As the dust begins to settle following the crucial US deal to extend the debt ceiling, the market's focus on Friday is likely to be on the fall-out of the government shutdown and what this means for the economic outlook.
Standard & Poor's has already estimated that the closure has already cost the US economy $24bn in lost activity, which will have a 0.6% adverse impact on growth in the fourth quarter. Meanwhile, Chinese ratings agency Dagong on Thursday downgraded its rating for US sovereign debt from 'A' to 'A-', keeping a negative outlook.
On a positive note, the shutdown has spurred speculation that the Federal Reserve will delay tapering quantitative easing until later in the year or possibly into 2014, which could provide some support to equity prices in the near term.
As such, speeches from several members of the Fed will likely be closely watched by market participants on Friday afternoon; presidents of the Richmond and New York Fed banks are due to speak, along with Fed governors Daniel Tarullo and Jeremy Stein.
Alex Young, Senior Sales Trader at CMC Markets, said that the sell-off in the dollar
on Thursday hinted at the market's view on Fed tapering, "which must surely now be pushed back well into 2014 given that we are very much in the dark as to the real effect on US growth of the shutdown until the government data departments are back up and running".
Turning to Friday's economic data, the big news of the day will be out from China with gross domestic product (GDP) figures expected. The annual rate of Chinese GDP growth is estimated to have picked up from 7.5% to 7.8% in the third quarter.
Analysts at Capital Economics said that economic activity had "turned a corner in late Q2 and rebounded markedly in July and August"; however data since then has been mixed.
"While September's imports were upbeat, the latest PMIs and electricity consumption figures were disappointing, at least raising some questions about the durability of this investment-led rebound. [Data on Friday] will be closely watched to get a clearer picture," they said.
Industrial production data, also due out on Friday, is forecast to grow at a year-on-year rate of 10.2% in September, down from the 10.4% growth the month before. Meanwhile, retail sales growth should have accelerated from 13.4% to 13.5% last month.
Friday October 18
INTERIM DIVIDEND PAYMENT DATE
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INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Leading Indicators (US) (15:00)
Belgian consumer confidence (14:00)
Speech President Richmond Fed (13:00)
Speech Fed Governor Tarullo (18:00)
Speech President New York Fed (19:00)
Speech Fed Governor Stein (21:30)
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UK ECONOMIC ANNOUNCEMENTS
Trends in Lending (09:30)
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