The week ahead was always going to be huge, with multiple central bank meetings and decisions, the raft of economic releases that always occur in the first week of the month, and of course US non-farm payrolls on Friday night.
And given Hillary Clinton’s lead in the polls uncertainty around the US election was not expected to feature heavily. But all that changed on Friday with the FBI telling lawmakers it had re-opened the investigation into Clinton’s emails as a result of an investigation into the notorious former congressman Anthony Weiner, who was married to a key Clinton aide.
So markets will need to digest the data, central bank meetings, news OPEC is still yet to nut out its deal to freeze production, and any fallout from the new FBI revelations.
It’s going to be one heck of a week.
The US presidential election may not be the lock for Clinton traders are pricing. The return of Hillary Clinton’s email scandal saw stocks dive before recovering towards the weekend’s close, but the US dollar fell, while bonds rallied a little on Friday night as traders tried to digest whether the revelations the FBI was reopening its investigation changed the outlook for the presidential race.
It’s a difficult to answer because the details are so scant. But while polls have consistently shown Hillary Clinton will easily win the November 8 election an artificial intelligence system that correctly predicted the last three elections says Trump will win.
Nothing would surprise me after the volatility of 2016. But it is not priced into markets, so when Donald Trump says he’s going to do a “Brexit” he might not be kidding when it comes to markets – if he wins.
Australian stocks collapsed last week and may be headed for 5150. The ASX lost another 0.2% on Friday, after falling 2.7% the previous two days in a complete departure from the performance of markets in the US and Europe. Matt Felsman from APP securities said in a note over the weekend that these falls “left many people scratching their heads as to what exactly had changed”.
But, he says the break of 5350 is bearish for the market:
For many, 5350 as an index level was where the market needed to hold to remain neutral to positive, given we broke this level, statistics show historically November is usually a weak month and big ex-dividends are looming, expect some bearish commentary in the week ahead. Heading towards 5150 will now become the focus of investors.
A huge week ahead with the most market moving pieces being the RBA Board Meeting Tuesday where we expect rates to be unchanged (and after that comes the Melbourne Cup), then Retail Sales and the RBA’s Statement on Monetary Policy on Friday. There is plenty of other top-tier data too with RBA Credit Statistics, Monday, Building Approvals on Wednesday and the Trade Balance, Thursday.
No Change from the RBA Tuesday. But what will they say in quarterly Statement on Monetary Policy on Friday? The majority of economists surveyed in the latest Bloomberg poll (21/27) expect the RBA to hold rates at 1.5% when the Board meets on Cup Day. Market price the chances of lower rates winning the day at around 6%.
But in the wake of higher-than-expected, yet still very low, headline inflation for Q3, released last week, the NAB economics team says “attention will be paid to any comments around the inflation figures and on the softening that appears to be occurring in the labour market”. Taken together they suggest the RBA most likely retains a bias to ease in 2017
The RBA gets a chance to further explain any comments in Tuesday’s statement by governor Philip Lowe with the release of its quarterly statement on Monetary Policy on Friday. Of great interest will be further discussion of the inflation and jobs outlook as well as any comments from the RBA on the housing market, which appears to have seen prices accelerate again in Sydney and Melbourne.
In many ways it could be the tension between jobs, inflation, and rampant property prices that decides if the RBA is at the end of its rate-cutting cycle.
International Calendar (also courtesy NAB Market Economics)
Global : A very big week with the RBA, BoJ, US Fed and BoE all meeting and markets expecting them all to keep rates on hold. In terms of dataflow, it will be dominated by the US and China. Key Chinese PMIs are Tuesday, and thereafter US data will dominate with the key US Manufacturing ISM on Tuesday, the Non-manufacturing ISM, Thursday, and the biggest mover of markets this year — Non-farm Payrolls this Friday.
US: There is plenty of key data out along with the November FOMC meeting result on Wednesday (expect them to hold with a pointer towards a December rate hike). The Fed’s preferred inflation measure, the PCE, is Monday along with the Chicago PMI, which is a good indicator of the more market-moving ISM Manufacturing on Tuesday. Wednesday sees the ADP measure of payrolls, and Thursday has the ISM Non-manufacturing, both of which can be a guide to Friday’s more important Non-farm Payrolls release. Following the FOMC meeting, Fed jive talking resumes with Fischer on Friday along with Lockhart.
China: A key week, with the October official Manufacturing and Non-manufacturing PMIs on Tuesday and the unofficial Caixin measures Tuesday and Thursday.
Japan: The BoJ meets Tuesday where no changes are expected. There is also plenty of data including Industrial Production and Retail Trade on Monday, the Nikkei Manufacturing PMI, Tuesday, and the Non-manufacturing PMIs, Friday.
Euro:The CPI is on Monday, and the unemployment rate is Thursday. Ahead of them, German Retail Sales is Monday and unemployment figures are Wednesday.
UK: The BoE meets Thursday (no move expected) in a quiet data week with only the PMIs likely to garner attention; Construction is Tuesday and Services Thursday.
NZ: A busy week with the highlight being the quarterly Labour Market data on Wednesday. Other key data includes Monday’s trifecta of the ANZ Business Survey, Building Consents and Credit Aggregates, while Wednesday also has the RBNZ releasing its latest RBNZ inflation expectations survey.
Here’s the NAB’s excellent calendar of data and events for the week ahead.
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