“October. This is one of the peculiarly dangerous months to speculate in stock. The others are, July, January, September, April, November, May, March, June, December, August and February” — Mark Twain

1. Earnings at top five banks seen taking major hit — analysts have cut their earnings estimates for the top five U.S. banks by over $1B in total, due to increasing fears about a sharp fall in trading revenue – especially from fixed-income operations – and higher legal costs. JPMorgan (JPM) has been particularly affected, with consensus for net income down $526M to below $5B. The company’s legal woes are seen adding $2B to expenses. Bank of America (BAC), Goldman Sachs (GS), Morgan Stanley (MS) and Citigroup (C) are the other banks to be affected.
2. Abe Orders Japan’s First Sales-Tax Increase Since ’97 — Bloomberg, Japan will go through with a plan to raise sales tax in April to 8% from 5%, a move that is set to raise ¥8T. To offset the economic impact of the hike, Prime Minister Shinzo Abe has unveiled a ¥5T ($51B) stimulus package that will include spending on public works and tax breaks to encourage companies to boost capital expenditures and wages.
3. ‘Obamacare’ launches amid government shutdown — BBC, a central provision of President Barack Obama’s healthcare reform law has taken effect, having survived Republicans’ years-long effort to undermine it. The opening of the private health insurance marketplaces, or exchanges, was the culmination of more than three years of political combat in Washington over the Patient Protection and Affordable Care Act, signed into law by President Barack Obama in 2010 and known to both sides as Obamacare.
4. PMI surveys show eurozone recovery gaining momentum — Eurozone services PMI climbed to 52.2 in September from 50.7 in August, while composite output rose to 52.2 from 51.5. “The eurozone enjoyed its strongest quarter of expansion for just over two years in the third quarter,” says Markit, adding that this bodes well for further growth in Q4. Germany led the way, France returned to expansion, Spain stabilized, and Ireland and Italy impressed.

The week ahead — Economic data from Econoday.com: