Key Events This Week: Busy Week of Asian policy Meetings Amid Policy Tightening Angst

Here are the key economic events and data releases to look out for this week:

Monday, January 17

CNH: China 4Q GDP, December industrial production and retail sales
US markets closed for Martin Luther King Jr. holiday

Tuesday, January 18

JPY: Bank of Japan decision
EUR: Germany ZEW survey expectations
GBP: UK November jobless claims, December unemployment
Goldman Sachs Q4 earnings

Wednesday, January 19

EUR: Germany December inflation
GBP: UK December inflation
GBP: Bank of England Governor Andrew Bailey speech
Bank of America Q4 earnings
Morgan Stanley Q4 earnings

Thursday, January 20

CNY: PBOC loan prime rate decision
JPY: Japan December external trade
AUD: Australia December unemployment
EUR: European Central Bank publishes Dec meeting account
USD: US weekly initial jobless claims
US crude oil: EIA inventory report
Netflix Q4 earnings

Friday, January 21

JPY: Japan December inflation
GBP: BOE policy maker Catherine Mann speech, UK December retail sales
EUR: Eurozone January consumer confidence

The potential for the removal of the liquidity punchbowl (aka monetary policy tightening) is dominating the market’s thinking at present.

The strong US CPI report released last week added more pressure on the US Federal Reserve to stat lifting rates earlier than once thought, potentially as soon as March. We’ve had numerous FOMC members recently marking a more hawkish bias to the committee’s views, including notably, the fabled dove Brainard in her Fed chair nomination appearance before the Senate.

Another Fed official, Waller, also mentioned the chance of five rates hikes this year, although he doesn’t favour a 50bp hike in March. It’s worth remembering that it is a US holiday on Monday, so their markets are closed, and the blackout period has started before the next Fed meeting on 26 January so there won’t be any more Committee members to listen out for on the wires.

Company earnings also continue with more bulge bracket US banks releasing their fourth quarter results. US stocks notched their second straight weekly decline, pushed lower by disappointing earnings from financial industry bellwether JPMorgan Chase which has clouded an already mixed outlook for the US economy.

S&P 500 daily chart

Asian policymakers in focus

We kick off the week with Chinese fourth quarter GDP (4% y/y vs. 3.3% est.), as well as December’s industrial production (4.3% vs. 3.7% est.) and retail sales (1.7% vs. 3.8% est.). The full-year GDP came in at 8.1%, slightly above the median estimate by economists but well above the government’s 2021 target of over 6%. Still, the data confirmed that the final quarter was losing momentum but the real test for the domestic economy will come in the first quarter of this year, due to current regional lockdowns on top of the ongoing woes in the property sector.

With this in mind, the PBoC lowered both the one-year medium-term lending facility rate abd the seven-day reverse repurchase rate by 10 basis points respectively, a move not seen in nearly two years, and also injected more liquidity into the financial system via US$110 billion in loans.

The Bank of Japan meeting on Tuesday is also getting some airtime after “sources” said it is thinking of a rate hike at some point beyond this year and debating how to manage the messaging. Inflation is picking up and possibly risks to prices may now be described as “balanced” but hitting the 2% inflation target is still a long way off.

USD/JPY daily chart

UK data to add pressure to the BoE

We get the usual mid-month data dump in the UK with signals about labour market strength, the pace of consumer price inflation and retail sales. These are the last official updates before the BoE meeting on 3 February, with CPI expected to rise above the forecast 5% going forward and a labour marker remaining tight.

GBP/USD daily

By Lukman Otunuga Senior Research Analyst

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

The Week Ahead – Earnings, Central Bank Chatter and a Busy Economic Calendar in Focus

On the Macro

It’s a busy week ahead on the economic calendar, with 63 stats in focus in the week ending 21st January. In the week prior, 44 stats had been in focus.

For the Dollar:

Key stats include Philly FED Manufacturing and initial jobless claims due out on Thursday.

Other stats include NY Empire State Manufacturing and housing sector data. These stats should have a muted impact on the markets, however.

In the week ending 14th January, the Dollar Spot Index fell by 0.58% to 95.165.

For the EUR:

ZEW Economic Sentiment figures for Germany and the Eurozone will be the key stats early in the week.

Finalized December inflation figures for member states and the Eurozone in the week will also draw interest.

At the end of the week, however, expect Eurozone consumer confidence figures to also influence. The markets will be looking for the effects of rising consumer prices on sentiment.

On the monetary policy front, the ECB monetary policy meeting minutes are due out on Thursday, with ECB President Lagarde scheduled to speak on Friday.

For the week, the EUR rose by 0.44% to $1.1411.

For the Pound:

It’s an important week ahead on the economic calendar.

On Tuesday, claimant counts and the UK’s unemployment rate will be in focus.

Inflation and retail sales figures due out on Wednesday and Thursday will also be key, however.

The stats through the week should give the BoE the numbers it needs to decide what’s next on the policy front.

On the monetary policy front, BoE Gov. Bailey is scheduled to speak on Wednesday.

The Pound rose by 0.64% to end the week at $1.3675.

For the Loonie:

It’s a relatively quiet week ahead on the economic calendar.

Inflation figures will be in focus on Tuesday, ahead of retail sales and employment figures on Friday.

With the markets expecting a hawkish BoC, this week’s stats could seal the fate of the Loonie near-term.

The Loonie ended the week up 0.72% to C$1.2552 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

Westpac consumer sentiment and employment figures will be in focus. While consumer sentiment is important, expect the employment numbers to be key. Another sharp pickup in hiring could force the RBA to reconsider its current stance on cash rates.

The Aussie Dollar rose by 0.36% to $0.7207.

For the Kiwi Dollar:

Business confidence figures for the 4th quarter get things started on Tuesday. We have seen business confidence wane recently, so the markets will be expecting some weak numbers.

Of greater significance will be electronic card retail sales figures due out on Wednesday.

At the end of the week, Business PMI numbers will also draw interest, however.

The Kiwi Dollar ended the week up by 0.37% to $0.6804.

For the Japanese Yen:

It’s a relatively quiet week ahead. Key stats are limited to trade data on Thursday and inflation figures on Friday. We don’t expect the numbers to move the dial, however.

On Tuesday, the BoJ also delivers its first monetary policy decision of the year. No surprises are expected…

The Japanese Yen rallied by 1.19% to ¥114.190 against the U.S Dollar.

Out of China

It’s a big week, with 4th quarter GDP numbers due out on Monday. Expect the numbers to set the tone for the week. Disappointing growth figures could bring into question market optimism towards the global economic outlook.

Other stats on Monday include fixed asset investments, industrial production, and retail sales figures. Barring dire numbers, however, these should have a limited impact on the markets.

On the monetary policy front, the PBoC will also be setting loan prime rates on Thursday.

The Chinese Yuan ended the week up by 0.39% to CNY6.3528 against the U.S Dollar.

Geo-Politics

Nothing new to consider in the week ahead, with China and Capitol Hill and Russia continuing to be the key areas of focus.

COVID-19

COVID-19 news updates will remain a key area focus. Risk aversion could hit should a new strain of the virus appear in a developed economy.

Corporate Earnings

It’s also corporate earnings season, with a number of big names releasing results that could test support for riskier assets.

The Weekly Wrap – U.S Inflation and FED Commentary Delivered a Choppy Week for the Markets

The Stats

It was a quieter week on the economic calendar, in the week ending 14th January.

A total of 44 stats were monitored, which was down from 63 stats in the week prior.

Of the 44 stats, 19 came in ahead forecasts, with 19 economic indicators coming up short of forecasts. 6 stats were in line with forecasts in the week.

Looking at the numbers, 19 of the stats reflected an upward trend from previous figures. Of the remaining 25 stats, 23 reflected a deterioration from previous.

For the Greenback, it was back into the red. In the week ending 14th January, the Dollar Spot Index fell by 0.58% to end the week at 95.167. A 0.65% slide on Wednesday did most of the damage as the markets responded to U.S inflation figures. In the week prior, the Index had risen by 0.07% to 95.739.

Out of the U.S

It was a big week for the Dollar. In the first half of the week, FED Chair Powell testimony and December inflation figures were key drivers.

While the FED Chair talked of the need to hike rates, there was no mention of the need for more than 3 this year. This was taken as a positive for the riskier assets and negative for the Dollar.

On Wednesday, another spike in inflation failed to spook the markets. This was in spite of the U.S annual rate of inflation at its highest since 1982. An easing in energy prices for the first time since the uptrend was taken as a sign of a possible topping out.

Jobless claims failed to impress on Thursday, with initial jobless claims increasing from 207k to 230k in the week ending 7th January.

Retail sales figures for December wrapped things up on Friday. In December, retail sales fell by 1.9% versus a forecasted 0.1% decline. Core retail sales tumbled by 2.3% versus a forecasted 0.2% rise.

Out of the UK

Retail sales were in focus early in the week. In December, the BRC Retail Sales Monitor was up 0.6% year-on-year versus a forecasted 0.3% increase. In November, retail sales had been up by 1.8%.

More significantly, however, were manufacturing production and GDP numbers at the end of the week.

The stats were skewed to the positive, supporting the more hawkish outlook on BoE monetary policy.

Manufacturing production rose by 1.1% in November versus a forecasted 0.2%. In October, manufacturing production had risen by 0.1%.

Month-on-month, the economy grew by 0.9% in November, following 0.2% growth in October, which was also Pound positive.

In the week, the Pound rose by 0.64% to end the week at $1.3675 In the week prior, the Pound had risen by 0.41% to $1.3588.

The FTSE100 ended the week up by 0.77% following a 1.36% gain from the previous week.

Out of the Eurozone

Key stats included Eurozone unemployment, industrial production, and trade data for November.

The stats were skewed to the positive. The Eurozone’s unemployment rate fell from 7.3% to 7.2%, with industrial production up 2.3% in the month. Production had fallen by 1.3% in October.

Trade data was EUR negative, however, while finalized inflation figures for France and Spain had a muted impact on the EUR. The Eurozone’s trade balance narrowed from a €3.3bn surplus to a €1.5bn deficit in November. It was the Eurozone’s first goods trade deficit since January 2014.

From the ECB, the Economic Bulletin sent mixed signals, while suggesting that inflation was more than just transitory.

For the week, the EUR rose by 0.44% to $1.1411. In the week prior, the EUR had fallen by 0.08% to $1.1361.

