European markets are set for a lower open, PMIs in focus

Stock markets across Europe are expected to tend lower on Monday, as investors weigh regional energy concerns, UK political turmoil, and concerns over Credit Suisse's health.

Week in a glance

The Federal Reserve's rate hikes will be closely watched by investors on Friday, as they try to gauge how much impact their rate hikes are having on the economy. As markets try to gauge their appetite for another 75-basis-point rate hike at the bank's November meeting, several Fed officials are also scheduled to speak during the week. US equity markets look set to remain volatile after closing the books on Friday with a third straight quarterly decline. Investors in the UK are watching the Conservative Party's annual conference for any signs of a U-turn on the government's tax-cutting budget, which has sent sterling plummeting and government borrowing costs skyrocketing. This week, OPEC is expected to consider a major production cut at its meeting on Wednesday. Here's what you need to know.

Stocks

After a turbulent third quarter, markets are entering the final leg of 2022, roiled by stubborn inflation, rising interest rates, and recession fears. It is the longest losing streak for the S&P 500 and Nasdaq since 2008, and the longest slump for the Dow since 2007. US Treasury yields shot to their highest levels in more than a decade when the Fed tightened monetary policy to tame the worst inflation in decades. The wild moves are expected to continue until there is evidence that the Fed is winning the war against inflation, allowing policymakers to eventually cease monetary tightening.

GBP rises amid UK market turmoil

Following the British government's decision to reverse the proposal to scrap the highest rate of income tax, which was widely criticized in both the country and within the governing Conservative Party, the GBP/USD climbed 0.3% to 1.1188. Several high-profile Conservative Party figures came out against the move over the weekend, making Liz Truss' position untenable. She attempted to defend the government's plan to drastically cut taxes, including the removal of the highest income tax rate.

Oil market awaits OPEC+ meeting

Monday, oil prices spiked amid speculation that top producers will cut production by a significant amount to support a market that has fallen for four months in a row.

A meeting of the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, is scheduled for Wednesday. Reuters reported that the members are considering cutting their output by more than one million barrels a day. It would be the largest reduction since the pandemic and would follow the cut of 100,000 barrels per day made last month. 

After Russia invaded Ukraine in February, oil prices surged, but have since fallen due to concerns over the impact of aggressive monetary tightening on global growth. Additionally, the stronger dollar has affected prices.

Events of the day

On Monday, the UK manufacturing PMI number will be released, which is expected to remain below the 50-level but rise from 47.3 to 48.5 in September. It comes after the German manufacturing PMI and EU manufacturing PMI showed a further contraction in the sector of the Eurozone's economic powerhouse, earlier Monday. Investors will closely watch the ISM manufacturing PMI in the US later in the day, which is foreseen to fall from 52.8 to 52.2.