A busy end to a chaotic year
December may normally be associated with everything slowing down as we ease our way into the festive period but as with everything else in 2020, this is no normal December. Donald Trump is continuing to fight the election result and is going out swinging, Brexit talks are somehow still ongoing, the EU budget and rescue fund is at risk, the Fed and ECB may add to the enormous stimulus efforts of central banks this year and OPEC+ may have one final trick up its sleeve. A few more twists and turns to come, it seems.
The upcoming week will provide crucial updates to both the labor market and manufacturing sector. The coronavirus spread and growing restrictions being imposed across the country have yet to really impact manufacturing and hiring until possibly now.
On Tuesday, the ISM manufacturing report is expected to show last month’s reading was the peak of the current recovery. The highly watched index is expected to decline from October’s 59.3, which was the highest level since September 2018, to 57.8. The fourth quarter slowdown is widely expected, but what might start becoming the consensus is for the first quarter to deliver an economic contraction.
The last nonfarm payroll report of the year comes ahead of a live Fed meeting. FOMC officials should be ready to act as softening jobs data could lead to permanent damage to the labor market. The upcoming nonfarm payroll is expected to see 500,000 jobs created in November, but given the recent weakness investors might not be too surprised if we saw hardly any job gains.
The formation of the Biden’s cabinet has been clearly one that embraced diversity and experience with the Obama administration. Wall Street has been positive to Biden’s picks for Secretary of State and Treasury Secretary. Tony Blinken has experience under both the Clinton and Obama administrations and is viewed as someone who will be able re-engage US allies. The selection of Janet Yellen as Treasury Secretary will raise expectations that the Fed and Treasury will be able to coordinate policy action early next year.
The upcoming Georgia Senate races will start to draw attention, but it seems very unlikely Democrats will be able to pick up both seats.
The battle continues between Hungary and Poland and the other 25 member states of the European Union over the “rule of law” clause tied to the 2021-27 budget, with the two countries vowing to stand side by side in its fight against Brussels. It’s difficult to see the way out of this, with both countries refusing to back down despite being massive financial beneficiaries as EU members. Two weeks to go until the EU summit and a deal looks unlikely, with other states insistent on the clause, which has been inserted to directly counter years of efforts in both countries to undermine it.
Face to face talks will continue on Saturday as Michel Barnier returns to London after undergoing self-isolation. Progress has slowed during virtual talks and can hopefully gather some momentum once again, with there being barely any time left to reach a deal and get it ratified. We’re seeing more public rhetoric once again, but that’s perhaps to be expected as we get into the final points. With talks taking part every day, there is increased weekend risk, with the markets currently not factoring in the possibility of negotiations collapsing, leading to no deal.
Rishi Sunak presented the spending review this week, while the government also put in place new restrictions as the country comes out of lockdown next week. Although most people won’t really notice the difference, with almost the entire country in tiers two or three. Brexit is the big risk now for the UK, with Covid cases falling again, although Christmas will undoubtedly be problematic on that front.
The lira remains volatile but conditions are improving despite a small setback over the last week. The government and central bank have a small grace period now in which to prove to investors that there will be no going back to the kinds of policies that triggered the plunge in the currency to record lows earlier this month.
Manufacturing and services PMIs headline the data releases from China next week as the country continues to perform solidly, despite countries around the world once again struggling to come to terms with another wave of Covid-19.
The wine industry was the latest to fall victim to China’s assault on Australian imports, with duties of between 107.1% and 212.1% being imposed. Again, markets are showing little sign of being particularly concerned by the tariffs but that may change if China turns its attention to more core industries.
The RBA rate decision next week is the standout event although no change is expected.