The DAX30 slipped by 0.40%, with both the CAC40 and the EuroStoxx600 ending the week down by 1.05% respectively.

For the Loonie

There were no material stats for the markets to consider. The lack of stats left market sentiment towards BoC monetary policy to influence, with the markets expectations of an imminent move delivering support.

An upswing in crude oil prices in the week was also Loonie positive.

In the week ending 14th January, the Loonie rallied by 0.72% to C$1.2552 against the Greenback. In the week prior, the Loonie had fallen by 0.05% to C$1.2643.

Elsewhere

It was a bullish week for the Aussie Dollar and the Kiwi Dollar.

The Aussie Dollar rose by 0.36% to $0.7207, with the Kiwi Dollar gaining 0.37% to end the week at $0.6804. A Friday sell-off limited the upside for the week.

For the Aussie Dollar

Retail sales and trade data were in focus, which delivered mixed results.

Key, however, was a 7.3% jump in retail sales in November versus a forecasted 3.9% increase. In October, retail sales had risen by 4.9%.

Australia’s trade surplus narrowed from A$11.22bn to A$9.423bn in November. Economists had forecasted a surplus of A$10.60bn.

For the Kiwi Dollar

Economic data was limited to building consents, which had a muted impact on the Kiwi Dollar in the week.

For the Japanese Yen

There were no material stats to provide the Yen with direction in the week.

The Japanese Yen rallied by 1.19% to ¥114.190 against the U.S Dollar. In the week prior, the Yen had fallen by 0.42% to ¥115.560.

Out of China

It was a relatively busy week on the economic data front. Inflation and trade data were in focus in the week.

In December, inflationary pressures eased, with China’s annual rate of inflation softening from 2.3% to 1.5%. China’s annual wholesale rate of inflation softened from 12.9% to 10.3%. These were positive for riskier assets, however.

Trade data was upbeat for December. China’s USD trade surplus widened from $71.72bn to $94.46bn. Exports were up 20.9% year-on-year, while imports increased by 19.5%. Exports been up by 22.0% and imports up by 31.7% in November.

In the week ending 14th January, the Chinese Yuan rose by 0.39% to CNY6.3528. In the week prior, the Yuan had ended the week down by 0.34% to CNY6.3778.

The Hang Seng Index ended the week up by 3.79%, while the CSI300 slid by 1.98%.

Factbox-Analysts’ 2022 outlook for Chinese assets

SYDNEY (Reuters) – Investment houses have started publishing their predictions for Chinese asset prices in 2022 following a bruising year for the financial markets.

The Hang Seng equity index has gained about 4.4% so far this year after losing more than 14% in 2021.

The MSCI China index rose nearly 3% after wiping out 23% of its value last year, against a 17% rise in world stocks during the same period.

On Jan. 13, the Hang Seng was at 24,422, MSCI China at 86.082 and the blue-chip CSI300 index at 4,818.8.

Here is a summary of some forecasts for Chinese assets at the end of 2022:

INVESTMENT HANG SENG MSCI CHINA CSI300 USD/CNY

HOUSE TARGET TARGET TARGET

Goldman 105 5,500 6.2

Sachs (12-month

forecast)

Morgan 25,000 95 6.4

Stanley

5,300

Barclays 6.5

HSBC 28,030

5,600

Standard 6.5

Chartered

KEY COMMENTS:

* GOLDMAN SACHS

“We believe Chinese stocks will have a better year in 2022 as the market recovers from a major correction and transitions into a ‘hope’ phase, where P/E expansion typically trumps weak fundamental growth and drives strong equity gains.”

* MORGAN STANLEY

“MSCI China has had its worst ever relative performance drawdown versus broad emerging markets in 2021 … despite such a record underperforming year, we still see some lingering risks skewed towards higher volatility or more downside in the near term. This makes us believe that now is not yet the right time to go bullish at a broad index level.”

* HSBC

“We think markets have been overzealous in selling Chinese stock … most funds are underweight and as the focus returns to growth in China, we think this market will roar back.”

* Credit Suisse

“Amid the expected relatively friendly policy environment and reasonable liquidity, we remain constructive on China A-share markets, despite the possible negative impact from the expected Fed’s tightening cycle. The Hong Kong stock market is likely to have a bigger impact from overseas macro and market volatilities, while we expect sector rotation could tilt back towards growth.”

(Reporting by Tom Westbrook and Winni Zhou; Editing by Rashmi Aich, Shailesh Kuber and Shounak Dasgupta)

The Week Ahead – Central Bank Chatter, COVID-19, and Stats from China and the U.S Key

On the Macro

It’s a quieter week ahead on the economic calendar, with 49 stats in focus in the week ending 14th January. In the week prior, just 63 stats had been in focus.

For the Dollar:

December inflation figures will be in focus on Wednesday along with wholesale inflation numbers on Thursday. Expect plenty of interest in the numbers, with inflation key to the FED’s policy moves for the year.

On Thursday, jobless claims will also draw interest ahead of retail sales and consumer sentiment figures on Friday.

With the markets now zoomed in on the FED, FED Chair Powell is due to give testimony on Tuesday before the Committee on Banking, Housing, and Urban affairs. Expect plenty of market interest, with FOMC member chatter in the week also needing consideration.

In the week ending 7th January, the Dollar Spot Index rose by 0.05% to 95.719.

For the EUR:

Unemployment and industrial production figures for the Eurozone will be the key stats early in the week. On Friday, Eurozone trade data will also draw interest.

Finalized member state inflation figures due out in the week should have a muted impact, however, barring any upward revisions.

On the monetary policy front, the markets will be looking for any shift in ECB stance on inflation. ECB President Lagarde is scheduled to speak in the week.

For the week, the EUR slipped by 0.08% to $1.1361.

For the Pound:

It’s a relatively busy week ahead on the economic calendar.

Industrial and manufacturing production figures are due out on Friday along with GDP and trade data.

Expect the GDP and manufacturing production figures to be key.

The Pound rose by 0.41% to end the week at $1.3588.

For the Loonie:

It’s a particularly quiet week ahead on the economic calendar.

There are no major stats due out of Canada to provide the Loonie with direction. With no stats to consider, the Loonie will be in the hands of crude oil prices and market risk sentiment.

The Loonie ended the week down 0.05% to C$1.2643 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

Retail sales and trade data will be in focus on Tuesday. Expect retail sales to be the key stat, however.

The Aussie Dollar slid by 1.13% to $0.7181.

For the Kiwi Dollar:

Economic data is limited to building consents that should have a muted impact on the Kiwi Dollar.

The Kiwi Dollar ended the week down by 0.69% to $0.6779.

For the Japanese Yen:

There are no material stats for the markets to consider. A lack of stats will leave the Yen in the hands of market risk sentiment and yield differentials.

The Japanese Yen fell by 0.42% to ¥115.560 against the U.S Dollar.

Out of China

Inflation figures for December will draw interest on Wednesday. Expect any market pickup in inflationary pressure to test support for riskier assets. At the end of the week, trade data will also influence. Weak numbers could point to further supply chain disruption stemming from the Omicron strain.

The Chinese Yuan ended the week down by 0.34% to CNY6.3778 against the U.S Dollar.

Geo-Politics

Nothing new to consider in the week ahead, with China and Capitol Hill and Russia continuing to be the key areas of focus.

COVID-19

COVID-19 news updates will remain a key area focus. Risk aversion could hit should a new strain of the virus appear in a developed economy.

The Weekly Wrap – COVID-19, Economic Data, and FED Monetary Policy Delivered a Choppy Week

The Stats

It was a particularly busy week on the economic calendar, in the week ending 7th January.

A total of 63 stats were monitored, which was up from 15 stats in the week prior.

Of the 63 stats, 34 came in ahead forecasts, with 23 economic indicators coming up short of forecasts. There 6 stats that were in line with forecasts in the week.

Looking at the numbers, 25 of the stats reflected an upward trend from previous figures. Of the remaining 38 stats, 31 reflected a deterioration from previous.

For the Greenback, it was back into the green. In the week ending 7th January, the Dollar Spot Index rose by 0.07% to 95.739. A 0.60% slide on Friday limited the upside, however. In the previous week, the Dollar Spot Index declined by 0.36% to 95.670. While finding strong support from the more hawkish FOMC meeting minutes on Wednesday, disappointing NFP numbers on Friday weighed.

Out of the U.S

Private sector PMIs and labor market stats were in focus ahead of Friday’s all-important nonfarm payrolls.

The stats were skewed to the negative, with private sector growth slowing. In December, the ISM Manufacturing PMI fell from 61.1 to 58.7. More significantly, the ISM Non-Manufacturing PMI declined from 69.1 to 62.0.

Labor market stats were also skewed to the negative in the week. In November, JOLT’s job openings stood at 10.562m, which was down from 11.091m in October. Initial jobless claims increased from 200k to 207k in the week ending 31st December.

More significantly, however, was a modest 199k increase in nonfarm payrolls in December. Economists had forecast a 400k rise. The markets were likely expecting more following an 800k increase in nonfarm payrolls according to the ADP. In spite of the lower number, the U.S unemployment rate fell from 4.2% to 3.9%.

On the monetary policy front, the FOMC meeting minutes were also in focus mid-week. The U.S equity markets responded negatively to more hawkish minutes than expected, which drove demand for the Dollar. The minutes revealed that the FED may need to lift rates sooner than had been previously priced in.

Out of the UK

Finalized private sector PMIs were in focus, with the stats Pound positive for the week. In December, the manufacturing PMI rose from 57.6 to 57.9, with the services PMI up from 53.2 to 53.6. As a result, the composite PMI increased from 53.2 to 53.6. All 3 were revised up from prelim figures.

In the week, the Pound rose by 0.41% to end the week at $1.3588 In the week prior, the Pound had rallied by 1.09% to $1.3532.

The FTSE100 ended the week up by 1.36% following a 0.17% gain from the previous week.

Out of the Eurozone

Private sector PMIs for the Eurozone and member states, inflation, and the German economy were in focus.

Manufacturing sector growth remained relatively stable in December, while the services sector took a hit.

The Eurozone’s manufacturing PMI fell from 58.4 to 58.0, while the services PMI declined from 55.9 to 53.1. As a result, the Eurozone Composite PMI fell from 55.4 to a 9-month low 53.3.

