of October inflation numbers, for both individual countries and the euro zone as a whole. Core consumer inflation was 2.4% in September, up from 2.3% in August but down from 2.7% last September. 

The headline number has stayed around the ECB’s 2% target for most of the year, however, and if the trade-weighted euro’s 5.5% 2025 rise starts to drag it lower at any point Frankfurt would have room to cut again.

But the jury is out for now. 

5/HOT CHILE 

The first round of Chile’s presidential election on Sunday was won by the leftist coalition candidate Jeannette Jara. But pollsters expect the race to now swing to the right in the run-off in a month’s time after far-right candidate Jose Antonio Kast secured a strong second place and three other right-wing runners scooped up plenty of votes, too.

A win for Kast in the December 14 head-to-head versus Jara - assuming those other right-wing votes migrate to him - would put in place a Chilean administration further to the right than any since the Augusto Pinochet dictatorship of the 1980s.

Almost as important is the concurrent congressional election. A win in both houses would mark the first such result since the 1950s and most likely be lapped up by investors who expect corporate tax cuts if Kast does go on to win the presidency.

The peso has strengthened nearly 7% year-to-date and equities in both dollar and peso terms have soared over 40% - and traders are eyeing where it goes next.

(Graphics by Pasit Kongunakornkul. Compiled by Marc Jones. Editing by Mark Potter)