øGlobal equities fell amid a decline in crude oil prices; European stocks were weighed by political uncertainty
øThe cabinet of the UK government backed a draft withdrawal treaty outlining terms for the UK’s departure from the EU. Nevertheless,there remain significant hurdles, including ratification
øIn the coming week, investor focus will turn to a plethora of US housing market data releases and the flash November eurozone PMIs
US
In a holiday shortened week (Thanksgiving on Thursday), the US economic data calendar is dominated by housing market releases. The NAHB/Wells Fargo Housing Market Index is expected to moderate to 67 in November from 68 in October following a moderation in sales. While there have been some signs of easing housing demand recently, homebuilders continue to see elevated prospective buyer traffic. Moreover, residential construction employment increased solidly in October, suggesting that homebuilding activity remained healthy.
Housing starts are expected to rebound 2.0% to 1,230,000 in October from a 5.3% fall in September. A decent 1.7% mom increase in September’s building permits suggests a rebound in housing starts in October is likely. Some of the expected rebound in October will likely be driven by a sharp rebound in multifamily housing starts, which tend to be highly volatile.
Headline durable goods orders are expected to decline sharply by 2.1% mom in October, from 0.7% mom in September, dragged lower by aircraft and transportation orders. Excluding transportation, durable orders are expected to rise 0.4% in October after remaining flat in September.
Existing home sales are expected to rebound in October by 1.0% from a 3.4% contraction in September as pending home sales, which track sale contract signings, increased modestly.
Europe
The flash eurozone PMIs for November may have been little changed from the previous month, with consensus expectations for the composite PMI to edge down 0.1 points to 53.0. This could leave the index at its lowest level since September 2016, suggesting still soft momentum in the eurozone economy amid external headwinds.
Asia and emerging markets
Japan’s trade balance may have reported a seasonally adjusted JPY48.3 billion deficit in October (following a deficit of JPY238.9 billion in September), as exports probably rebounded from a plunge caused by natural disasters. Meanwhile, CPI inflation excluding fresh food and energy is expected to stabilise at 0.4% yoy. This measure has failed to breach 0.5% since mid-2016, highlighting the ongoing challenges faced by the Bank of Japan in returning inflation to target.
In South Africa, the combination of a weak currency and a worse than expected medium-term budget has tilted the balance of risks in favour of a 25-bp rate hike to 6.75% on Thursday.
Market Moves
Equities
US equities retreated this week, with the S&P 500 Index finishing 1.6% lower with telecoms, materials and energy stocks underperforming, following the sharp drop in crude oil prices. Risk sentiment was also dampened by lingering trade and global growth concerns, although there was some paring back of losses on Thursday amid better than expected retail sales data for October. In Canada, the S&P/TSX Composite Index tracked US stocks, ending the week 0.8% lower.
European stocks also fell following disappointing German Q3 GDP data and the ongoing stand-off between the EU and Italy. Risk sentiment was further weighed down by increased Brexit concerns as a series of ministerial resignations led to doubts over whether UK Prime Minister Theresa May will be able to pass the withdrawal deal through parliament. The EURO STOXX 50 Index shed 1.5% while Germany’s DAX underperformed (-1.6%). Meanwhile, the UK’s FTSE 100 Index closed down 1.3%. All other major European bourses also fell.
Asian stock markets ended the week mixed, as investors weighed hopes of progress in US-China trade talks amid mixed economic data and corporate earnings, while technology and crude prices contributed to volatility in the markets. Japan’s Nikkei 225 Index posted a weekly loss of 2.6% as the country’s Q3 GDP growth came in weaker than expected. The Shanghai Stock Exchange Composite Index rallied (+3.1%) on US-China trade optimism and as policymakers pledged more funding support to private enterprises and small companies. India’s SENSEX 30 Index ended the week 0.8% higher, amid foreign fund inflows as crude oil prices declined and the rupee rose.
