Key Factors:- PBoC LPR, FOMC, ECB, RBA, Japanese CPI, UK Budget, Riksbank, and Flash PMI data are next week’s highlights.
Investors will be watching the Federal Reserve’s recent meeting minutes for interest rate predictions in the holiday-shortened week ahead. Retailers anticipate for another busy holiday shopping season. Oil prices are fluctuating and Nvidia is the last megacap to announce earnings. Start your week with these tips.
Weekly Economic calendar USA Oct 06 to Nov 10
Monday
- Construction Investment
- Bloomberg Nanos Confidence
- U.S. Leading Indicators
Tuesday
- Consumer Price Index
- New Housing Price Index
- U.S. Existing Home Sales
- FOMC Minutes
- Federal Fall Economic Statement
Wednesday
- U.S. Initial Jobless Claims
- U.S. Durable Goods Orders
- U. of M.
- BoC Governor Macklem speaks in St. John, NB
Thursday
- U.S. Thanksgiving Day (U.S. markets closed)
Friday
- Retail Sales
- U.S. S&P Global PMIs
TOP FACTORS IN WALL STREET
Fed minutes
Due to Thanksgiving, the Fed will release its Oct. 31-Nov. 1 minutes on Tuesday, a day early.
The U.S. central bank may be done raising rates due to decreasing inflation, so investors will be watching the minutes for policymakers’ stance.
Vice Chair for Supervision Michael Barr said Friday that the Fed is nearing the peak of interest rate hikes, but San Francisco Fed president Mary Daly and Boston Fed President Susan Collins stressed the need for more indicators of lowering inflation.
On Tuesday, existing home sales will be released, followed by weekly initial jobless claims and October durable goods orders.
Black Friday
Retailers are preparing for Black Friday, the start of the Christmas shopping season that follows Thanksgiving. Investors are wondering if the consumer-driven U.S. economy will survive.
Despite easing, interest rates and inflation remain over the Fed’s 2% objective on Black Friday.
United States retail sales declined for the first time in seven months in October, indicating declining demand, albeit the decline was smaller than predicted.
Retailers have predicted a weaker holiday season. Even as Walmart (NYSE:WMT) upped its sales and profit estimate for the year, the largest U.S. retailer said Thursday that shoppers are spending less during the holidays.
Equity optimism
With markets recovering following a months-long decline in August and October, investor optimism on equities has increased in recent weeks. Treasury yields, which had dragged on stocks for months, have fallen swiftly amid hopes the Fed is done hiking rates.
S&P 500, Nasdaq, and Dow gained for the third week in a row last week. The S&P and Dow had their longest weekly winning streak since July. It was Nasdaq’s longest weekly increase since June.
Nvidia (NASDAQ:NVDA) will report its quarterly earnings on Tuesday, attracting investors this week. It is the penultimate earnings season result from the Magnificent Seven megacap businesses, whose big share gains this year have boosted global indices.
Oil prices
As short-term investors took profits and U.S. sanctions on some Russian oil shippers supported oil prices, they rose more than 4% on Friday from a four-month low.
Still, Brent and crude oil benchmarks fell more than 1% for the fourth straight week, largely due to rising U.S. crude inventories and record production.
The Chinese property crisis and industrial slowdown also contributed.
Many analysts expect the Organization of the Petroleum Exporting Countries and its allies to extend output curbs till 2024 when they meet later this month with Brent below $80.
Eurozone data
On Thursday, the Eurozone will release November purchasing manager indices, with economists predicting little change. On Wednesday and Friday, the bloc will disclose consumer confidence figures and the critically monitored German Ifo business environment index.
On Wednesday, the European Central Bank will release its latest financial stability review and its October policy meeting minutes.
ECB President Christine Lagarde will talk in Berlin on Tuesday and in Frankfurt on Friday, along with many other ECB officials.
