Markets dodged a bullet to end the week, in a much better mood than almost anyone would have predicted in the wake of Donald Trump winning the US presidential election. In some ways, with that uncertainty behind them, traders can simply focus on the expected Fed rate hike in December and perhaps a Santa Claus stock market rally.
But there is still plenty of water to flow under the bridge, including any announcements of Cabinet members or policy prescriptions from the President-elect and his team. We also have Janet Yellen and 10 other Fed speeches this week to traders on their toes.
And let’s not forget the monthly trifecta of retail sales, industrial production, and fixed asset investment out of China which, in the current environment, will be critical to sentiment.
In Australia alongside the global influences, we’ll see the release of October’s labour force report.
Who’s afraid of a President Trump? Markets bounced back quickly on Wednesday in North American trade after heavy selling during the Asian session as everyone realised Trump was about to win the US presidential election. The selling in Asia went exactly to script for the many investors who warned of carnage from a Trump triumph. But the recovery was so swift it also caught many on the hop and by week’s end the Dow closed at a new all-time high, bonds were sharply higher, gold is $110 an ounce lower than Asia Wednesday, and fear seems to have evaporated.
Some say traders grabbed the Brexit playbook, but there is more to it than that. The divergent moves in certain sectors of stock markets, across different curency pairs – even within the majors and especially across Asia, Latin America and the Aussie – in bonds, and commodities suggest this is something very different to the Brexit recovery.
What’s apparent in these divergent moves is that traders and investors are making active bets on the sectors and nations that will be the winners and losers under President Trump. Markets are clearly embracing the potential paradigm shift that Trumponomics can bring to a global economy mired in the central bank induced torpor of low rates and low growth. At the same time they appear to be also hedging against potentially negative geopolitical impacts of his presidency. Against that backdrop the collapse in gold could be a great opportunity for the long term if Trump really is going to be reflationary as many expect.
(courtesy NAB Economics, our emphasis)
There are three big watch points. The first is RBA Governor Philip Lowe’s speech to CEDA on Tuesday evening (and the RBA Minutes earlier on Tuesday). Secondly, there’s the Wage Price Index for Q3 on Wednesday, followed by the October Labour Force release on Thursday, complete with its interpretation difficulties.
Australian Labour Force – October Australia’s wildly volatile employment report is out Thursday with the NAB’s economic team noting that “looking through the monthly noise, we imagine the focus will be on whether the emerging picture of predominantly part time jobs has continued and whether there is any key take away about the performance of labour markets across the country”.
That’s after traders try to figure out the isues related to monthly variations in sample rotation and the unreliability of the month seasonally adjusted move in jobs. With the market looking for a rise of 20,000 jobs in October there is plenty of room for disappointment if the slowdown we’ve been seeing in teh labour market continues. Unemployment is expected to rise to 5.7%.
(courtesy NAB Market Economics)
Global :The market will remain alert to any news on president-elect Trump’s policies and possible appointments.
US: Along with Yellen’s testimony Thursday, there are no less than 10 other Fed speeches! As for the data, after the UoM Consumer Sentiment tonight (polled before the election), there is Retail Sales, Empire Manufacturing, and Business Inventories Tuesday, PPI, Industrial Production and NAHB Housing Wednesday, Housing Starts, CPI and the Philly Fed Survey Thursday, then the Leading Index and Kansas City Fed Manufacturing Friday.
China: The activity trifecta of Industrial Production, Retail Sales and Fixed Assets Investment is due Monday. Property prices are due Friday
Japan: Revised Q3 GDP and final Sep Industrial Production Monday the main interests. BoJ Governor Kuroda also speaks Monday.
Euro: Euro Finance Week has several ECB speakers scheduled through the week. For data, there’s revised Q3 EC/German GDP and the ZEW Survey Tuesday with CPI Thursday.
UK: CPI/PPI/House Prices Tuesday, Labour Market Wednesday, and Retail Sales Thursday.
Canada: Quiet ahead of the CPI on Friday.
NZ: Thursday’s Q3 Retail Trade is the main focus. There’s also service sector conditions (PSI), housing, dairy prices, inflation expectations and consumer confidence. “Year to March 2016” national accounts also out ahead of Q3 GDP on 15 Dec.