For Germany, retail sales, unemployment, and industrial production figures were all upbeat for November. With the sharp rise in Omicron cases late in the year, however, the numbers had a relatively muted impact on the EUR. A sharp narrowing in Germany’s trade surplus also failed to move the dial.

On the inflation front, however, the prelim numbers pointed to another pickup in inflationary pressure in December.

While France’s annual rate of inflation held steady at 2.8%, Germany’s picked up from 5.2% to 5.3%. Italy’s annual rate of inflation accelerated from 3.7% to 3.9%. As a result, the Eurozone’s annual rate of inflation ticked up from 4.9% to 5.0%. The uptick will likely put more pressure on the ECB to make a move, particularly after the FED’s shift in stance on interest rates.

For the week, the EUR slipped by 0.08% to $1.1361. In the week prior, the EUR had risen by 0.45% to $1.1370.

The EuroStoxx600 slipped by 0.40%, while the CAC40 and the DAX30 ended the week up by 0.91% and by 0.40% respectively.

For the Loonie

Trade data, together with employment and Ivey PMI numbers were in focus. The stats were skewed to the positive for the Loonie.

In November, Canada’s trade surplus widened from C$2.26bn to C$3.13bn. Employment rose by a further 54.7k in December, after a 153.7k jump in November. As a result, Canada’s unemployment rate fell from 6.0% to 5.9%.

The only negative for the Loonie was a sharp fall in the Ivey PMI from 61.2 to 45.0 in December.

Adding support to the Loonie in the week, was a pickup in crude oil prices. WTI Crude ended the week up by 4.91% to $78.9 per barrel.

In the week ending 7th January, the Loonie slipped by 0.05% to C$1.2643 against the Greenback. In the week prior, the Loonie had rallied by 1.39% to C$1.2637.

Elsewhere

It was a bearish week for the Aussie Dollar and the Kiwi Dollar.

The Aussie Dollar slid by 1.13% to $0.7181, with the Kiwi Dollar falling by 0.69% to end the week at $0.6779.

For the Aussie Dollar

There were no major stats to provide direction.

For the Kiwi Dollar

It was also a quiet week for the Kiwi Dollar, with no major stats for the markets to consider.

For the Japanese Yen

Finalized private sector PMIs, household spending, and inflation were key stats in the week.

It was a mixed set of numbers, however. The all-important services sector PMI fell from 53.0 to 52.1, with household spending also on the slide. In November, household spending fell by 1.2%, month-on-month.

Inflation figures were positive, however, with Tokyo’s core annual rate of inflation picking up from 0.3% to 0.5% in December.

The Japanese Yen declined by 0.42% to ¥115.560 against the U.S Dollar. In the week prior, the Yen had fallen by 0.61% to ¥115.080.

Out of China

It was a relatively quiet week on the economic data front. Private Sector PMIs were back in focus.

In December, the Caixin Manufacturing PMI rose from 49.9 to 50.9, with the services PMI increasing from 52.1 to 53.1.

In the week ending 7th January, the Chinese Yuan fell by 0.34% to CNY6.3778. In the week prior, the Yuan had ended the week up by 0.18% to CNY6.3561.

The Hang Seng Index ended the week up by 0.41%, while the CSI300 slid by 2.39%.

When the Facts Change, I Change My Mind. What Do you Do, Sir? (Keynes)

For a second year, Christmas and New Year celebrations took place within travel restrictions, as we enter the third year of the pandemic.

But despite this strange end of year, swinging between an Omicron sell off and a Santa Claus rally, overall, it’s been another positive year for developed markets’ risk assets. On the other hand, investment grade bonds were mainly sold off, with the US Treasury yield ending the year 50% higher from where it started. Among equity sectors, the big winner of the year was definitely the energy sector which converted 2020’s losses into the highest earnings in years.

During the last Fed meeting of the year, Chairman Powell removed ‘transitory’ from the Fed’s official statement and neither Omicron nor the bad November jobs report was a game changer in terms of policy. Indeed, the ultimate goal seems to be now the battle against the inflationary pressures, since they are now expected to be higher and stickier than anticipated, mainly due to demand and supply imbalances.

So, unsurprisingly, the Fed took a hawkish turn last month, and the tapering pace has been doubled. This process should end by March, opening the way to an eventual, much predicted, rate hike. Altogether, three rate hikes in total are expected in 2022. The question is now if an interest rate of 1% will be enough of a tool to fight inflation, whose rate reached 6.8% in December, the highest level seen since 1982.

Similarly in Europe, the new wave of Corona didn’t change the ECB’s plan to taper. However, unlike the Fed, the ECB will remain very supportive through its Asset Purchase Program and no rate hike is to be expected until year’s end since Chairwoman Lagarde still sees the inflation as temporary.

As for China, it has been the big loser of the year. The property developers’ debt crisis is still in a state of extreme confusion and the contagion effect of Evergrande is hugely impacting the whole Chinese financial system. Also, the economic situation is not improving and once again retail sales disappointed, showing signs of consumption weakness and staying below pre-pandemic levels. Therefore, in order to boost the recovery,

The People’s Bank of China cut its loan rate for the first time, since April 2020, from 3.85% to 3.80%. We expect more easing to come in 2022, putting the world’s second largest economy on the complete opposite direction than the rest of the world. On top of that, on a geopolitical matter, President Biden officially announced that he would not send any diplomatic representation to the Winter Olympic Games in Beijing next month, due to human rights issues.

From our side, with inflation still around we continue to favor value companies, as we think they will continue to outperform growth companies in 2022. Within value, we feel that US Banks should have another great year, benefitting from higher rates. Within tech exposure, Metaverse could be the hottest topic of the year.

If 2021 was a rebound year in terms of companies’ earnings and economic growth, 2022 is expected to be a year of ‘normalization’, with a strong focus on Corona’s new variants, supply chain issues, inflation, interest rates and tax hikes and more potential events to come related to the new generation of investors.

But after two years of “Black Swans”, we must be able to adapt, and like Keynes said it well, it means reassessing our allocation when facts change. Having said that, we must not underestimate the markets’ resilience (and especially the US’ one) and therefore, every downturn could be an opportunity to buy the dip.

As always, risk-management combined with rigorous sector and geographical diversification will remain key factors for investment performance.

You are more than welcome to contact us to discuss our investment views or financial markets generally.

Sweetwood Capital Investment Team

The Week Ahead – Private Sector PMI, U.S Nonfarm Payrolls, and Central Banks in Focus

On the Macro

It’s a busy week ahead on the economic calendar, with 63 stats in focus in the week ending 7th January. In the week prior, just 15 stats had been in focus.

For the Dollar:

ISM Manufacturing and Non-Manufacturing PMIs, ADP nonfarm, and jobless claims will be in focus Tuesday through Thursday. There will be plenty of interest in the numbers after the holidays.

At the end of the week, however, nonfarm payrolls will be key stat of the week. Expect any marked increase in hiring to drive the Dollar.

On the monetary policy front, the FOMC meeting minutes on Wednesday will also influence.

In the week ending 31st December, the Dollar Spot Index fell by 0.36% to 95.670.

For the EUR:

At the start of the week, Italian and Spanish manufacturing PMIs and finalized PMIs for France, Germany, and the Eurozone will be in focus. Barring revisions to prelims, expect Italy and the Eurozone’s PMIs to be key.

On Tuesday, German retail sales and unemployment figures are due out ahead of services PMIs on Wednesday.

Through the remainder of the week, the focus returns to the German economy. German factory orders, prelim inflation, industrial production, and trade data are due out.

Expect plenty of interest in the factory orders and industrial production figures.

Through the week, member state and Eurozone inflation figures for December are also due out. With inflation still a hot topic, expect the numbers to influence.

For the week, the EUR rose by 0.45% to $1.1370.

For the Pound:

It’s a relatively quiet week ahead on the economic calendar.

Finalized private sector PMIs for December are due out along with the UK’s construction PMI. Expect any revisions to the services PMI to be key.

The Pound rallied by 1.09% to end the week at $1.3532.

For the Loonie:

It’s also a particularly busy week ahead on the economic calendar.

Early in the week, RMPI numbers for November will be in focus. Expect plenty of influence ahead of trade data on Thursday.

At the end of the week, December employment change figures will be key, however.

Other stats include housing sector data and December’s Ivey PMI. We don’t expect the numbers to influence.

The Loonie ended the week up 1.39% to C$1.2637 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

There are no material stats due out of Australia to provide the Aussie Dollar with direction.

While there are no material stats, the RBA is in action on Tuesday. The RBA Rate Statement will be key, with the markets looking for any shift in outlook on interest rates.

The Aussie Dollar rose by 0.58% to $0.7263.

For the Kiwi Dollar:

There are also no material stats to provide the Kiwi Dollar with direction.

The Kiwi Dollar ended the week up by 0.12% to $0.6826.

For the Japanese Yen:

Finalized private sector PMIs will be key stats ahead of household spending and inflation figures on Friday.

The Japanese Yen fell by 0.61% to ¥115.080 against the U.S Dollar.

Out of China

Private PMI numbers will be the key stats of the week. The market’s favored Caixin Manufacturing PMI, due out on Tuesday, will be the key stat of the week. Expect some interest in the services PMI due out on Thursday, however.

The Chinese Yuan ended the week up by 0.18% to CNY6.3561 against the U.S Dollar.

The Weekly Wrap – Upbeat Omicron News Delivered another Dollar Loss

The Stats

It was a particularly quiet week on the economic calendar, in the week ending 31st December.

A total of 15 stats were monitored, which was down from 33 stats in the week prior.

Of the 15 stats, 9 came in ahead forecasts, with 5 economic indicators coming up short of forecasts. There was just 1 stat that was in line with forecasts in the week.

Looking at the numbers, 10 of the stats reflected an upward trend from previous figures. Of the remaining 5 stats, 3 reflected a deterioration from previous.

For the Greenback, it was a 2nd consecutive week in the red. In the week ending 31st December, the Dollar Spot Index declined by 0.36% to 95.670. In the previous week, the Dollar had fallen by 0.57% to 96.019.

Out of the U.S

Jobless claims was the key stat in the week, with the markets looking to assess the impact of the Omicron strain on labor market conditions.

In the week ending 24th December, initial jobless claims fell from 206k to 198k. Economists had forecast an increase to 208k.

PMI numbers also drew interest. In December, Chicago’s PMI rose from 61.8 to 63.1, which was also market positive.