Weekly Global Market Calendar (20 Nov-24 Nov)
Monday, October 20
- PBoC LPR
- German Producer Prices (Oct)
- New Zealand Trade Balance (Oct)
Tuesday, October 21
- FOMC Minutes (Nov)
- RBA Minutes (Nov)
- NBH Policy Announcement
- UK PSNB (Oct)
- Canadian CPI (Oct)
Wednesday, NOV 22
- UK Autumn Statement
- Dutch Elections; US IJC (13 Nov w/e)
- Durable Goods (Oct)
- Uni. of Michigan Final (Nov)
- Australian Flash PMIs (Nov)
Thursday, NOV 23
- US Thanksgiving (Market Holiday)
- Riksbank & SARB Policy Announcements
- ECB Minutes (Oct)
- EZ & UK Flash PMIs (Nov)
- Japanese CPI (Oct)
Friday, NOV 24
- US post-Thanksgiving (early-closures)
- UK GfK (Nov)
- Japanese Jibun Flash PMIs (Nov)
- German GDP Detailed (Q3)
- Swedish PPI (Oct)
- German Ifo (Nov)
- US Flash PMIs (Nov)
Global Events in details date wise
Monday Nov 20
PBoC LPR:-
The 1-year and 5-year PBoC Loan Prime Rates are expected to remain at 3.45% and 4.20%, respectively, next week. The PBoC’s recent decision to keep the 1-Year MLF rate unchanged at 2.50%, which is a good indicator of its benchmark rate intentions, led to expectations that it would not adjust LPRs, which most loans and mortgages are based on. The MLF operation resulted in the largest net injection in 7 years. Recent Chinese data has been mixed, with disappointing Manufacturing PMIs and weaker Exports offset by a surprise expansion in Imports and stronger-than-expected activity data. Property investment and house prices continued to fall, suggesting future policy action, and local press reports have noted expectations of another RRR cut before year-end.
New Zealand Trade Balance
No forecast. shipments fell 18% Y/Y to NZD 4.9bln in September, with milk powder, butter, and cheese shipments sliding. September exports to China fell 20% Y/Y. Exports to Australia, the US (-6.7% Y/Y), the EU (-26% Y/Y), and Japan (-12%) fell. The NZ Stats Bureau reported that imports fell 15% Y/Y to NZD 7.2bln, with China (-17% Y/Y), the EU (-1.5% YoY), Australia (-21% Y/Y), and South Korea (-16% Y/Y) decreasing, while US imports gained 6.1%. Westpac analysts estimate the M/M Trade Balance deficit to drop to NZD 1.8bln (prev. NZD 2.329bln) as dairy price weakness, which caused a bigger shortfall, fades.
Tuesday Nov 21
Fed Minutes:
The FOMC maintained rates at 5.25-5.50% during its November policy meeting, in accordance with expectations and market pricing, with just minor revisions. The central bank maintained that “additional policy firming that may be appropriate” and upgraded its rating of economic growth to “strong” in Q3, up from “solid” in September. It admitted that job increases had “moderated since earlier in the year” (from “slowed in recent months”) but maintained its focus on job growth and the low unemployment rate. It also added a line to address the rise in Treasury yields ahead of the meeting, stating that tighter financial and credit conditions are likely to hurt economic activity, hiring, and inflation, unlike the September statement, which only acknowledged tighter credit conditions. Chair Powell reiterated his recent comments and reaffirmed the Fed’s commitment to tight monetary policy after the meeting. He said the full ramifications of this strategy were unclear. His assessment of the economy focused on solid growth and labor demand. Powell said that inflation is rising and tight labor markets have slowed wage increases. He suggested interest rate hikes in the Q&A due to policy and financial uncertainty. He also implied that the Fed is nearing the end of its rate-hike cycle and reassessing its strategy. Powell stated that rate decreases are not being evaluated, but rather how long to maintain a restrictive stance. After the FOMC meeting, nonfarm payrolls, CPI data, and some survey reports (like ISMs) surprised negative, causing traders to pull back on rate hikes and add to bets on rate cuts in 2024 — 100bps of easing is priced by the end of next year. A week after the FOMC meeting, Fed Chair Powell struck a hawkish tone and said that while inflation had improved, there was still a “long way to go” and that officials were not confident that they had achieved a sufficiently restrictive policy stance. He added that the FOMC would not hesitate to tighten policy further if necessary.
RBA minutes
Next week, the RBA will release minutes from its November 7th meeting. The central bank hiked the Cash Rate by 25bps, as expected, to 4.35% from 4.10%, but tweaked forward guidance to note that whether further tightening of monetary policy is needed to ensure that inflation returns to target in a reasonable timeframe will depend on data and the evolving assessment of risks. This was less hawkish than the RBA’s previous language that some further tightening of monetary policy may be needed, but it reiterated that returning inflation to target within a reasonable timeframe remains the Board’s priority and that it will do what is necessary to achieve that goal. The central bank also claimed that Australian inflation has peaked but is still too high and proving more persistent than projected a few months ago, with CPI inflation expected to be 3.5% by 2024 and at the top of the 2-3% target range by 2025. The RBA’s quarterly Statement on Monetary Policy released a few days after the rate decision noted that they considered holding policy rates steady, but decided a hike would provide more inflation assurance and reiterated a data-dependent approach. It also noted that recent data indicate the domestic economy has been stronger than previously thought and there are both upside and downside risks to the outlook.
