Weekly Market Outlook (13-17 November)

UPCOMING EVENTS:

• Monday: Japan PPI.
• Tuesday:
  UK Jobs
  data, German ZEW, NFIB Small Business Optimism Index, US CPI.
• Wednesday:
  Japan
  GDP, Australia Wage data, China Industrial Production and Retail Sales, UK
  CPI, US PPI, US Retail Sales, PBoC MLF.
• Thursday:
  Australia
  Jobs data, US Jobless Claims, US Industrial Production, NAHB Housing
  Market Index, New Zealand PPI.
• Friday:
  UK
  Retail Sales, Canada PPI, US Building Permits and Housing Starts.

Tuesday

The UK unemployment rate is expected to
remain unchanged at 4.3% in the three-month period to September and the
employment change to contract by 198K. The average earnings including bonus are
seen at 8.3% vs. 8.1% prior, while the average earnings excluding bonus are
expected to remain unchanged at 7.8% vs. 7.8% prior.

There’s no consensus at time of writing
for the US headline CPI data. The Core CPI Y/Y is expected to hold steady at
4.1% vs. 4.1% prior,
while the M/M reading is seen at 0.3% vs. 0.3% prior. The Fedspeak has been
leaning on the hawkish side since the last FOMC meeting and although the market
expects the Fed to keep rates steady until the mid-2024, we might see another
rate hike if the upcoming two CPI reports fall short of their expectations and
show persistently elevated underlying inflation. The whole reaction function
will need to be paired with the NFP report in December of course as another
notable
miss and increase in the unemployment
rate will keep the Fed on the sidelines.

Wednesday

The Australian Wage price index for Q3 is
expected to increase by 1.3% vs. 0.8% prior for the Q/Q reading and 3.9% vs.
3.6% prior for the Y/Y figure. The RBA
recently hiked by 25 bps citing
surprisingly persistent services inflation. The central bank is keeping the
door open for further tightening as it left in the statement the line “whether
further tightening of monetary policy is required to ensure that inflation
returns to target in a reasonable time frame will depend upon the data and the
evolving assessment of risks”.

The UK CPI Y/Y is expected to fall to 4.8%
vs. 6.7% prior,
while the M/M reading is seen at 0.1% vs. 0.5% prior. The Core CPI Y/Y is
expected at 5.8% vs. 6.1% prior and the M/M figure at 0.4% vs. 0.5% prior. The BoE
has kept rates steady for two consecutive meetings and it will be harder for
them to do so at the next one as well if this week’s employment and inflation
data beats expectations.

The US Retail Sales have been surprisingly
hot in the past few months, but this time around the data is expected to show a
decline of -0.1% M/M vs. 0.7% prior.
Although, the data is unlikely to change the Fed’s stance, the central bank
won’t be pleased with too hot figures.

Thursday

The Australian employment change is
expected at 18K vs. 6.7K prior
with the unemployment rate ticking higher to 3.7% vs. 3.6% prior. Although the
labour market has been showing signs of cooling, it remains historically tight,
and the RBA would like to see more softening.

The US Jobless Claims lately have been
pointing to a softening labour market via lower job opportunities rather than
more layoffs. In fact, Continuing Claims have been rising steadily while
Initial Claims remained subdued around the 200-220K level. There’s no consensus
at the time of writing for this week’s data, but as always it will be one of
the most important releases.