By Deepta Bolaky
Despite a relatively quiet end to the month of November due to the US public holiday, Wall Street recorded fresh record highs. We expect the first week of December to be a busy one with a series of economic data releases, central bank meetings and an OPEC meeting while the focus will remain on dominant geopolitical themes.
Over the weekend, we note that China has struck confident and optimistic tones on Phase One trade deal. However, China looks set on the fact that the rolling back of tariffs levied by the US is a must and cannot be replaced by a US pledge to scrap planned tariffs scheduled on December 15.
We expect investors to keep scrutinising any developments on the trade front. The possibility of the partial trade before the year ends has fizzled out and now the Chinese New Year at the end of January 2020 will be the next period whereby investors will look for concrete commitments from the two sides.
UK Election Campaign
Even though the Tory lead has narrowed last week, the recent polls still show a comfortable and significant majority for the Conservative Party. If the predictions are correct, Labour might suffer its worst defeat in a long time.
The British Pound has gapped lower this morning due to the narrow lead but remained in elevated levels back by the prospects of a majority win by the governing party.
Reserve Bank of Australia
Tuesday’s meeting will mark the last meeting for the year. It is widely expected that the RBA will keep the interest rate on hold at a record low of 0.75% at this meeting. The recent speech by Governor Lowe has shrugged off the speculations of quantitative easing and negative interest rates, but also rose expectations of further rate cuts in 2020.
Bank of Canada
Similarly, the BoC will hold its last meeting and is expected to keep interest rate steady. The economic indicators continue to favour the BoC’s stance on holding interest rates with no obvious reason to alter rate in the foreseeable future.
The OPEC meeting on December 5 will be closely monitored alongside the Saudi Aramco’s IPO. These two events will be key in determining the short-price action of the oil market. While the oil producers are expected to extend their supply cut commitments, there are also expectations that deeper cuts and longer-lasting OPEC cuts will also be on the agenda.
At a minimum, traders are expecting the extension which will provide support to oil prices. Deeper- than-expected cuts or lengthy extension could cause a rally in the oil prices. Any disappointment or comments highlighting the fragility of OPEC politics could add pressure on oil prices.
Among a barrage of economic releases, NFP and Manufacturing PMIs will stand out. November has been good for the US dollar which traded higher against major currencies mainly because further easing has been ruled out. We expect jobs reports to remain the strongest spot of the US economy and NFP to tick higher above 180k.
With the Fed on hold, the run of upbeat economic releases could provide more upside momentum for the greenback. However, traders should continue to monitor trade headlines.
Monday: Markit & ISM Manufacturing PMI and ISM prices Paid
Wednesday: ADP Employment Change, Markit Services PMI & PMI Composite, ISM Non-Manufacturing PMI and Fed’s Quarles Speech
Thursday: OPEC Meeting, Trade Balance, Jobless Claims, Fed Speech and Factory Orders
Friday: OPEC Meeting, Nonfarm Payrolls, Average Hourly Earnings, Labor Force Participation Rate, Unemployment Rate and Michigan Consumer Sentiment Index
The GDP figures and Industrial Production in Germany will be among the most important data releases.
Monday: Markit Manufacturing PMI (Germany) and ECB Speech (EZ)
Tuesday: ECB Speech (EZ)
Wednesday: Eurogroup Meeting and Markit PMI Composite (EZ) and Markit PMI Composite and 10-Y Bond Auction (Germany)
Thursday: EcoFin Meeting, Retail Sales, and GDP (EZ) and Factory Orders (Germany)
Friday: Industrial Production (Germany)
The focus will also be on German politics as the win of the left-wing SPD duo poses a threat to the grand coalition led by Angela Merkel. Market participants will have more clarity this week on whether the SPD party will stay in the current governing party or the country will face an early election.
Aside from the RBA meeting, the economic calendar will be packed for Australia with Manufacturing PMI reports, Building Permits, GDP figures, Imports, Exports, Trade Balance, Retail Sales and Performance of Construction Index.
|Tuesday, 3 November 2019
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