Bonds
US Treasuries rose this week (yields fell), boosted by perceived “safe-haven” demand as equities sold off, and amid lower inflation expectations as crude oil prices fell. Ten-year Treasury yields fell 12 bps to 3.06% and two-year yields closed 12 bps lower at 2.80%. Meanwhile, Canadian 10-year yields fell 14 bps to 2.36%.
In Europe, core government bond yields also fell, with the bulk of the price action occurring on Thursday amid Brexit-related concerns. Benchmark German 10-year bund yields edged 4 bps lower to 0.37%, and UK equivalents underperformed (-8 bps to +1.41%). Meanwhile, peripheral European bonds declined, led by weakness in Italy amid the ongoing dispute between the country’s government and the European Commission.
Currencies
The British pound fell against the US dollar this week (-1.1%) – with most of the losses occurring on Thursday – weighed down by the resignation of UK Brexit Secretary Dominic Raab, which followed UK Prime Minister Theresa May gaining cabinet approval for a withdrawal deal with the EU. Meanwhile, the euro gained (+0.7%), with the dollar weighed down by dovish comments from Fed Vice Chairman Richard Clarida, who focused on the prospect of a weaker growth and inflation outlook.
Most Asian currencies appreciated against the US dollar this week, led by gains in the Japanese yen and Indian rupee. Sentiment toward Asian currencies was helped by hopes of easing US-China trade tensions and a fall in crude oil prices. Meanwhile, gains in the Indonesian rupiah and Philippine peso came as both country’s central banks hiked rates.
Commodities
Crude oil prices fell this week as OPEC revised down its demand forecasts for next year while data showed US output and inventories continuing to rise. Some support came later in the week amid signals that OPEC and allied producers are considering production cuts as soon as next year, and as the US government imposed sanctions on Saudi officials. Overall, WTI declined 5.6% to USD56.8 a barrel.
Gold prices rose this week (+1.0% to USD1,222 per troy ounce) as Brexit concerns supported demand for perceived “safe-haven” assets. Dovish comments from Fed Vice Chairman Richard Clarida on Friday also boosted the non-interest-bearing precious metal.
Regards Anyone.
øThe cabinet of the UK government backed a draft withdrawal treaty outlining terms for the UK’s departure from the EU. Nevertheless,there remain significant hurdles, including ratification
øIn the coming week, investor focus will turn to a plethora of US housing market data releases and the flash November eurozone PMIs
US
In a holiday shortened week (Thanksgiving on Thursday), the US economic data calendar is dominated by housing market releases. The NAHB/Wells Fargo Housing Market Index is expected to moderate to 67 in November from 68 in October following a moderation in sales. While there have been some signs of easing housing demand recently, homebuilders continue to see elevated prospective buyer traffic. Moreover, residential construction employment increased solidly in October, suggesting that homebuilding activity remained healthy.
Housing starts are expected to rebound 2.0% to 1,230,000 in October from a 5.3% fall in September. A decent 1.7% mom increase in September’s building permits suggests a rebound in housing starts in October is likely. Some of the expected rebound in October will likely be driven by a sharp rebound in multifamily housing starts, which tend to be highly volatile.
Headline durable goods orders are expected to decline sharply by 2.1% mom in October, from 0.7% mom in September, dragged lower by aircraft and transportation orders. Excluding transportation, durable orders are expected to rise 0.4% in October after remaining flat in September.
Existing home sales are expected to rebound in October by 1.0% from a 3.4% contraction in September as pending home sales, which track sale contract signings, increased modestly.
Europe
The flash eurozone PMIs for November may have been little changed from the previous month, with consensus expectations for the composite PMI to edge down 0.1 points to 53.0. This could leave the index at its lowest level since September 2016, suggesting still soft momentum in the eurozone economy amid external headwinds.
Asia and emerging markets
Japan’s trade balance may have reported a seasonally adjusted JPY48.3 billion deficit in October (following a deficit of JPY238.9 billion in September), as exports probably rebounded from a plunge caused by natural disasters. Meanwhile, CPI inflation excluding fresh food and energy is expected to stabilise at 0.4% yoy. This measure has failed to breach 0.5% since mid-2016, highlighting the ongoing challenges faced by the Bank of Japan in returning inflation to target.