Other stats in the week included goods trade data, inventory, and housing sector figures. The stats had a muted impact on the markets, however.

Out of the UK

There were no major stats to provide the Pound with direction. Market bets of a more hawkish outlook on Bank of England monetary policy delivered support, however.

In the week, the Pound rose by 1.09% to end the week at $1.3532 In the week prior, the Pound had risen by 1.06% to $1.3386.

The FTSE100 ended the week up by 0.17% following a 1.41% gain from the previous week.

Out of the Eurozone

Unemployment figures from France and inflation figures from Spain were the key stats in the week.

In November, jobseeker totals declined from 3,142.5k to 3,087.8k.

More significantly, however, was a marked pickup in inflationary pressure in Spain.

According to prelim figures, Spain’s annual rate of inflation accelerated from 5.5% to 6.7%. Economists had forecast a more modest pickup to 5.7%.

For the week, the EUR rose by 0.45% to $1.1370. In the week prior, the EUR had risen by 0.70% to $1.1319.

The EuroStoxx600 rose by 1.10%, with the CAC40 and the DAX30 ending the week up by 0.94% and by 0.82% respectively.

For the Loonie

It was a particularly quiet week, with no key stats from Canada to provide direction. The lack of stats left market risk sentiment to influence in the week.

In the week ending 31st December, the Loonie rose by 1.39% to C$1.2637 against the Greenback. In the week prior, the Loonie had gained 0.57% to C$1.2815.

Elsewhere

It was a bullish week for the Aussie Dollar and the Kiwi Dollar.

The Aussie Dollar rose by 0.58% to $0.7263, with the Kiwi Dollar gaining 0.12% to end the week at $0.6826.

For the Aussie Dollar

There were no major stats to provide direction ahead of the coming week’s RBA monetary policy decision.

Better than expected private sector PMIs from China and a pickup in risk appetite delivered support, however.

For the Kiwi Dollar

It was also a quiet week for the Kiwi Dollar, with no major stats for the markets to consider.

For the Japanese Yen

Retail sales and industrial production figures for November impressed in the week.

Retail sales rose by 1.9%, year-on-year, versus a forecasted 1.9%. In October, retail sales had increased by 0.90%.

Industrial production jumped by 7.2% month-on-month, following a 1.8% increase in October. Economists had forecast a 4.8% increase.

The numbers had a muted impact on the Yen, however. A pickup in risk appetite stemming from Omicron news updates weighed on the Yen.

The Japanese Yen declined by 0.61% to ¥115.080 against the U.S Dollar. In the week prior, the Yen had fallen by 0.58% to ¥114.380.

Out of China

It was a relatively quiet week on the economic data front. NBS Private Sector PMIs were in focus at the end of the week.

In December, the NBS Manufacturing PMI rose from 50.1 to 50.3, with the Non-Manufacturing PMI increasing from 52.3 to 52.7. Economists had forecast a fall in the Manufacturing PMI to 50.0.

In the week ending 31st December, the Chinese Yuan rose by 0.18% to CNY6.3561. In the week prior, the Yuan had ended the week up by 0.12% to CNY6.3677.

The Hang Seng Index ended the week down by 0.35%, while the CSI300 rose by 0.39%.

The Week Ahead – U.S and Chinese Economies and COVID-19 in Focus

On the Macro

It’s a particularly quiet week ahead on the economic calendar, with 14 stats in focus in the week ending 31st December. In the week prior, 32 stats had been in focus.

For the Dollar:

Consumer confidence figures for December will be key on Tuesday along with jobless claims on Thursday.

Other stats include trade data, Chicago PMI numbers, and housing sector figures. These are unlikely to draw too much attention, however.

In the week ending 24th December, the Dollar Spot Index fell by 0.57% to 96.019.

For the EUR:

At the start of the week, French jobseeker total figures will be the key stat of the day. With many European majors closed, however, impact on the EUR will likely be limited.

Prelim December inflation figures for Spain will be in focus on Thursday. Expect any further pickup in inflationary pressure to deliver EUR support.

For the week, the EUR rose by 0.70% to $1.1319.

For the Pound:

It’s a particularly quiet week ahead on the economic calendar.

There are no major stats to provide direction, leaving the Pound in the hands of COVID-19 news in the week.

The Pound rallied by 1.06% to end the week at $1.3386.

For the Loonie:

It’s also a particularly quiet week ahead on the economic calendar.

There are no material stats due out of Canada to provide the Loonie with direction. The lack of stats will leave the Loonie in the hands of crude oil prices and market risk sentiment.

The Loonie ended the week up 0.57% to C$1.2815 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

There are no material stats due out of Australia to provide the Aussie Dollar with direction.

The Aussie Dollar rallied by 1.35% to $0.7221.

For the Kiwi Dollar:

There are also no material stats to provide the Kiwi Dollar with direction.

The Kiwi Dollar ended the week up by 1.17% to $0.6818.

For the Japanese Yen:

Retail sales figures for November will be on focus on Monday ahead of prelim industrial production figures on Tuesday.

While both data sets will draw plenty of interest, the influence on the Japanese Yen will be limited at best.

The Japanese Yen fell by 0.58% to ¥114.380 against the U.S Dollar.

Out of China

Private PMI numbers will be the key stats of the week. On Friday, the NBS private sector PMIs for December will influence market risk sentiment. The manufacturing PMI will be the key stat of the day.

The Chinese Yuan ended the week up by 0.12% to CNY6.3677 against the U.S Dollar.

Geo-Politics

Nothing new to consider in the week ahead, with China and Capitol Hill and Russia continuing to be the key areas of focus.

COVID-19

News updates on the Omicron strain and vaccines will be a key area focus.

The Weekly Wrap – Upbeat COVID-19 Vaccine News Left the Dollar in the Red

The Stats

It was a particularly quiet week on the economic calendar, in the week ending 24th December.

A total of 33 stats were monitored, which was down from 87 stats in the week prior.

Of the 33 stats, 17 came in ahead forecasts, with 12 economic indicators coming up short of forecasts. There were 4 stats that were in line with forecasts in the week.

Looking at the numbers, 17 of the stats reflected an upward trend from previous figures. Of the remaining 16 stats, 14 reflected a deterioration from previous.

For the Greenback, it was back into the red, with a return of market risk appetite weighing on the Dollar. In the week ending 24th December, the Dollar Spot Index fell by 0.57% to 96.019. In the previous week, the Dollar had risen by 0.60% to 96.672.

Out of the U.S

Finalized 3rd quarter GDP and consumer confidence figures for December were upbeat mid-week. The U.S economy grew by 2.3% in the 3rd quarter, which was up from a prelim 2.1%. In spite of a shift in FED monetary policy, rising consumer prices, and Omicron, consumer confidence improved in December.

The CB Consumer Confidence Index climbed from 111.9 to 115.8.

On Thursday, jobless claims, personal spending, core durable goods orders, and inflation figures were also in focus.

In the week ending 17th December, initial jobless claims held steady at 205k. Personal spending rose by 0.6%, with core durable goods up 0.8%.

The FED’s preferred inflation measure was also aligned with the FED’s shift in stance on inflation. In November, the core PCE price index rose by 4.7%, which was up from 4.2% in October.

Out of the UK

It was a quiet week, with CBI Industrial Trend Orders and GDP numbers in focus. Industrial trend orders slipped from 26 to 24. GDP numbers were mixed, however.

Quarter-on-quarter, the economy expanded by 1.1%, which was down from a prelim 1.3%. Year-on-year, however, the economy grew by 6.8% according to finalized figures. This was up from a prelim 6.6%.

Ultimately, the stats had a muted impact on the Pound, with risk appetite supporting the Pound in the week.

In the week, the Pound rose by 1.06% to end the week at $1.3386 In the week prior, the Pound had fallen by 0.21% to $1.3245.

The FTSE100 ended the week up by 1.41% reversing a 0.30% loss from the previous week.

Out of the Eurozone

Consumer confidence figures for Germany and the Eurozone were the key stats of the week. The numbers were EUR negative, with inflation and COVID-19 containment measures weighing. Impact on the EUR was limited, however, with the markets expecting consumer confidence to wane.

Germany’s GfK Consumer Climate Index for January fell from -1.6 to -6.8. The Eurozone’s Flash consumer confidence index fell from -6.8 to -8.3 for December.

For the week, the EUR rose by 0.70% to $1.1319. In the week prior, the EUR had fallen by 0.65% to $1.1240.

The CAC40 rallied by 2.31%, with the DAX30 and the EuroStoxx600 ending the week with up by 1.45% and by 1.82% respectively.

For the Loonie

Retail sales and GDP numbers were in focus. The numbers were Loonie positive.

In October, core retail sales rose by 1.3%, with retail sales up by 1.6%. Both had been in decline in September.

Month-on-month, Canada’s economy expanded by 0.8% in October, picking up from 0.2% growth in September.

While the stats were positive, rising crude oil prices and positive market risk sentiment also contributed to the upside.

In the week ending 24th December, the Loonie rose by 0.57% to C$1.2815 against the Greenback. In the week prior, the Loonie had fallen by 1.31% to C$1.2889.

Elsewhere

It was a bullish week for the Aussie Dollar and the Kiwi Dollar.

The Aussie Dollar rallied by 1.35% to $0.7221, with the Kiwi Dollar gaining 1.17% to end the week at $0.6818.

For the Aussie Dollar

Economic data was limited to private sector credit figures for November, which had a muted impact on the Aussie Dollar.

The RBA meeting minutes drew plenty of interest early in the week, however, delivering Aussie Dollar support. A more optimistic outlook on the economic recovery delivered support.

For the Kiwi Dollar

Economic data was mixed in the week. Consumer sentiment deteriorated in the 4th quarter. The Westpac Consumer Sentiment Index fell from 102.7 to 99.1.

In November, New Zealand’s trade deficit narrowed from NZ$1,302m to NZ$864m. Year-on-year, the deficit widened from NZ$4,900m to NZ$6,040m.

According to NZ Stats,

Compared with November 2020,

  • Goods exports rose NZ$668m (13%) to NZ$5.9bn.
  • Goods imports rose NZ$1.8bn (37%) to NZ$6.7bn.

For the Japanese Yen

Inflation was back in focus, though the numbers had a muted impact on the markets on Friday.