Next week offers a selection of tier three data in Japan which should have little impact although the stock market is continuing to make solid gains as part of the vaccine rotation recovery move.
|Sunday 29 November|
|Japan||Industrial O/P Prelim MM SA||Oct|
|Monday 30 November|
|China (Mainland)||NBS Manufacturing PMI||Nov||51.5|
|Turkey||GDP Quarterly YY||Q3||4.8%|
|Denmark||GDP QQ Prelim||Q3|
|Denmark||GDP YY Prelim||Q3|
|Switzerland||Official Reserves Assets CHF||Oct|
|Italy||CPI (EU Norm) Prelim MM||Nov|
|Italy||CPI (EU Norm) Prelim YY||Nov|
|Germany||CPI Prelim YY||Nov||-0.2%|
|Germany||HICP Prelim YY||Nov||-0.5%|
|Tuesday 1 December|
|Japan||Jibun Bank Mfg PMI||Nov|
|Australia||Current Account Balance SA||Q3||7.1B|
|Australia||Net Exports Contribution||Q3||-1.7%|
|South Korea||IHS Markit Mfg PMI||Nov|
|Indonesia||IHS Markit PMI||Nov|
|China (Mainland)||Caixin Mfg PMI Final||Nov||53.5|
|Australia||RBA Cash Rate||Dec||0.10%|
|Russia||Markit Mfg PMI||Nov|
|United Kingdom||Nationwide house price mm||Nov||0.4%|
|United Kingdom||Nationwide house price yy||Nov||5.6%|
|Italy||Markit/IHS Mfg PMI||Nov||52.0|
|France||Markit Mfg PMI||Nov|
|Germany||Markit/BME Mfg PMI||Nov|
|Germany||Unemployment Chg SA||Nov|
|Germany||Unemployment Rate SA||Nov|
|Germany||Unemployment Chg SA||Nov|
|Germany||Unemployment Rate SA||Nov|
|Italy||GDP Final QQ||Q3||16.1%|
|Italy||GDP Final YY||Q3|
|Turkey||ITO Istanbul Retail Prices||Nov|
|Euro Zone||Markit Mfg Final PMI||Nov||53.6|
|United Kingdom||Markit/CIPS Mfg PMI Final||Nov||55.2|
|Euro Zone||HICP Flash YY||Nov||-0.2%|
|Euro Zone||HICP-X F&E Flash YY||Nov|
|India||IHS Markit Mfg PMI||Nov||57.3|
|New Zealand||Milk Auctions||3 Nov, w/e|
|Canada||GDP QQ Annualized||Q3|
|Canada||Markit Mfg PMI SA||Nov|
|United States||Markit Mfg PMI Final||Nov|
|United States||ISM Manufacturing PMI||Nov||57.5|
|Mexico||Markit Mfg PMI||Nov|
|Wednesday 2 December|
|Australia||Real GDP QQ SA||Q3||2.5%|
|Australia||Real GDP YY SA||Q3||-4.5%|
|Euro Zone||Unemployment Rate||Oct||8.4%|
|Thursday 3 December|
|Australia||Trade Balance G&S (A$)||Oct||5,800M|
|China (Mainland)||Caixin Services PMI||Nov|
|India||IHS Markit Svcs PMI||Nov||55.5|
|Russia||Markit Services PMI||Nov|
|United Kingdom||Reserve Assets Total||Nov|
|South Africa||Std Bank Whole Econ PMI||Nov|
|France||Markit Serv PMI||Nov|
|France||Markit Comp PMI||Nov|
|Germany||Markit Services PMI||Nov||46.2|
|Germany||Markit Comp Final PMI||Nov|
|Euro Zone||Markit Serv Final PMI||Nov||41.3|
|Euro Zone||Markit Comp Final PMI||Nov||45.1|
|United States||Initial Jobless Clm||28 Nov, w/e||770k|
|United States||Markit Comp Final PMI||Nov|
|United States||Markit Svcs PMI Final||Nov|
|United States||ISM N-Mfg PMI||Nov||56.0|
|Friday 4 December|
|Australia||Retail Sales MM||Oct||1.6%|
|India||Cash Reserve Ratio||4 Dec||3.00%|
|India||Repo Rate||4 Dec||4.00%|
|India||Reverse Repo Rate||4 Dec||3.35%|
|Germany||Industrial Orders MM||Oct||1.4%|
|United States||Non-Farm Payrolls||Nov||500k|
|United States||Unemployment Rate||Nov||6.7%|
|United States||Average Earnings YY||Nov||4.3%|
|United States||International Trade $||Oct||-64.7B|
|Canada||Trade Balance C$||Oct|
|United States||Factory Orders MM||Oct||0.9%|