Weekly Market Outlook (27-01 December)

UPCOMING EVENTS:

• Tuesday:
  Australian
  Retail Sales, US Consumer Confidence.
• Wednesday:
  Australian
  Monthly CPI, RBNZ Policy Decision, US GPD Q3 2^nd Estimate.
• Thursday:
  Japan
  Industrial Production and Retail Sales, China PMIs, Switzerland Retail
  Sales, Eurozone CPI and Unemployment Rate, Canada GDP, US Core PCE, US
  Jobless Claims.
• Friday:
  Japan
  Jobs data, China Caixin Manufacturing PMI, Switzerland GDP, Canadian
  Labour Market report, Canada Manufacturing PMI, US ISM Manufacturing PMI

Tuesday:

The US Consumer Confidence has been
falling steadily in the past quarter as the labour market started to weaken.
In fact, compared to the University of Michigan Consumer Sentiment, which shows
more how the consumers see their personal finances, the Consumer Confidence
shows how the consumers see the
labour market. The consensus sees the
index falling to 101 in November vs. 102.6 in October.

Wednesday

The Australian Monthly CPI Y/Y is expected
to fall to 5.2% vs. 5.6% prior. The RBA
hiked the cash rate by 25 bps at the last
meeting following higher than expected CPI
data. The recent hawkish RBA
Meeting Minutes and the comments from RBA’s
Governor Bullock suggest that the
central bank is losing some patience
amid some inflation persistence. A
higher-than-expected release won’t be welcome news for the RBA.

The RBNZ is widely expected to keep the
OCR steady at 5.50% as the central bank made
it clear that despite some near
term volatility in the data, inflation is expected to decline to the target
band by the second half of 2024. The economic
data from New Zealand has been showing clear weakness with the PMIs in
contraction and the unemployment
rate rising steadily.

Thursday

The Eurozone CPI Y/Y is expected to tick
lower to 2.8% vs. 2.9% prior,
while the Core CPI Y/Y is seen at 3.9% vs. 4.2% prior. The ECB is firmly in
a “wait and see” mode and this report is unlikely to trigger a rate hike
even if it beats expectations. We will also see the Unemployment Rate, which in
my opinion, is more important at the moment. The consensus sees the
Unemployment Rate to remain unchanged at 6.5%.

The US PCE Y/Y is expected to fall to 3.1%
vs. 3.4% prior, while the M/M reading is seen at 0.1% vs. 0.4% prior. The
Core PCE Y/Y, which is the Fed’s preferred measure of inflation, is expected to
fall to 3.5% vs. 3.7% prior, while the M/M measure is seen at 0.2% vs. 0.3%
prior. The market is unlikely to react much to this report given that it
already moved a lot on the more timely CPI
release just two weeks prior. In fact, in my
opinion, the US Jobless Claims released at the same time will be more
important.

The US Jobless Claims beat expectations
across the board last
week with Continuing Claims falling for
the first time in two months. The data set covered the NFP survey week, but
Jobless Claims are notoriously volatile, so one good report doesn’t make a
trend. This week the consensus sees Initial Claims at 218K vs. 209K prior
and Continuing Claims at 1855K vs. 1840K prior.

Friday

The Canadian Unemployment Rate is expected
to tick higher once again to 5.8% vs. 5.7% prior
with 14K jobs added vs. 17.5K prior. The BoC is expected to keep rates
unchanged, especially after the last week’s CPI
report where all the inflation
measures fell further and the BoC’s Governor
Macklem reaffirmed the central bank “wait and see” approach.

The US ISM Manufacturing PMI is expected
to tick higher to 47.6 vs. 46.7 prior.
If the index prints below 50, it would be the 13^th consecutive month
that the US Manufacturing sector remained in contraction. The S&P
Global US Manufacturing PMI released last
Friday missed estimates falling back in contraction. The most important
takeaway from the report though was this line: “As a result of subdued
demand and decreasing backlogs, companies reduced their workforce for the first
time since June 2020, affecting both service providers and goods producers.”