In our Investment Bank Outlook each week, we bring you a selection of perspectives from leading investment banks to outline the key issues and directional views for the week ahead. These excerpts, taken from research notes, will cover issues such as key market themes, economic releases, as well as any major trends and levels to watch. Please note, this material, which does not reflect the opinions of Tickmill, is provided for educational purposes only and should not be taken as an investment recommendation.
Risk has traded moderately weaker during Asia, with USDCNH back at 7.00, USDJPY back below the 109 handle and S&P futures down around 0.3% to 3081.50 at the time of writing. Recapping the weekend trade headlines:
President Trump pushed back on recent market speculation. Trump said things are moving "very nicely" as China wants a deal "much more than I do." However, he said that the reports suggesting the US is ready to roll back tariffs are "incorrect." He added: “If we don’t make that right deal, we’re not going to make a deal. A lot of positive things are happening.”
Ignore headlines highlighting risk of inflow restrictions. Craig Phillips, a former top aide to Treasury Secretary Steven Mnuchin, also made headlines by digging up old rumors: Trump administration weighed limiting US inflows into China. The headlines read ominous, but the full story brings no new details - Phillips revisited the subject during a speech for the China Finance Association’s annual conference in New York as he left the Treasury in June.
This week also sees the latest deadline for the US to impose auto tariffs on the European Union, South Korea and Japan among others. November 13 is supposedly the day a decision is due, which could see 25% tariffs imposed by the US on close trading partners. However, currently market expectations are for this deadline to be rolled again, we are unclear on till when this might be. The European Commission’s President Juncker was also quoted by Bloomberg towards the end of last week saying: “Trump will ruffle a bit, but there will not be any automobile tariffs. He won’t do it. You’re talking to a fully informed man.”
India-US talks are also scheduled this week. Commerce and Industry Minister Piyush Goyal will meet his US counterpart Robert Lighthizer on Wednesday in Washington to discuss trade issues and on Thursday, Goyal will meet with various US industry representatives.
RBC Capital Markets
Week ahead: Fed Chair Powell’s testimonies (Wednesday and Thursday) are the key events in the week ahead. Given the proximity of the latest FOMC meeting and the unambiguous “pause” signal sent at the time, our economists don’t think we will learn much on this occasion, however. Data‐wise, we have October US CPI (likely to mark the short-term peak in y/y core inflation) and October retail sales. The latter are the first hard data on Q4 consumer spending and likely to suggest a firm start to the quarter. Outside the US, there is a deluge of UK data (see GBP), but little of note in Europe or Canada.
GBP: Five opinion polls in the weekend press echo the message of last week’s polls in that the two main parties continue to gain at the cost of the smaller parties. The average of the weekend polls has the Conservatives on 40% (+1%); Labour on 29% (+2%); LibDems on 16% (u/c) and Brexit on 8% (‐2%). There is a deluge of Sep/Q3 activity data due at 9:30 this morning, but attention will likely focus n the first estimate of Q3 GDP and the monthly figure for September. The UK economy has been volatile in 2019, with GDP having already swung from a 0.6% q/q advance to a 0.2% q/q contraction the first two quarters of the year. The timing effects of the various Brexit deadlines explain the swings in the performance of the economy and they are likely to be evident again this quarter. Our economists expect growth this quarter (0.4% q/q) to emanate mainly from the services sector, where the impact of that Brexit effect is much less pronounced. The data deluge continues in the rest of the week, though markets are likely to remain distracted by politics. Tomorrow brings Sep labour market data, Wednesday Oct CPI and Thursday Oct retail sales.
JPY: Japan’s capital flows data for September again show net buying of foreign bonds was dominated by USTs (JPY1.3trn of JPY1.7trn in total). Flows into Australia and Canada were negligible. As highlighted by the Lifers’ investment plans, the ongoing high cost of hedging means much of the outflow is likely to be unhedged.
AUD: This week brings key volume and price indicators for the Labour market. The underlying moderation in the labour market with a further increase in persistent slack suggests that wages growth will remain modest in Q3. There is a gentle moderation occurring in monthly trend employment. Consistent with the leading indicators, we expect this trend to continue.
CAD: Friday’s daily close above resistance at 1.3206 has added to bullish momentum in USD/CAD, with the breakout targeting the 200‐dma at 1.3276 ahead of stronger resistance at 1.3345. Support is now located at 1.3206 and 1.3115.
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