Canadian CPI
inflation expectations are unknown. The BoC’s latest meeting minutes highlighted that current policy settings should be enough to bring inflation back to 2% if rates stay at 5.00% for long enough. BoC policymakers worried that underlying inflation was not falling fast enough, either because monetary policy needed more time or was too loose. Given the higher near-term inflation forecast, continued core inflation, and higher oil prices, members agreed that inflationary risks had grown. Persistence in core inflation, rising inflation expectations and wage growth, and abnormal pricing behavior could suggest persistent higher inflation. Finally, officials emphasized that near-term inflation expectations are excessive but reducing, while longer-term expectations are well-anchored.
Wednesday NOV 22
UK Autumn Statement:
With 12 months until a UK election (the latest probable date is January 2025), Chancellor Hunt will likely keep his limited powder dry and not make any substantial fiscal policy changes. Pre-election modifications could appear in a Mar’24 Budget or the Autumn 2024 announcement if the election is in early 2025. of its March update, Morgan Stanley anticipates GBP 15bln of fiscal easing to target higher-income households, such as repealing inheritance tax (projected by the IFS to cost the Treasury GBP 7bln/year if eliminated). The Gilt remit for FY23/24 is expected to be GBP 15bln lower Y/Y at slightly over GBP 220bln. Lower-than-expected borrowing and wage-driven tax receipts have given the UK budgetary leeway, but the BoE’s tightening cycle has raised debt servicing costs, eroding it. As always, the statement will include OBR forecasts, which may be downgraded in the near term due to the OBR’s bullish March growth projections. The institute is likely to find Hunt’s statement compliant with the fiscal charter, especially as this update rolls out the 5-year reference point to the following fiscal term.
Dutch Election:
Following PM Rutte’s departure over immigration policy issues in his fourth cabinet, the Netherlands will hold a quick election on Wednesday, November 22, 2023. On election day, voting booths are open from 07:30-21:00CET (06:30-20:00GMT), and exit polls start one hour after booths close. Polls indicate that the future coalition will differ from the current one but not become right-wing. The VVD, PM Rutte’s old party, would likely form a coalition with PvdA/GL, NSC, and another party. Rabobank says this is “likely to be viewed in a positive light by the market given the country’s strong borrowing metrics”, while ING says every party will boost its deficit to support economic growth regardless of seat count.
Thursday NOV 23
Riksbank Announcement:
Desks are torn between an unchanged announcement or a 25bp raise to 4.25% from the current 4.00% rate established in September, when the regulator stated rates may need to rise further with a 40% possibility of another 25bp hike by Q3-2024. Recently rising inflation has caused disagreements about November’s announcement. Most importantly, the October CPIF release saw the headline Y/Y rate rise, but not as much as markets expected and in line with the Riksbank’s forecast, while the key CPIF ex-Energy metric was much weaker than the previous month and market forecasts but just above the Riksbank’s view. Due to this headline-core gap and rising Money Market 1yr CPIF inflation expectations, November calls are different. Market pricing currently favors an unaltered outcome (56% likelihood), making the choice a coin flip. After November, the current SEB survey is split around 50/50, with those favoring a 25bp raise anticipating dovish rate advice and those favoring an unchanged outcome expecting hawkish direction.
ECB Minutes
The ECB kept all three key rates steady in its “pause” in its hiking campaign, as expected. The Governing Council found rates restrictive enough to return inflation to goal and observed that prior interest rate hikes continue to force financial conditions. Despite predictions for a bringing forward, the ECB confirmed that PEPP reinvestments will continue until “at least the end of 2024” on the balance sheet. At the follow-up press conference, Lagarde predicted a sluggish economy and tougher financial conditions for the Eurozone. Lagarde said the policy choice was unanimously agreed and there was no discussion of early PEPP reinvestments or minimum reserve changes. Later, ECB sources told Reuters that policymakers would discuss the PEPP reinvestment end date in early 2024 and minimum reserves during the Spring framework review. They said that the ECB would likely cease reinvestments gradually, like it did with the APP. Most will consider the meeting report stale, as usual. While the ECB has paused its rate hike cycle and the first 25bps drop is not priced until June 2024, traders should utilize data to predict the Bank’s future actions rather than last month’s meeting report.
EZ Flash PMI
Manufacturing is predicted to remain in contraction territory at 43.5 (prev. 43.1), Services at 48.0 (prev. 47.8), and Composite at 46.7 (prev. 46.5). November forward-looking statistics suggest the economy will improve in the following months. Oxford Economics’ department stated a strong rebound is unlikely until the troubled German economy recovers. On that note, the modest PMI improvements expected are consistent with the latest EZ and German ZEW surveys, which signalled confidence that the German economy downturn has bottomed out and suggested investors were becoming more optimistic about the eurozone outlook, despite current conditions deteriorating further from previously low levels. German ZEW Economic Sentiment beat estimates at 9.8 vs. Exp. 5.0 (Prev. -1.1), but German Current Conditions underperformed at -79.8 vs. Exp. -76.9 (Prev. -79.9). EZ ZEW Expectations for November were 13.8 (Prev. The study also found that more ZEW respondents expected EZ inflation to fall and rate reduction in the following six months. In addition to measures, participants will analyze the PMI release for commentary on inflation and growth during the survey period amid deflationary trends in other key economies like the US and UK. At now, market pricing suggests the first full 25bps ECB rate cut will occur in June, with April pricing implying 23bps of easing. Money markets completely price 100bps ECB rate cuts by December 2024.
