Risk off sentiment as Las Vegas shooting and Catalonia riots

This morning another horrific terror attack took place, this time in Las Vegas. At least 20 people have been killed and more than 100 injured in a mass shooting at a festival in Las Vegas. A gunman launched an attack from the 32nd floor of the Mandalay Bay Hotel and Casino using an automatic fire weapon. The attacker, described as a “lone wolf” was a local resident who had been shot and killed by officers. The attacker’s motive is still unknown.

The region of Catalonia has signalled they are on course to declare independence from Spain after over 2m people took part in Sunday’s referendum. The result showed that 90 percent of the 2.26m votes cast were in favour of independence, out of the 5 million who were eligible to vote. Catalan President Carles Puigdemont has appealed to the EU for support as he is to inform the regional parliament of the vote in the coming days. He said within 48 hours of this, it could lead to a declaration of independence. However, the Spanish constructional court has ruled the referendum as illegal and invalid and it is unlikely to be recognised by the international community. The result of the referendum saw the Euro depreciate as the markets opened in Asia.

Across the pond, the prospect of the new tax reform, outlined by US President Donald Trump last week, has seen the Dollar continue to extend its gains. As well as slashing corporation tax, the reform promises simpler tax codes and nearly doubles the standard deductions. It is hoped the changes could help support the strengthening economy as the reduction in corporation tax will help towards profits, whilst a reduction in individual income tax will contribute to consumer spending. Like the previous failed health care bill, the reform still needs to gain the support of Senate before it becomes legalisation.

Monday

Today will be a busy start to the new month with the release of the Manufacturing PMIs from the US, UK and Eurozone. The Eurozone will also be releasing the individual final Manufacturing PMIs from the biggest economies in the EU; Spain, Italy, France and Germany as well as the combined final figure, expecting to post 58.2.  The UK’s Manufacturing PMI is expected to drop slightly from last month to 56.3. Across the pond, the US will release the ISM Manufacturing PMI, forecasted to post 57.9. Today will end with the FOMC member, Robert Kaplan speaking at the El Paso branch of the Federal Reserve Bank of Dallas, with audience questions expected.

Tuesday

Tuesday will start with the release of the interest rate decision and policy statement from the Reserve Bank of Australia. Although no rate hike is expected to take place, the markets will be looking for any hawkish notes from the RBA signalling when the next hike is set to take place. Recent commentary from the Governor, Philip Lowe, indicated the next rate movement would rather be an increase than a cut. Back in the UK, the second of the PMIs will be released in the form of the Construction PMI, expected to post 51.2. Across the pond, FOMC member Jerome Powell will be speaking about regulatory reform at a financial regulation event in Washington.

Wednesday

On Wednesday, the services PMI will be released from the UK, expected to post 53.3. The Eurozone will also be releasing service PMI’s from Spain, Germany, France and Italy as well as the Eurozone as a whole, which is expected to post 55.6. ECB President, Mario Draghi is set to deliver the opening remarks at the Inauguration of the ECB visitor Centre. In the afternoon, the focus will be on the US with the release of the ADP Non-Farm Employment Change figure and ISM Non-Manufacturing PMI. The Employment Change has been expected to post a lower 151k compared to last month’s 237k, due to the hurricanes which hit the Southern East coast of the United States last month.  In the evening, Fed Chair, Janet Yellen will be delivering the opening remarks at a community banking conference. Also released on Wednesday is the weekly Crude Oil Inventories figure.

Thursday

Thursday is a quieter day on the economic docket, with the only high tier data release being the weekly US Unemployment Claims figure, forecasted to post 270k. The markets will remain volatile however as FOMC and MPC members speak at different events. With both the Fed and Bank of England expected to raise rates in the coming months, these speeches will be watched closely for any tones which could indicate when these hikes will take place. The first to speak is FOMC member, Jerome Powell about the Treasury Markets Practices Group best practices at the Federal Reserve Bank of New York. The next is FOMC member, Patrick Harker, who is due to speak at the Investing in America’s workforce capstone conference. These will be followed by MPC member, Ian McCafferty speaking at the Founders’ Company Annual Lecture and MPC member Andy Haldane who will be speaking about the Central Bank engagement with society.

Friday

The week will end with the focus on North America, as the US and Canada release their employment figures. Canada will post both their Employment Change figure and the Unemployment Rate figure. The US will be releasing their all-important Non-Farm Employment Change figure, expected to post 88k, as well as their average hourly earnings and unemployment rates, expected to post 0.3% and 4.4%.