Japan’s annual core rate of inflation picked up from 0.1% to 0.5%. Economists had forecast an uptick to 0.4%. The annual rate of inflation accelerated from 0.1% to 0.6%.

The Japanese Yen fell by 0.58% to ¥114.380 against the U.S Dollar. In the week prior, the Yen had fallen by 0.25% to ¥113.720.

Out of China

It was a quiet week on the economic data front. There were no major stats to consider.

While there were no stats, the PBoC lowered the 1-year LPR by 5 bps to 3.8%. The markets had expected rates to be left unchanged.

In the week ending 24th December, the Chinese Yuan rose by 0.12% to CNY6.3677. In the week prior, the Yuan had ended the week declined by 0.08% to CNY6.3754.

The Hang Seng Index ended the week flat, while the CSI300 fell by 0.67%.

The Week Ahead – Economic Data back in Focus after Last Weeks’ Central Bank Action

On the Macro

It’s a quiet week ahead on the economic calendar, with 32 stats in focus in the week ending 24th December. In the week prior, 87 stats had been in focus.

For the Dollar:

Finalized 3rd quarter GDP and weekly jobless claims will be in focus mid-week. Expect the jobless claims to be key.

On Thursday, core durable goods, inflation, and personal spending figures will also draw plenty of interest ahead of Friday’s holiday.

In the week ending 17th December, the Dollar Spot Index rose by 0.49% to 96.565.

For the EUR:

Consumer sentiment Germany and the Eurozone will be in focus on Tuesday. We continue to see heightened EUR sensitivity to consumer sentiment figures. A sharp decline, stemming from rising COVID-19 cases, would test EUR support.

On Thursday, 3rd quarter GDP numbers for Spain are also due out but should have a muted impact on the EUR.

For the week, the EUR fell by 0.65% to $1.1240.

For the Pound:

It’s a quiet week ahead on the economic calendar.

CBI industrial trend orders for December are due out on Monday but should have a muted impact on the Pound.

On Wednesday, finalized 3rd quarter GDP numbers will also be in focus. Expect any revisions to influence.

The Pound fell by 0.21% to end the week at $1.3245.

For the Loonie:

It’s relatively quiet week ahead on the economic calendar.

Retail sales figures for November will be in focus on Tuesday ahead of GDP numbers on Thursday. Expect both data sets to influence.

The Loonie ended the week down 1.31% to C$1.2889 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

There are no material stats due out of Australia to provide the Aussie Dollar with direction.

While there are no stats, the RBA meeting minutes and Australia’s mid-year economic and fiscal outlook will both influence on Tuesday.

The Aussie Dollar fell by 0.66% to $0.7125.

For the Kiwi Dollar:

Trade data for November will be in focus at the start of the week. With little else for the markets to consider, we can expect Kiwi Dollar sensitivity to the numbers.

The Kiwi Dollar ended the week down up 0.84% to $0.6739.

For the Japanese Yen:

It’s a quiet week on the economic data front, with stats limited to inflation figures for November. We don’t expect Yen sensitivity to the numbers, however.

The Japanese Yen fell by 0.25% to ¥113.720 against the U.S Dollar.

Out of China

There are no material stats due out of China to influence the markets in the week. COVID-19 news, however, will draw interest.

On the monetary policy front, the PBoC is scheduled to set loan prime rates on Monday. The markets are not expecting any moves.

The Chinese Yuan ended the week down by 0.08% to CNY6.3754 against the U.S Dollar.

Geo-Politics

Nothing new to consider in the week ahead, with China and Capitol Hill continuing to be the key areas of focus.

COVID-19

News updates on the Omicron strain will be a key area focus.

The Weekly Wrap: FED Monetary Policy Delivered for the Dollar Bulls in Delayed Fashion

The Stats

It was a particularly busy week on the economic calendar, in the week ending 17th December.

A total of 87 stats were monitored, which was down from 48 stats in the week prior. Away from the stats, monetary policy was also in focus, with the FED, the ECB, the BoE, and the BoJ in action.

Of the 87 stats, 33 came in ahead forecasts, with 44 economic indicators coming up short of forecasts. There were 10 stats that were in line with forecasts in the week.

Looking at the numbers, 32 of the stats reflected an upward trend from previous figures. Of the remaining 55 stats, 52 reflected a deterioration from previous.

For the Greenback, the upward trend resumed as the markets responded to the FED’s projections on rate hikes. A 0.67% rally on Friday delivered a 7th weekly gain in 8-weeks for the Dollar. In the week ending 17th December, the Dollar Spot Index rose by 0.60% to 96.672. In the previous week, the Dollar had fallen by 0.02% to 96.097.

Out of the U.S

Early in the week, wholesale inflation and retail sales figures drew plenty of interest. A further pickup in wholesale inflationary pressures and softer than expected consumer spending tested support for riskier assets.

In November, the U.S core annual rate of wholesale inflation accelerated from 7.0% to 7.7%.

Core retail sales rose by just 0.3%, however, following a 1.8% increase in October. Economists had forecast a 0.9% rise.

On Thursday, jobless claims and private sector PMIs were also in focus along with industrial production.

In the week ending 10th December, initial jobless claims rose from 188k to 206k. There were also modest declines in the private sector PMIs for December. The all-important Services PMI slipped from 58.0 to 57.5.

While industrial production rose by a further 0.5% in November, after having risen by 1.7% in October, Philly FED data disappointed. In December, the Philly FED Manufacturing Index slid from 39.0 to 15.4.

Ultimately, however, it was the FOMC monetary policy decision and economic projections that moved the markets.

In line with expectations, the FED announced a faster end to the asset purchasing program and projected 3 rate hikes for next year This was up by just 1 rate hike from the September projections. While hawkish, interest rates for Q4 2022 were projected to sit at just 0.9%, supporting demand for riskier assets.

Out of the UK

It was a busy week. On the economic data front, employment, inflation, and retail sales were in focus.

Another large rise in employment supported a fall in the unemployment rate from 4.3% to 4.2% in October. The downward trend is expected to continue in November, with claimant counts having declined by 49.8k in November.

Inflationary pressures continued to pick up, however, with the UK’s annual rate of inflation accelerating from 4.2% to 5.1%.

Private sector PMIs were skewed to the negative. According to prelim figures, the UK’s services PMI fell from 58.5 to 53.2 in December. This was largely anticipated, with the upward trend in new COVID-19 cases.

At the end of the week, retail sales figures were impressive, with retail sales up 1.4% in the month of November. Core retail sales rose by 1.1%, both coming in ahead of forecasted increases of 0.8%. Year-on-year, core retail sales were up 2.7% after having been down by 2.1% in October.

While the stats drew plenty of interest, the BoE delivered an unexpected rate hike on Thursday, driving the Pound back to $1.33 levels.

In the week, the Pound fell by 0.21% to end the week at $1.3245 In the week prior, the Pound had risen by 0.28% to $1.3273.

The FTSE100 ended the week down by 0.30% following a 2.38% gain from the previous week.

Out of the Eurozone

Early in the week, member state finalized inflation and Eurozone industrial production figures were in focus.

Finalized numbers affirmed a further increase in consumer prices across France, Italy, and Spain.

Industrial production figures for the Eurozone were also positive, with production up 1.1% in October.

In the 2nd half of the week, prelim private sector PMI numbers for France, Germany, and the Eurozone were key, however.

An increase in Germany’s manufacturing PMI from 57.4 to 57.9 was the only highlight. In December, the Eurozone’s composite PMI fell from 55.4 to 53.4, with a contraction in Germany’s service sector contributing.

German business sentiment and finalized Eurozone inflation figures wrapped things up. While the inflation figures further affirmed the upward trend in consumer prices, business sentiment waned.

For December, the Ifo Business Climate Index fell from 96.5 to 94.7.

On the inflation front, the Eurozone’s annual rate of inflation accelerated from 4.1% to 4.9% in November, which was in line with prelim figures.

Other stats included wage growth and trade data for the Eurozone that had a muted impact on the markets.

On the monetary policy front, the ECB was also in action, delivering a more dovish stance on policy. While announcing an end to net asset purchases by March 2022, there were no other changes, with the ECB continuing to deliver assures of continued policy support.

For the week, the EUR fell by 0.65% to $1.1240. In the week prior, the EUR had also slipped by 0.02% to $1.1313.

The CAC40 fell by 0.93%, with the DAX30 and the EuroStoxx600 ending the week with losses of 0.59% and 0.31% respectively.

For the Loonie

November inflation figures were the key stats of the week, with the numbers skewed to the negative.

Canada’s annual rate of core inflation softened from 3.8% to 3.6% in November. Core consumer prices stalled in the month after having risen by 0.6% in October.

Other stats included manufacturing sales and wholesale sales figures that had a muted impact on the Loonie.

In the week ending 17th December, the Loonie slid by 1.31% to C$1.2889 against the Greenback. In the week prior, the Loonie had risen by 0.94% to C$1.2722.

Elsewhere

It was a bearish week for the Aussie Dollar and the Kiwi Dollar.

The Aussie Dollar fell by 0.66% to $0.7125, with the Kiwi Dollar declining by 0.84% to end the week at $0.6739.

For the Aussie Dollar

Economic data included business and consumer confidence figures along with employment numbers for November.

While both business and consumer sentiment waned, a sharp rise in hiring supported the Aussie Dollar before a Friday sell-off.

In November, employment surged by 366.1k, leading to a fall in the unemployment rate from 5.2% to 4.6%.

For the Kiwi Dollar

It was a quiet week, with GDP and business confidence in focus.

The stats were skewed to the negative.

In the 3rd quarter, the New Zealand economy contracted by 3.7% as a result of lockdown measures. Business confidence took another hit in December, falling from -16.4 to -23.2.

The numbers were not enough to send the Kiwi Dollar into the deep red, however.

For the Japanese Yen

At the start of the week, 4th quarter Tankan numbers provided some comfort. The Large Manufacturers Index held steady at 18 versus a forecasted 19, with the Large Non-Manufacturers Index climbing from 2 to 9.

In the second half of the week, however, the stats were skewed to the negative.

Japan’s trade deficit widened from ¥68.5bn to ¥954.8bn. While negative, both exports and imports were on the rise, year-on-year, with a marked increase in imports contributing to the widening.

Private sector PMIs did disappoint, however. The Manufacturing PMI fell from 54.5 to 54.2, with the services PMI falling from 53.0 to 51.1.

