A preview of the week ahead from Marc Ostwald, ADMISI’s Global Strategist & Chief Economist
The new week’s schedule will find its focal points in US and China CPI; China Trade; German Orders, Production, ZEW and Trade; UK monthly GDP, Industrial Production and BRC Retail Sales, with the US also looking to JOLTS Job Openings, Trade Balance and preliminary Michigan Sentiment. On the central bank front, the Fed goes into purdah ahead of the Dec 14/15 FOMC meeting, no change rate decisions are expected from the RBA, BoC and RBI, while Brazil’s BCB is expected to deliver another bone crunching 150 bps rate hike to 9.25%, which would mean a cumulative 725 bps since it started raising rates in March. Politically Olaf Scholz will finally be intalled as Germany’s new Chancellor, though outside of selecting the new Bundesbank president, this changes little or nothing, until such time as the traffic light coalition starts to turn words and plans into action; yet another US debt ceiling drama will also be in view. However it will be the various govt reactions (i.e. renewed restrictions) to the spread of the Omicron Covid-19 variant which will command most attention. China’s property sector woes are also attempting to move back into centre stage, above all with major credit event looming for China Evergrande and Kaisa.
Commodity markets are primed for more volatility, with the focus most obviously on oil prices, as well an array of key monthly reports and a number of major conferences. The EIA publishes its Short Term Energy Outlook, while a busy week for Agricultural commodity markets has the initial details of China’s monthly trade data, along with a rash of S&D reports; USDA WASDE, China CASDE, Australia Abares, Brazil CONAB, France’s AgriMer and Agricultural Ministry and Malaysia’s Palm Oil Board. The US World Petroleum Congress, with speakers including OPEC’s Barkindo, heads the run of conferences, which also include Benchmark Mineral Intelligence Battery Materials & Fitch ESG Outlook Conference Asia Pacific.
It will be a light week for corporate earnings, while the US heads the run of govt bond auctions with $102 Bln total of 3, 10 & 30-yr, with the Eurozone schedule seasonally light with just EUR 7.0 Bln total of German 2 & 10-yr, while the UK sells 30-yr.
Given concerns about the new Omicron variant, much of this week’s data will likely be seen as ‘historical’, though US and Chinese inflation data will be closely watched, even if both will not actually change the near-term outlook for either Fed or PBOC near-term policy outlooks. China’s PPI is expected to edge down from October’s multi decade high 13.5% y/y to 12.0%, as oil prices eased, and base effects turn benign; by contrast adverse food price base effects, and higher energy costs are set to give a boost to CPI from 1.5% to 2.5% y/y. As for the US CPI readings, a 0.7% m/m headline rise is expected to push the y/y rate up to 6.7% from 6.2%, and the highest since 1982, while core CPI is projected at 0.5% m/m 4.9% y//y (vs. Oct 4.6%), highest since June 1991. But in policy terms, it would still see the PBOC on course to hold rates, but continue to apply targeted easing measures to assist SMEs, while Powell’s comments last week already signalled a taper ‘speed up’ (end March 2022), and an ealier rate hike (June 2022?). A rash of UK data to end the week is projected to see monthly GDP to dip to 0.4% m/m from 0.6%, with Production, Manufacturing and Construction Output seen easing back from larger than expected rebounds in October.
Corporate earnings highlights include (via Bloomberg News): Ashtead Group, AutoZone, Broadcom, Brown-Forman, Chewy, Costco Wholesale, Lululemon Athletica, MongoDB, UiPath
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Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
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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