Fundamentals in full swing as November draws to a close
Leaving aside the inevitable volatility coming off the back of Sunday’s emergency EU Brexit summit, it will be the suite of German IFO reports regarding business sentiment that stand to dominate the economic calendar. The Business Climate Index is expected to post its third consecutive monthly decline with a print of 102.3 being forecast against the October figure of 102.8. The forward-looking IFO Expectations reading is also tipped to fall from 99.8 to 99.3, and this sentiment certainly won’t prove all that supportive with regard to the European Central Bank’s (ECB) ambitions to normalise monetary policy. Both Bank of England (BoE) Governor Mark Carney and ECB President Mario Draghi are scheduled to speak during the day, with comments on Brexit likely to be closely followed.
The US Conference Board is scheduled to release its Consumer Confidence reading for November on Tuesday. There are a growing number of signals suggesting that the US economy is starting to slow and forecasts for this print are tipped to reflect that. Expectations have been set at 136.2 against last month’s 137.9. It needs to be taken into account that these are upbeat figures, so a modest reduction needs to be read in context. There’s also the fact that flash sales data from post-Thanksgiving shopping will be coming into circulation, which could serve to cloud the picture. Speeches from Federal Open Market Committee (FOMC) members Raphael Bostic, Esther George, and Richard Clarida are expected during the day, as well as the President of the Chicago Fed, Charles Evans.
There’s a revision to the Q3 US Gross Domestic Product (GDP) figure expected on Wednesday, and this is forecast to show a modest move upward to 3.6% from the flash reading for the quarter which came in at 3.5%. Unless a significant upward adjustment is seen, this print will be notably below the 4.2% recorded for the second quarter, underlining the fact that the US economy was served up a one-off boost from those tax breaks on repatriating overseas cash. There’s growing speculation that the economy will slow in the New Year, allowing the Federal Reserve to take a less hawkish stance over monetary policy. Markets will also be paying increased attention to any early indication of Q4 GDP, such as last week’s forecast by the Atlanta Fed of a modest 2.5%. Federal Reserve Chief Jerome Powell is due to speak at 5pm GMT.
Brexit uncertainty has been weighing on the minds of the UK population, so the Bank of England’s consumer credit report for October will be under some scrutiny. Consumer debt levels have been trending lower since April, driven both by a falling appetite for loans and also the imposition of tighter lending criteria. A modest rebound is being forecast for this figure—up to £928 million from September’s £785 million.
The FOMC’s latest meeting minutes are also scheduled for release with the potential to provide further certainty over the possibility of a fourth interest rate hike from the Federal Reserve before the end of the year.
One of the most watched developments of the day will be the Group of 20 (G20) meeting taking place on Friday and Saturday where both trade and climate change will be discussed. Eyes will be on US President Donald Trump following a year which has been rife with trade war threats.
Eurozone inflation data is set for publication and the ramifications this carries for the ECB’s policy tightening agenda means the print will be seen as significant. The October print came in at 2.2% - the highest reading in six years - and forecasts are suggesting a slight decline to 2.1%. The ECB is mandated to keep inflation close to, but just below, the 2.0% figure so a modest decline would be seen as a move in the right direction. However, too dramatic a dip could lead to concerns that inflation will begin to undershoot its target early in the New Year.
The Chicago PMI reading for November is also expected ahead of the weekend break. This has been in steady decline since July when it hit 65.5, although expectations are for a modest turnaround. After October’s reading of 58.4, analysts are calling a figure of 58.5 for this month.
China’s official NBS Manufacturing PMI is also due for release. Last month’s print of 50.2 was the lowest level recorded in over two years, and a move below 50.0 indicates contraction. Despite the impact of US trade tariffs, expectations are for a recovery to 50.6. Anything that suggests growth in China can be maintained would be seen as a positive for the global economy.