Mixed data messages will maintain Fed's “lift-off” suspense

US data next week is likely to confirm recovery with a forecast +225K gain on non-farm payrolls in September, personal spending up 0.5% in August and firmer housing data, with gains forecast for both selling prices and construction spending. 

"US September ISM manufacturing survey is set to be the one soft spot, expected to ease to 50.4 down from 51.1 previously, dragged lower by overseas trends in the sector. A lacklustre official PMI reading in China, a softer Tankan in Japan and a batch of weaker industrial production numbers in Korea (-2.2% yoy in August) and Brazil (-8.8% yoy in August), will signal little change on the Fed's evaluation of external dynamics", says Societe Generale.

The emphasis placed by the 16-17 September FOMC on global developments, and notably in China and other emerging economies, has focused Fed watchers' attention well beyond the geographical boundaries of US. 

"And while unemployment in Mexico may improve slightly (4.64% after 4.72% previously), further weakness is expected in Chile (6.8% after 6.6% previously). In Japan,  a bounce back is likely in August industrial production at 0.6% mom following -0.8% previously. Overall, the trend remains weak, however", forecasts Societe Generale. 

Fedspeak will also be in abundance this week, with half a dozen speeches on the calendar, including Chair Yellen on 30 September scheduled to give welcoming remarks at the Annual Community Banking Research and Policy Conference.

"This picture is likely to be confirmed by the closely watched Korean trade data, not only are these trade data published first but historically they correlate well to export activity in the broader Asia region. While a slight improvement is seen from August, the September report is likely to confirm a still fairly dismal picture with export growth forecast at -10.5% yoy", added Societe Generale.