At the end of the week, there were no surprises, with the BoJ standing pat on the monetary policy front.

The Japanese Yen fell by 0.25% to ¥113.720 against the U.S Dollar. In the week prior, the Yen had fallen by 0.57% to ¥113.440.

Out of China

It was also a mixed week on the economic data front.

In November, China industrial production rose by 3.8% year-on-year, which was up from an October 3.5%. Retail sales disappointed, however. After having been up 4.9% in October, retail sales increased by just 3.9% year-on-year in November.

Fixed asset investments also saw a more modest increase. In November, fixed asset investment rose by 5.2% year-on-year versus 6.1% in October.

In the week ending 17th December, the Chinese Yuan declined by 0.08% to CNY6.3754. In the week prior, the Yuan had ended the week up by 0.10% to CNY6.3700.

The Hang Seng Index slid by 3.35%, with the CSI300 falling by 1.99%.

The Week Ahead BoE, ECB and the FED all Set to Deliver Policy Decisions in a Busy Week Ahead

The Week Ahead with Dukascopy TV

On the Macro

It’s a busier week ahead on the economic calendar, with 76 stats in focus in the week ending 10th December. In the week prior, 48 stats had been in focus.

For the Dollar:

Wholesale inflation and retail sales will be in focus in the 1st half of the week. Following the FED’s shift in stance on inflation, expect both data sets to be key.

On Thursday, jobless claims, Philly FED Manufacturing PMI, and prelim December private sector PMIs will draw attention. Expect the services PMI and jobless claims to have a greater impact, however.

While the stats will influence, the FOMC monetary policy decision, economic projections, and press conference will be the key driver.

The markets will be looking for a shift in forecasts on interest rates and any adverse impact of inflation on the economic outlook.

In the week ending 10th December, the Dollar Spot Index slipped by 0.02% to 96.097.

For the EUR:

Prelim private sector PMIs for December on Thursday and business sentiment figures on Friday will be in focus.

Finalized Eurozone inflation figures for November will also draw interest on Friday.

The main event, however, will be the ECB monetary policy decision and press conference on Thursday. Tapering aside, will ECB President Lagarde continue to see the spike in inflation as transitory?

For the week, the EUR slipped by 0.02% to $1.1313.

For the Pound:

It’s a busy week ahead on the economic calendar.

Early in the week, claimant counts and inflation will be key stats due out on Tuesday and Wednesday.

Prelim private sector PMIs on Thursday will also influence, with the services PMI the key stat.

The main event of the week, however, is the BoE monetary policy decision. A shift in sentiment towards policy has seen the Pound slide back to sub-$1.33 levels against the Dollar. A higher number of descent votes should support a bounce back. Much will depend, however, on the Bank’s view on inflation and its impact on consumption.

The Pound rose by 0.28% to end the week at $1.3273.

For the Loonie:

It’s relatively quiet week ahead on the economic calendar.

Inflation is back in the spotlight, with consumer price inflation figures due out on Wednesday.

Away from the economic calendar, crude oil price and market risk sentiment will remain key drivers. OPEC’s monthly report on Monday will draw plenty of interest.

The Loonie ended the week up 0.94% to C$1.2722 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

Business and consumer confidence figures will be in focus on Tuesday and Wednesday. Both are of interest from an RBA perspective, to support investment and consumption.

On Thursday, employment numbers will likely be the key driver, however.

The Aussie Dollar rallied by 2.44% to $0.7172.

For the Kiwi Dollar:

3rd quarter GDP numbers on Thursday will be the key stats of the week. Business confidence will also be in focus at the end of the week, however.

The Kiwi Dollar ended the week down up 0.35% to $0.6796.

For the Japanese Yen:

Tankan survey figures for the 4th quarter and trade data are due out in the week.

Expect the large manufacturing and non-manufacturing index figures and the trade data to be the key areas of focus.

At the end of the week, the BoJ is also in action though there are unlikely to be any surprises.

The Japanese Yen fell by 0.57% to ¥113.440 against the U.S Dollar.

Out of China

Fixed asset investment, industrial production, retail sales, and unemployment figures are due out on Wednesday.

Expect the industrial production figures to be the key driver.

The Chinese Yuan ended the week up by 0.10% to CNY6.3700 against the U.S Dollar.

Geo-Politics

Nothing new to consider in the week ahead, with China and Capitol Hill continuing to be the key areas of focus.

COVID-19

News updates on the Omicron strain and any further news on vaccine efficacies will be key.

The Weekly Wrap: Omicron and Market Sentiment towards the FED Drove the Markets

The Stats

It was a quieter week on the economic calendar, in the week ending 10th December.

A total of 48 stats were monitored, which was down from 86 stats in the week prior.

Of the 48 stats, 25 came in ahead forecasts, with 16 economic indicators coming up short of forecasts. There were 7 stats that were in line with forecasts in the week.

Looking at the numbers, 22 of the stats reflected an upward trend from previous figures. Of the remaining 26 stats, 24 reflected a deterioration from previous.

For the Greenback, a run of 6 consecutive weekly gains came to an end after a Friday pullback. Market sentiment towards FED monetary policy, supported by economic data, had driven the Dollar northwards before a 0.18% loss on Friday. In the week ending 10th December, the Dollar Spot Index slipped by 0.02% to 96.097. In the previous week, the Dollar had risen by 0.06% to 96.151.

Out of the U.S

Following disappointing NFP numbers for November, JOLT’s job openings and weekly jobless claims were market positive.

In October, job openings climbed from 10.602m to 11.033m. Of greater significance, was a fall in jobless claims. In the week ending 3rd December, initial jobless claims fell from 227k to 184k.

While both sets of numbers were Dollar positive, inflation figures were key at the end of the week.

In November, the U.S core annual rate of inflation picked up from 4.6% to 4.9%, with core consumer prices up 0.5% in the month. Core consumer prices had risen by 0.6% in October.

Out of the UK

It was a relatively quiet week, with the markets needing to wait until Friday for key numbers.

In October, industrial production fell by 0.6%, with manufacturing production flat for the month. Manufacturing production had risen by 0.1% in September, while industrial production had fallen by 0.4%.

GDP numbers for October were also key ahead of next week’s BoE monetary policy decision.

In October, the UK economy grew by just 0.1% following 0.6% growth in September, easing expectations of a year-end rate hike.

Other stats included BRC retail sales, construction PMI, and trade data that had a muted impact on the Pound.

In the week, the Pound rose by 0.28% to end the week at $1.3273 In the week prior, the Pound had fallen by 0.76% to $1.3236.

The FTSE100 ended the week up by 2.38%, following a 1.11% gain from the previous week.

Out of the Eurozone

It was a busy week, with the German economy in focus through much of the week.

In October, German factory orders slid by 6.9% after having risen by 1.8% in September. Industrial production rose by 2.8%, however, reversing a 0.5% decline from September.

Alongside factory orders, trade data and economic sentiment figures for Germany also disappointed, however. In October, Germany’s trade surplus narrowed from €12.9bn to €12.5bn.

For December, the ZEW Economic Sentiment index fell from 31.7 to 29.9. This was in contrast to the Eurozone’s ZEW Economic Sentiment index, which rose from 25.9 to 26.8.

Other stats in the week included Eurozone GDP, French nonfarm payrolls, and finalized German inflation figures. These stats had a muted impact on the EUR, however.

For the week, the EUR slipped by 0.02% to $1.1313. In the week prior, the EUR had also slipped by 0.02% to $1.1315.

The CAC40 rallied by 3.34%, with the DAX30 and the EuroStoxx600 ending the week with gains of 2.99% and 2.76% respectively.

For the Loonie

On the economic data front, trade and Ivey PMI numbers were in focus in the week.

The stats were skewed to the positive. In October, Canada’s trade surplus widened from C$1.40bn to C$2.10bn. The Ivey PMI increased from 59.3 to 61.2.

While the stats drew attention, it was the BoC monetary policy decision and forward guidance that was key, however.

In line with market expectations, the BoC left rates unchanged. Weighing on the Loonie, the BoC talked of uncertainty stemming from the new Omicron strain, however. The BoC rate statement suggested a wait-and-see approach that could delay a move near-term.

In the week ending 10th December, the Loonie rose by 0.94% to C$1.2722 In the week prior, the Loonie had fallen by 0.41% to C$1.2843.

Elsewhere

It was a bullish week for the Aussie Dollar and the Kiwi Dollar.

The Aussie Dollar rallied by 2.44% to $0.7172, with the Kiwi Dollar rising by 0.35% to end the week at $0.6796.

For the Aussie Dollar

Economic data was limited to house price figures that had a muted impact on the Aussie Dollar.

The RBA monetary policy decision and rate statement delivered much-needed support, however.

While standing pat on policy, the RBA did not see the Omicron strain derailing the economic recovery, which was key.

For the Kiwi Dollar

It was a quiet week, with business PMI and electronic card retail sales in focus.

It was a mixed set of numbers. While the business PMI fell from 54.3 to 50.5 in November, consumer spending was on the rise once more.

Following a 10.0% jump in electronic card retail sales in October, spending rose by a further 9.6% in November.

For the Japanese Yen

Household spending figures for October impressed at the start of the week.

Month-on-month, spending rose by 3.4% following a 5.0% jump in September.

By contrast, 3rd quarter GDP numbers disappointed. Year-on-year, the economy contracted by 3.6%, which was down from a 1st estimate 3.1% contraction. Quarter-on-quarter, the economy shrank by 0.9%, which was also down from a 1st estimate 0.8% contraction.

On the positive, however, ahead of the Tankan survey numbers next week, was a rise in the BSI Large Manufacturing Conditions Index. In the 4th quarter, the index rose from 7.0 to 7.9.

The Japanese Yen fell by 0.57% to ¥113.440 against the U.S Dollar. In the week prior, the Yen had risen by 0.51% to ¥112.800.

Out of China

Trade and inflation figures were in focus.

China’s USD trade surplus narrowed from $84.54bn to $71.72bn in November. Exports rose by 22%, year-on-year, while imports were up 31.7%. Imports had been up by 20.6% in October, while exports had been up by 27.1%.

While exports were down, strong demand driving imports was a positive for the markets.

In November, China’s annual rate of inflation accelerated from 1.5% to 2.3%. Economists had forecast an annual rate of inflation of 2.5%. Month-on-month, consumer prices increased by 0.4% versus a forecasted 0.3% rise. In October, consumer prices had risen by 0.7%.