In South Africa, the combination of a weak currency and a worse than expected medium-term budget has tilted the balance of risks in favour of a 25-bp rate hike to 6.75% on Thursday.
Market Moves
Equities
US equities retreated this week, with the S&P 500 Index finishing 1.6% lower with telecoms, materials and energy stocks underperforming, following the sharp drop in crude oil prices. Risk sentiment was also dampened by lingering trade and global growth concerns, although there was some paring back of losses on Thursday amid better than expected retail sales data for October. In Canada, the S&P/TSX Composite Index tracked US stocks, ending the week 0.8% lower.
European stocks also fell following disappointing German Q3 GDP data and the ongoing stand-off between the EU and Italy. Risk sentiment was further weighed down by increased Brexit concerns as a series of ministerial resignations led to doubts over whether UK Prime Minister Theresa May will be able to pass the withdrawal deal through parliament. The EURO STOXX 50 Index shed 1.5% while Germany’s DAX underperformed (-1.6%). Meanwhile, the UK’s FTSE 100 Index closed down 1.3%. All other major European bourses also fell.
Asian stock markets ended the week mixed, as investors weighed hopes of progress in US-China trade talks amid mixed economic data and corporate earnings, while technology and crude prices contributed to volatility in the markets. Japan’s Nikkei 225 Index posted a weekly loss of 2.6% as the country’s Q3 GDP growth came in weaker than expected. The Shanghai Stock Exchange Composite Index rallied (+3.1%) on US-China trade optimism and as policymakers pledged more funding support to private enterprises and small companies. India’s SENSEX 30 Index ended the week 0.8% higher, amid foreign fund inflows as crude oil prices declined and the rupee rose.
Bonds
US Treasuries rose this week (yields fell), boosted by perceived “safe-haven” demand as equities sold off, and amid lower inflation expectations as crude oil prices fell. Ten-year Treasury yields fell 12 bps to 3.06% and two-year yields closed 12 bps lower at 2.80%. Meanwhile, Canadian 10-year yields fell 14 bps to 2.36%.
In Europe, core government bond yields also fell, with the bulk of the price action occurring on Thursday amid Brexit-related concerns. Benchmark German 10-year bund yields edged 4 bps lower to 0.37%, and UK equivalents underperformed (-8 bps to +1.41%). Meanwhile, peripheral European bonds declined, led by weakness in Italy amid the ongoing dispute between the country’s government and the European Commission.
Currencies
The British pound fell against the US dollar this week (-1.1%) – with most of the losses occurring on Thursday – weighed down by the resignation of UK Brexit Secretary Dominic Raab, which followed UK Prime Minister Theresa May gaining cabinet approval for a withdrawal deal with the EU. Meanwhile, the euro gained (+0.7%), with the dollar weighed down by dovish comments from Fed Vice Chairman Richard Clarida, who focused on the prospect of a weaker growth and inflation outlook.
Most Asian currencies appreciated against the US dollar this week, led by gains in the Japanese yen and Indian rupee. Sentiment toward Asian currencies was helped by hopes of easing US-China trade tensions and a fall in crude oil prices. Meanwhile, gains in the Indonesian rupiah and Philippine peso came as both country’s central banks hiked rates.
Commodities
Crude oil prices fell this week as OPEC revised down its demand forecasts for next year while data showed US output and inventories continuing to rise. Some support came later in the week amid signals that OPEC and allied producers are considering production cuts as soon as next year, and as the US government imposed sanctions on Saudi officials. Overall, WTI declined 5.6% to USD56.8 a barrel.
Gold prices rose this week (+1.0% to USD1,222 per troy ounce) as Brexit concerns supported demand for perceived “safe-haven” assets. Dovish comments from Fed Vice Chairman Richard Clarida on Friday also boosted the non-interest-bearing precious metal.
Regards Anyone.