News & Analysis
News & Analysis

FOMC meeting, Brexit and PMIs

14 December 2020 By Deepta Bolaky

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Global equities swung between losses and gains last week as investors digested contradictory headlines on key themes like Brexit negotiations, vaccine updates, stimulus talks and EU budget deal driving the price action in the markets.

Investors are gearing up for another busy week with the same dominant themes amid a busy economic calendar. 

Equity markets

Investors are closely watching the Brexit updates coming from the EU and UK, the US stimulus talks and the avoidance of a government shutdown and more lockdown restrictions following a surge in coronavirus cases in certain economies. 

US vaccinations

The US FDA authorises COVID-19 mRNA vaccine for emergency use. Pfizer and BioNTech are prepared to deliver the first doses in the U.S. immediately. The vaccine is now authorized under an Emergency Use Authorization (EUA) while Pfizer and BioNTech gather additional data and prepare to file a planned Biologics License Application (BLA) with the FDA for a possible full regulatory approval in 2021. 

The vaccinations will provide some relief to the country which recorded the highest number of infection cases compared to other major countries. Investors will eagerly monitor the rolling out of the vaccine which is scheduled to start as early as Monday.

Further lockdowns

Germany is set to go on a hard lockdown over the Christmas holiday as the number of deaths and coronavirus cases jumped to record levels. Investors will likely eye other lockdown measures of hot spots for the virus. 

US stimulus talks

With talks on a new relief package aid still in deadlock over the disagreements between the White House and Congress, the country avoided a last-minute government shutdown as President Trump signed a last-minute spending bill to fund government programs for just one week. We expect investors to keep monitoring the stimulus talks with only a few weeks left for Congress to pass a bill.

Brexit

With only a few weeks to go before the transition period ends, Brexit talks have reached an important turning point. The UK and the European Union is yet to agree on a deal with major disagreements arising on three critical issues: level playing field, governance and fisheries. Investors were taken on a roller-coaster ride following intensifying deal negotiations and on-and-off positive and negative announcements. 

Over the weekend, both the EU’s Commission leader, Ursula von der Leyen and the UK Prime Minister, Boris Johnson had a “constructive and useful phone call” and are willing to go the extra mile reviving hopes of an agreement. Investors will be eagerly watching the statements from both parties over the next few days to gauge the tone of the negotiations.

Key economic data to watch

FOMC meeting

Amid a busy economic calendar, the last FOMC meeting will gather much attention due to the stimulus gridlock over another coronavirus relief package, the post-election situation, a second wave of coronavirus outbreak and the first immunisations in the US. 

Over the last few months, we note that the Chairman of the Fed has been calling for more support from the fiscal side given the limitations of the central bank. Investors will be looking for the kind of support and commitment from the Fed given the lack of fiscal stimulus.

Bank of England meeting and employment data

The Bank of England’s interest rate decision and employment data will be the key events for the UK alongside Brexit noises. We expect the BoE to keep interest rates unchanged at 0.1% but traders will likely look for further clues on the negative interest rate route and vaccinations while also monitoring the tones of the central bank around the UK-EU relationship.

PMIs and retail sales

A series of PMI figures across the UK, US, Germany and the Eurozone and Retail Sales for the UK, US, China and Canada will help investors gauge economic recovery and impact of the second wave on consumer spending. 

Commodities

Oil

Last week, crude oil prices initially struggled to edge higher despite the latest positive news ranging from vaccine updates to the OPEC compromise deal as tougher lockdown restrictions, surging coronavirus cases and bearish weekly oil reports weighed on the oil market.

However, the US FDA voting and authorisation of the vaccine in the US helped crude oil prices to extend gains. As of writing, WTI Crude oil (Nymex) and Brent Crude (ICE) were trading at around $46.69 and $50.14 respectively. Traders will likely keep monitoring weekly oil reports, vaccine updates and further lockdown measures for fresh trading impetus.

Gold

The precious metal swung from gains to losses driven mostly by US stimulus talks and vaccine updates recently. As of writing, the XAUUSD pair was trading around $1,836.The stimulus negotiations will likely remain the primary driver for the yellow metal. 

Key events ahead

Monday

  • Tankan Large Manufacturing Outlook, Index, Large All Industry Capex and Industrial Production (Japan)
  • Foreign Direct Investment (China)
  • Industrial Production (Eurozone)
  • Westpac Consumer Survey (New Zealand)

Tuesday

  • RBA Meeting Minutes (Australia)
  • NBS Press Conference, Industrial Production and Retail Sales (China)
  • Claimant Count, ILO Unemployment Rate, and Average Earnings (UK)
  • Industrial Production (United States)
  • GDT Price Index (New Zealand)
  • BoC’s Governor Macklem Speech (Canada)

Wednesday

  • Commonwealth Bank Manufacturing & Services PMI, Westpac Leading Index and HIA New Home Sales (Australia)
  • Merchandise Trade Balance, Imports and Exports (Japan)
  • Consumer & Retail Price Index, PPI Core Output, and Markit Manufacturing & Services PMI (UK)
  • Markit Manufacturing & Services PMI (Germany)
  • Markit Manufacturing & Services PMI and Labor Cost (Eurozone)
  • BoC Consumer Price Index (Canada)
  • SNB Quarterly Bulletin (Switzerland)
  • Retail Sales, Markit Manufacturing & Services PMI, FOMC Economic Projections, Fed Interest Rate Decision, Monetary Policy Statement and Press Conference (US)

Thursday

  • Gross Domestic Product (New Zealand)
  • Fulltime Employment, Employment Change and Unemployment Rate (Australia)
  • SNB Interest Rate, Monetary Policy Assessment and Press Conference (Switzerland)
  • Consumer Price Index (Eurozone)
  • BoE MPC Vote Unchanged, Asset Purchase Facility, Vote Cut, Bank of England Minutes, Interest Rate Decision, Building Permits, Housing Starts, Jobless Claims, Philadelphia Fed Manufacturing Survey, and COVID-19 Vaccine Announcement (US)
  • Trade Balance, Exports, and Imports (New Zealand)

Friday

  • National CPI, BoJ Monetary Policy Statement, Interest Rate Decision and Press Conference (Japan)
  • Retail Sales (UK)
  • Producer Price Index, IFO – Business Climate, Current Assessment and Expectations (Germany)
  • Retail Sales (Canada)

Tuesday, 15 December 2020 
Indicative Index Dividends
Dividends are in Points
ASX200 WS30 US500 US2000 NDX100 CAC40 STOXX50
0 0 0.051 0.087 0 0 0
ESP35 ITA40 FTSE100 DAX30 HK50 JP225 INDIA50
0 0 0 0 0 0 0


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