Significantly, however, was softer wholesale inflation. In November, the annual wholesale rate of inflation eased from 13.5% to 12.9. Economists had forecast an annual wholesale rate of inflation of 12.4%.

In the week ending 10th December, the Chinese Yuan rose by 0.10% to CNY6.3700. In the week prior, the Yuan had ended the week up by 0.26% to CNY6.3764.

The CSI300 rallied by 3.14%, with the Hang Seng rising by 0.96%.

2022 Global Economic Outlook: Covid-19, Structural Inflation, Monetary Tightening Challenge Global Outlook

Explainer video: Scope Ratings introduces its 2022 Global Sovereign Outlook

Download Scope’s 2022 Sovereign Outlook (report).

Entering 2022, new variants of Covid-19, elevated inflation, and withdrawal of fiscal and monetary support present risk for the robustness of recovery. GDP is seen, nevertheless, continuing to grow above trend over 2022 of 3.5% in the US, 4.4% in the euro area, 3.6% in Japan and 4.6% for the UK, even if, in most cases, normalising to a degree from elevated early-recovery growth of 2021. China is seen growing nearer trend of 5%.

Amid an uneven recovery, we see momentary slowdown over Q4 2021 and Q1 2022 across many economies, if not in some cases temporary output contraction, as countries of Europe reintroduce generally lighter restrictions on basis of renewed rise in Covid-19 cases, including those associated with a new Omicron variant. But we see economic rebound regathering traction by the spring of 2022.

As expected, full economic normalisation has remained vulnerable to renewed introduction of restrictions as transmissible virus variants challenge public-health systems, though we see severity of virus risk for economic recovery continuing to moderate with time as governments adopt more targeted responses, virus becomes more transmissible but less lethal, and businesses and people adapt ways of doing business. Nevertheless, risk to the 2022 outlook appears skewed on the downside.

More persistent inflation, even as it begins to moderate, supports increasing monetary policy divergence

Inflationary pressure is likely to remain more persistent than central bank projections, running above pre-crisis averages even after price changes begin to moderate by next year. This is likely to compel a continued divergence of monetary policy within the globe’s core economies, with associated risk of crystallisation of latent debt and financial-bubble risk as central banks pull back.

This is especially true as regards the UK and the US, where inflation might continue testing 2% mandates, although much less the case for Japan of course, with the euro area somewhere in between with inflation potentially remaining under 2% over the long run.

By end-2022, policy rates of leading central banks are expected to similarly diverge: remaining on hold with respect to the ECB and the Bank of Japan but with rate hikes next year from the Bank of England and Federal Reserve. The ECB is seen halting the Pandemic Emergency Purchase Programme (PEPP) next year but adapting PEPP and/or other asset-purchases facilities to retain room for manoeuvre and smoothen transition in markets.

Higher inflation holds both positive and negative implications for sovereign credit ratings

Higher and more persistent inflation holds both positive and negative credit implications as far as sovereign ratings are concerned. Somewhat higher trend inflation supports higher nominal economic growth, helping reduce public debt ratios via seigniorage, and curtails historical deflation risk of the euro area and Japan. However, rising interest rates push up debt-servicing costs especially for governments carrying heavy debt loads and running budget deficits. Emerging economies, with weakening currencies and subject to capital outflows, are particularly at risk.

Substantive accommodation from central banks has cushioned sovereign credit ratings over this crisis, so any scenario of much more persistent inflation limiting room for monetary-policy manoeuvre is a risk affecting credit outlooks. Bounds in central bank capacity to impede market sell-off due to high inflation compromising monetary space may expose latent risk associated with debt accrued in past years.

Monetary innovation during this crisis has supported credit outlooks

As many central banks tighten monetary policy amid policy divergence, peer central banks that might otherwise prefer looser financial conditions may see themselves compelled to likewise remove some accommodation, otherwise risking currency depreciation. At the same time, with governments dealing with record levels of debt and central banks owning large segments of this debt, “fiscal dominance” may coerce moderation in speed of policy normalisation.

Monetary innovation over this crisis such as flexibility made available in ECB asset purchases supports resilience of sovereign borrowers longer run, assuming such innovations were available for re-deployment in future crises.

Emerging market vulnerabilities entering 2022, while ESG risks becoming increasingly substantive

Emerging market vulnerabilities are a theme entering 2022, amid G4 central bank tapering, geopolitical risk, and a slowdown of China’s economy. Debate heats up furthermore during 2022 around adaptation of fiscal frameworks for a post-crisis age, with potentially far-reaching implications as far as sovereign risk. Environmental, social and governance (ESG) risks are becoming increasingly significant – presenting opportunities and challenges for ratings.

Sovereign borrowers with a Stable Outlook make up presently over 90% of Scope Ratings’ publicly rated sovereign issuers, indicating comparatively lesser likelihood of ratings changes next year as compared with during 2021, although economic risks could present upside and downside ratings risk. Only one country is currently on Negative Outlook: Turkey (rated a sub-investment-grade B).

For a look at all of today’s economic events, check out our economic calendar.

Giacomo Barisone is Managing Director of Sovereign and Public Sector ratings at Scope Ratings GmbH.

 

The Week Ahead: Central Banks and COVID-19 in Focus alongside a busy Economic Calendar

The Economic Calendar

On the Macro

It’s a quieter week ahead on the economic calendar, with 45 stats in focus in the week ending 10th December. In the week prior, 86 stats had been in focus.

For the Dollar:

On Wednesday, JOLT’s job openings will be on focus ahead of the weekly jobless claims on Thursday.

Expect both sets of numbers to draw interest following last week’s disappointing NFP numbers.

At the end of the week, however, November inflation figures and prelim consumer sentiment figures for December will also provide direction.

In the week, the U.S Dollar Index rose by 0.03% to 96.089.

For the EUR:

The German economic is in focus at the start of the week, with factory orders and industrial production figures due out.

On Tuesday, ZEW Economic Sentiment figures for Germany and the Eurozone and Eurozone GDP numbers will also be in focus.

Through the 2nd half of the week, the focus returns to the German economy, with trade and inflation figures due out.

For the week, the EUR fell by 0.02% to $1.1315.

For the Pound:

It’s a relatively quiet week ahead on the economic calendar.

Early in the week, BRC retail sales figures will draw interest ahead of key stats on Friday.

Manufacturing and industrial production, trade, and GDP numbers are due out at the end of the week.

Expect the production and GDP numbers to be key.

The Pound ended the week down by 0.76% to $1.3236.

For the Loonie:

It’s relatively quiet week ahead on the economic calendar.

On the economic data front, trade data and December’s Ivy PMI are due out on Tuesday.

The main event of the week, however, will be the BoC monetary policy decision. Expect any hawkish chatter on the economic outlook to deliver a boost.

The Loonie ended the week down 0.41% to C$1.2843 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a quiet week ahead. Economic data is limited to house price numbers that will likely have a muted impact on the Aussie.

On Tuesday, the RBA monetary policy decision will be key, however.

Better than expected GDP numbers for the 3rd quarter are unlikely to cause a shift in the RBA’s policy outlook. COVID-19 uncertainty could lead to a more cautious stance.

The Aussie Dollar ended the week down by 1.71% to $0.7001.

For the Kiwi Dollar:

It’s a quiet week ahead.

Business PMI and electronic card retail sales, due out on Friday, will be the key stats of the week.

Expect the electronic card retail sales figures to have a greater impact on the Kiwi.

The Kiwi Dollar ended the week down by 0.73% to $0.6772.

For the Japanese Yen:

Household spending will be in focus early in the week ahead of 3rd quarter GDP numbers mid-week.

Expect the household spending figures to garner greater interest.

On Thursday, BSI survey-based data for the 4th quarter will also be in focus.

The Japanese Yen rose by 0.51% to ¥112.800 against the U.S Dollar.

Out of China

It’s a busy week ahead on the economic calendar.

Trade data will be in focus early in the week ahead of inflation figures on Thursday.

While trade data will need to impress, a further pickup in inflationary pressure could test support for riskier assets. The markets will be looking for wholesale inflationary pressures to begin to soften at a minimum.

The Chinese Yuan ended the week up by 0.26% to CNY6.764 against the U.S Dollar.

Geo-Politics

Nothing new to consider in the week ahead, with China and Capitol Hill continuing to be the key areas of focus.

COVID-19

News updates on the Omicron strain and any further lockdown measures will be key. The markets will also be looking towards vaccine producers on the efficacy of the existing vaccines against Omicron.

The Weekly Wrap: FED Chair Powell Delivered Dollar Support amidst a Hectic Economic Calendar

The Stats

It was a busier week on the economic calendar, in the week ending 3rd December.

A total of 86 stats were monitored, which was up from 50 stats in the week prior.

Of the 86 stats, 44 came in ahead forecasts, with 33 economic indicators coming up short of forecasts. There were 9 stats that were in line with forecasts in the week.

Looking at the numbers, 48 of the stats reflected an upward trend from previous figures. Of the remaining 38 stats, 31 reflected a deterioration from previous.

For the Greenback, it was a 6th consecutive week in the green. Market reaction to FED Chair Powell testimony on Capitol Hill drove the Dollar northwards. In the week ending 3rd December, the Dollar Spot Index rose by 0.03% to 96.117. In the previous week, the Dollar had risen by 0.04% to 96.071.

Out of the U.S

Early in the week, consumer confidence was in focus. Rising consumer prices and new COVID-19 cases weighed, with the CB Consumer Confidence Index falling from 111.6 to 109.5.

Mid-week, ADP nonfarm payrolls and ISM Manufacturing PMI numbers were market positive, however.

In November, the ADP reported a 534k increase in nonfarm payrolls, with the ISM Manufacturing PMI up from 60.8 to 61.1.

On Thursday, jobless claims increased from 194k to 222k in the week ending 26th November.

More significantly, however, continuous jobless claims fell from 2,063k to 1,956k. The fall to sub-2,000 was the first since March 2020, when continuous jobless claims had stood at 1,803k on 20th March.

Continuous jobless claims had peaked at 25,073k back in May 2020.

At the end of the week, nonfarm payrolls and ISM Non-Manufacturing PMI figures were the key stats, however.

In November, nonfarm payrolls rose by just 210k. While the rise was modest, the unemployment rate fell from 4.6% to 4.2%. This was in spite of the participation rate increasing from 61.6% to 61.8%.