UK Flash PMI:
UK Flash PMI:- November Flash Services is projected to be 49.7 (prev. 49.5), Manufacturing 45.0 (prev. 44.8), and Composite 48.7. In September, it dipped below 50 for the first time since January and stayed there in October. Services dominated the decline, while manufacturing PMI has been below 50 since August 2022. Investec analysts note that rising natural gas and electricity costs, mostly owing to the Russia-Ukraine conflict, and other input cost pressures have subsided, but sustained inflation continues. BoE interest rates are slowly taking effect, with half of the impact realized so far, according to the desk. Services PMI is expected to fall from 49.5 to 49.0, while Manufacturing is expected to stay at 44.8, with recent global news marginally favorable. “Overall, services weakness ought to have dominated, hence our call for a 0.4pt composite PMI drop to 48.3,” adds the desk.
CBRT Announcement:
There are no expectations for what the CBRT may do at its November meeting. As expected, the Central Bank raised its benchmark weekly repo rate to 35.0% from 30% in October after raising it 500bp in September and 750bp in August. The Bank said monetary tightening will be increased as needed gradually until inflation improves significantly. To counteract inflation, which exceeded 60%, the key interest rate has been raised from 8.5% to 35% since June. A Bloomberg article says the Turkish central bank will keep its present policy mix to combat high inflation with President Erdogan’s support. In her recent biannual Financial Stability Report, Governor Erkan pledged to resist government temptation to decrease borrowing costs prematurely. The Governor noted in the report, “We will not compromise on our aims of price and financial stability and will move with determination”. The CBRT survey, released the Friday before the decision, predicted end-2023 CPI of 67.23% (prev. 68.01%), 12-month CPI of 43.94% (prev. 45.28%), and GDP of 4.1%. USD/TRY is forecast to end the year at 29.9961 (prev. 30.0453), and the 12-month Repo Rate at 37.01% (prev. 37.00%).
Friday NOV 24
New Zealand Retail Sales
No Q3 Retail Sales predictions for New Zealand. Westpac predicts Q/Q to fall to -2.0% from -1.0% in Q2. Despite population growth and more tourists, nominal retail spending fell 0.2% and volume of goods sold fell 1% in the June quarter, according to the bank. The bank said that hospitality and durable goods consumption plummeted. Westpac predicts a 0.4% drop in nominal spending, a 2% drop in goods sold, and a 0.2% drop in core retail goods volume in the September quarter due to financial pressures.
Japanese CPI
October Core CPI Y/Y is predicted to rise to 3.0% from 2.8%, while non-Core was 3.0% and M/M 0.3%. The core Y/Y rate dipped below 3% for the first time in almost a year last month, while the BoJ’s latest predictions showed core inflation hitting 2.8% this year (up from 2.5% in July), 2.8% in 2024 (prev. 1.9%), and 1.7% in 2025 (prev. 1.6%). The BoJ prioritized June 2024 spring wage discussions. Asahi newspaper reports that Japan’s main trade union confederation, Rengo, aims to set a wage boost target of “5% or higher” for the next spring discussions, including recurring pay raises. In light of current price patterns, Japanese PM Kishida has requested businesses to raise wages in next year’s spring labor discussions. On November 2, BoJ Governor Ueda indicated the next step is abolishing NIRP and raising short-term rates to 0 from -0.1%, presumably around Spring when annual wage negotiations are clear. ING analysts predict a 3.3% increase in October’s headline inflation, driven by fresh food and energy prices, with other services also expected to rise due to accumulated input price pressure. Core inflation, excluding these factors, is expected to remain above 4.0%, shifting the Bank of Japan’s policy stance from ultra-easing to neutral.
WEEKLY EARNINGS CALENDAR
Monday Nov 20
Agilent Technologies, Keysight Technologies, Zoom Video Communications.
Tuesday, Nov 21
Lowe’s Cos., Best Buy, George Weston, Analog Devices, NVIDIA, HP Inc., Autodesk, Dick’s Sporting Goods, Kohl’s Corp., Guess? Inc, Urban Outfitters
Wednesday, NOV 22
Deere & Co.
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