EVENTS PREVIEW
While the FOMC meeting dominates the day’s schedule, there will be plenty of major data to digest before their statement and Powell’s press conference, kicking off with the array of monthly activity and real estate data in China and UK inflation indicator. Final HICP data from France, Italy & Spain is accompanied by South African CPI and PPI, UK ONS House Prices, Brazil’s monthly GDP and Canadian CPI while the US has Retail Sales, Import Prices, NY Fed Manufacturing and NAHB Housing Market surveys. Bookending the FOMC meeting & presser, there are keynote speeches from BoC governor Macklem and RBA’s Lowe. While the RBA’s dovish stance has been rammed home, with no rate hikes on the table until 2024, the BOC’s stance has been rather fluid, with a rate hike signalled for mid-2022, and the focus on todays’ CPI, which is expected to be little changed in y/y terms on both headline (4.7% y/y) and core (average 2.7%), though recent BoC comments have flagged that it remains “elevated and the impact of global supply constraints is feeding through to a broader range of goods prices”.
China – November Retail Sales, Industrial Production, FAI
– The run of Chinese data are projected to see Retail Sales little changed in y/y terms at 4.8%, still well below the pre-pandemic 8.0% plus trend rate, with perhaps some downside risks given a much weaker than expected boost from Singles Day, and given adverse base effects. Industrial Production is expected to pick up to 3.8% y/y from 3.5%, with the energy sector (power and rising refinery rates) providing a boost, as was signalled by the recovery in the PMI output sub-index. Fixed Asset and Property Investment are seen slowing further to 5.4% and 5.9% y/y respectively, as the drag from the property sector continues to weigh heavily, and it will be interesting to see how much further Property Prices decline after modest drops in the past two months.
U.K. – November CPI, RPI and PPI
– Ahead of tomorrow’s MPC meeting, and after some quite surprisingly stark warnings from the IMF about the BoE needing to eschew its ‘inaction bias’ (yes, we hear your cry of ‘what do they know?’ Ed.), there will be considerable focus on CPI and PPI. A more modest 0.4% m/m (after 1.1% m/m in October) is seen for CPI, which would thanks to adverse base effects still see the y/y rate jump to 4.8% from 4.2%, while core is expected to rise to 3.7% from 3.4%. PPI is also expected to slow in m/m terms, but still see both Input and Output pick up in y/y terms to 13.2% and 8.2% respectively.
U.S.A. – November Retail Sales
– Retail Sales are seen up 0.8% m/m on headline and core measures, after jumping in October, with much of the ‘strength’ still likely to be due to inflation (above all gasoline and both new and used autos) and imparting upside risks to headline sales, though early Christmas shopping predicated on concerns about shortages due to supply chain bottlenecks should also give a boost to core sales. The NY Fed Manufacturing survey is expected to drop back to 25.0 after unexpectedly posting a sharp jump in November to 30.9 from 19.8, though the headline index has been very choppy in m/m change terms for much of the year. While the focus will be on supplier deliveries and prices components, it would be wise not to overinterpret any drops as signalling a significant improvement in supply chain bottlenecks.
U.S.A. – FOMC meeting
The Fed meeting will be primus inter pares in this week’s deluge of policy meetings. The consensus looks for the pace of the Fed taper to be doubled from $15 Bln per month to $30 Bln, which would bring its QE programme to an end by March, and open the door to a rate hike after that, with June generally anticipated to be the lift-off moment. The real point of market interest will be the extent to which the rate trajectory is steepened relative to September’s ‘dot plot’ and current market pricing (see attached), even if this is a rather flawed medium for such projections, though it should be added that if the terminal point for rates is higher than the long-term estimate (current 2.5%), then this would be an unexpectedly hawkish, above all given that markets are projecting a terminal point of around 1.5%. It will also be important to note any tweaks to its economic projections, above all how much less ‘transitory’ inflation is expected to be, as well as any changes to long-run projections, perhaps above all for unemployment.
Switzerland – SNB policy meeting
As for the SNB tomorrow, it is expected to hold rates, and it will be interesting to see what shifted its stance back to CHF intervention after a protracted period of tolerating a firmer CHF, in what had appeared to be an acknowledgement that the CHF’s real effective exchange rate has remained well below trend.
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ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
© 2021 ADM Investor Services International Limited.
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