Service sector PMIs also impressed, with the ISM Non-Manufacturing PMI rising from 66.7 to 69.1 in November.

While the stats provided direction in the week, FED Chair Powell testimony was pivotal for the markets. The FED Chair talked of the need to discuss speeding up the tapering of bond purchases. Powell also said that the reference to transitory, in relation to inflation, should be removed, raising the chances of a sooner than expected rate hike.

Out of the UK

It was a relatively quiet week, with finalized service sector and composite PMIs in focus at the end of the week.

The services PMI rose from 54.6 to 58.5 in November, which was down from a prelim 58.6.

In the week, the Pound declined by 0.76% to end the week at $1.3236. In the week prior, the Pound had fallen by 0.85% to $1.3337.

The FTSE100 ended the week up by 1.11%, partially reversing a 2.49% loss from the previous week.

Out of the Eurozone

It was a particularly busy week.

Member state and Eurozone inflation and private sector PMIs for November were the key stats.

Inflationary pressures continued to pick up, with the Eurozone’s annual rate of inflation accelerating from 4.1% to 4.9%.

Private sector PMIs were largely market positive, with the Eurozone’s composite PMI up from 54.2 to 55.4.

Other stats included French consumer spending and German unemployment figures, which were mixed.

Consumer spending fell in France, while unemployment fell in Germany. With new restrictions being imposed across member states to curb the spread of COVID-19, the market response was muted.

For the week, the EUR slipped by 0.02% to $1.1315. In the week prior, the EUR had risen by 0.24% to $1.1317.

The CAC40 rose by 0.38%, while the DAX30 and the EuroStoxx600 ended the week with losses of 0.57% and 0.28% respectively.

For the Loonie

GDP and unemployment figures were key stats ahead of next week’s BoC monetary policy decision.

In the 3rd quarter, the Canadian economy expanded by 1.3% after having contracted by 0.8% in the previous quarter. On an annualized basis, the economy grew by 5.4% in the quarter.

Employment figures were also upbeat, with employment rising by 153.7k in November. As a result, Canada’s unemployment rate fell from 6.7% to 6.0% in the month.

In the week ending 3rd December, the Loonie declined by 0.41% to C$1.2843. In the week prior, the Loonie had fallen by 1.19% to C$1.2791.

Elsewhere

It was yet another bearish week for the Aussie Dollar and the Kiwi Dollar.

The Aussie Dollar slid by 1.71% to $0.7001, with the Kiwi Dollar falling by 0.73% to end the week at $0.6772.

For the Aussie Dollar

Company gross operating profits and private sector credit figures were in focus early in the week.

In the 3rd quarter, profits rose by 4.0% off the back of a 7.1% jump in the quarter prior. Private sector credit increased by just 0.5% in October, however, easing from a 0.6% rise in the month prior.

Mid-week, GDP numbers for the 3rd quarter delivered some comfort, with the economy contracting less than expected.

Quarter-on-quarter, the economy contracted by 1.9% versus a forecasted 2.7% contraction. The economy had expanded by 0.7% in the previous quarter.

Late in the week, trade data drew little interest in spite of a narrowing of the trade surplus from A$12.243bn to A$11.220bn.

For the Kiwi Dollar

It was a quiet week, with business confidence in focus. A fall from -13.4 to -16.4 in November weighed on the Kiwi early in the week.

COVID-19 and downside risks to the economic recovery ultimately did the damage, however.

For the Japanese Yen

Retail sales impressed early in the week, with sales up by 0.9% in October, year-on-year. In September, retail sales had been down by 0.5%.

Industrial production was also on the rise according to prelim figures. In October, production rose by 1.1% after having fallen by 5.4% in September.

Finalized private sector PMIs wrapped up a positive week on the economic data front. The services PMI rose from 50.7 to 53.0 in November, which was up from a prelim 52.1.

The Japanese Yen rose by 0.51% to ¥112.800 against the U.S Dollar. In the week prior, the Yen had risen by 0.54% to ¥113.380.

Out of China

Private sector PMIs for November were in focus.

The all-important Caixin manufacturing PMI fell from 50.6 to 49.9, with the Caixin services PMI falling from 53.8 to 52.1.

In the week ending 3rd December, the Chinese Yuan rose by 0.26% to CNY6.3764. In the week prior, the Yuan had ended the week down by 0.10% to CNY6.3933.

The CSI300 rose by 0.84%, while the Hang Seng fell by 1.30%.

Factbox-Analysts’ 2022 outlook for Chinese assets

SYDNEY (Reuters) – Investment houses have begun publishing their predictions for Chinese asset prices next year, and after a bruising 12 months in financial markets even bulls have a tempered outlook.

The Hang Seng equity index has fallen about 13% this year and the MSCI China index has lost about 20% against a 12% rise in world stocks.

On Dec. 2, the Hang Seng was at 23,714, MSCI China at 86.733 and the blue-chip CSI300 index at 4,854.6.

Here is a summary of some forecasts for Chinese assets at the end of 2022:

INVESTMENT HANG SENG MSCI CHINA CSI300 USD/CNY

HOUSE TARGET TARGET TARGET

Goldman Sachs 105 5,500 6.2

(12-month

f’cast)

Morgan Stanley 25,000 95 5,250 6.4

Barclays 6.5

HSBC 28,030

Standard 6.5

Chartered

KEY COMMENTS:

*GOLDMAN SACHS

“We believe Chinese stocks will have a better year in 2022 as the market recovers from a major correction and transitions into a ‘hope’ phase, where P/E expansion typically trumps weak fundamental growth and drives strong equity gains.”

*MORGAN STANLEY

“MSCI China has had its worst ever relative performance drawdown vs. broad emerging markets in 2021…despite such a record underperforming year, we still see some lingering risks skewed towards higher volatility or more downside in the near term. This makes us believe that now is not yet the right time to go bullish at a broad index level.”

*HSBC

“We think markets have been overzealous in selling Chinese stock… most funds are underweight and as the focus returns to growth in China, we think this market will roar back.”

** Credit Suisse

“Amid the expected relatively friendly policy environment and reasonable liquidity, we remain constructive on China A-share markets, despite the possible negative impact from the expected Fed’s tightening cycle. The Hong Kong stock market is likely to have a bigger impact from overseas macro and market volatilities, while we expect sector rotation could tilt back towards growth.”

(Reporting by Tom Westbrook and Winni Zhou; Editing by Rashmi Aich and Shailesh Kuber)

The Week Ahead – Central Bank Chatter, Economic Data, and COVID-19 in Focus

On the Macro

It’s a particularly busy week ahead on the economic calendar, with 78 stats in focus in the week ending 3rd December. In the week prior, 49 stats had been in focus.

For the Dollar:

Early in the week, consumer confidence will be in focus ahead of ADP nonfarm and manufacturing data on Wednesday.

Expect the consumer confidence and ADP numbers to draw the greatest interest.

On Thursday, weekly jobless claims will also influence ahead of a busy end to the week.

Nonfarm payrolls and ISM non-manufacturing PMI figures wrap things up on Friday.

On the monetary policy front, FED Chair Powell and FOMC member chatter will also be in focus. The FED Chair is scheduled to deliver testimony in the 1st half of the week, which will be key with the latest new COVID-19 strain.

In the week, the U.S Dollar Index rose by 0.06% to 96.089.

For the EUR:

French consumer spending and German unemployment figures get things going on Tuesday.

While consumption is key, expect Germany’s unemployment data to have a greater impact.

On Wednesday, German retail sales and manufacturing sector PMIs will be in focus.

At the end of the week, service sector PMIs and Euro area retail sales will also influence.

While the stats will draw plenty of interest, prelim November inflation figures for the Eurozone and member states will likely be key.

Away from the economic calendar, any new COVID-19 lockdown measures would likely overshadow any upbeat numbers.

For the week, the EUR rose by 0.24% to $1.1317.

For the Pound:

It’s a relatively quiet week ahead on the economic calendar.

Finalized private sector PMIs for November will be in focus. Expect any revisions to the services PMI to have the greatest impact on the Pound.

On the monetary policy front, central bank chatter will also provide direction. BoE Gov. Bailey is scheduled to speak on Wednesday.

The Pound ended the week down by 0.85% to $1.3337.

For the Loonie:

It’s relatively quiet week ahead on the economic calendar.

GDP figures will provide direction on Tuesday ahead of employment figures on Friday.

Away from the economic calendar, however, expect crude oil inventories and prices to influence. OPEC’s meeting in the week and sentiment towards consumption amidst the latest COVID-19 lockdown measures will drive crude oil prices.

The Loonie ended the week down 1.19% to C$1.2791 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a busy week ahead. Early in the week, company gross operating profits and private sector credit data will be in focus.

For the week, however, the key stats will be GDP numbers on Wednesday ahead of trade data on Thursday.

The Aussie Dollar ended the week down by 1.55 to $0.7123.

For the Kiwi Dollar:

It’s a quiet week ahead.

Economic data is limited to business confidence figures due out on Tuesday. With lockdown measures eased, the markets will be looking for a recovery following the decline in October.

The latest COVID-19 news from Europe, however, could weigh on sentiment and more heavily on the Kiwi.

The Kiwi Dollar ended the week down by 2.60% to $0.6822.

For the Japanese Yen:

Retail sales and prelim industrial production figures will be in focus early in the week.

In the 2nd half of the week, finalized private sector PMIs for November will also draw interest.

Ultimately, however, COVID-19 news updates will continue to be the key driver for the Japanese Yen.

The Japanese Yen rose by 0.54% to ¥113.380 against the U.S Dollar.

Out of China

It’s a busy week ahead on the economic calendar.

On Tuesday, NBS manufacturing PMI numbers will be in focus ahead of the all-important Caixin Manufacturing PMI on Wednesday.

While the headline figure will draw plenty of interest, new orders, delivery times, and input and output price trends will likely be the main areas of focus.

On Friday, the Services PMI will also draw interest, however.

The Chinese Yuan ended the week down by 0.10% to CNY6.3933 against the U.S Dollar.

Geo-Politics

Nothing new to consider in the week ahead, with China and Capitol Hill continuing to be the key areas of focus.

COVID-19

News of rising new COVID-19 cases and the talk of lockdown measures will influence. Key, however, will be news updates on the new COVID-19 strain and any government chatter on border controls.