Monday: UK M4 Money Supply, Mortgage Approvals, Autumn Budget, EU Economic Forecasts, US Core PCE Price Index, Personal Spending/Income UK Earnings: HSBC
Tuesday: FR/IT/EU Flash GDP, Consumer Spending, GE/SP Prelim CPI, GE Unemployment Change, IT 10-yr bond auction, US S&P HPI, Consumer Confidence, Weekly API Inventories, BoC Poloz speaks, US/UK Earnings: General Electric, Pfizer, Facebook, BP
Wednesday: AU CPI, CN Manufacturing, Non-Manufacturing, JN Rate Decision, Outlook Report, Press Conference, Consumer Confidence, GE Retail Sales, FR/IT Prelim CPI, SP Flash GDP, IT Monthly Unemployment Rate, EU Flash CPI Estimate, Unemployment Rate, US ADP Employment Change, Employment Cost Index, Chicago PMI, Weekly DoE Inventories, BoC Poloz, SNB's Jordan speak, US/UK Earnings: General Motors, GlaxoSmithKline
Thursday: AU Trade Balance, CN Caixin Manufacturing PMI, JN Final Manufacturing PMI, 10-yr bond auction, UK Nationwide HPI, SZ Manufacturing PMI, CPI, UK Manufacturing PMI, BoE Rate Decision, Quarterly Inflation Report, Press Conference, US Challenger Job Cuts, Prelim Non-Farm Productivity Costs, Unit Labour Costs, Weekly Jobless Claims, Final Manufacturing PMI, ISM Manufacturing PMI, Construction Spending, Total Vehicle Sales, US Earnings: Apple (All Saints' Day observed in mainland Europe)
Friday: AU Retail Sales, PPI, GE Import Prices, SP/IT/FR/GE/EU Manufacturing PMI, SZ Retail Sales, UK Construction PMI, US Non-Farm Payrolls, Average Hourly Earnings, Unemployment Rate, Trade Balance, Factory Orders, CA Employment Change, Unemployment Rate, Trade Balance, US Earnings: Exxon Mobil, Chevron
QIR to save the day? witchful thinking...
Another testing week in store for the GBP as traders await today's budget announcement and the Thursday's Bank of England Quarterly Inflation Report (QIR). Of the two events, the latter is what we are placing greater priority given historical the budget tends to be more an opportunity for single stock movement rather than the broader direction of UK assets as a whole.
On Thursday, no rate change is expected from the Bank and attention will be firmly on the outlook issued from the BoE given their forecasts are based on a Brexit with a smooth transition to an "average of a range of outcomes", meaning that they will not reflect the growing risks of a no deal scenario. How downbeat, or not, their assessment is is likely to be the main driver for Sterling and further declines in cable could also be amplified should the US jobs report on Friday prove to be positive for the USD. Looking technically, this means that the low of the year could be tested as soon as this week under this scenario.
Merkel to stay or ghoul...
Following the dismal performance of Angela Merkel's CDU party at the weekend's regional election in Hesse, the rumour mill has been in full flow this morning with speculation rife that the leader of the ruling party will step down. At present, the government has not passed official comment and I personally find it hard to believe that Merkel would make such a sudden decision when the poor results in recent regional elections are to be expected. None the less, the Chancellor is due to speak at 1200GMT so keep your eyes peeled.
If Merkel were to confirm the rumours then I would anticipate more broad based selling of the EUR. However, I believe any imminent stepping down is highly unlikely and the latest on this from a Reuters source is that Frau Merkel told party members that she will not be a candidate for Chancellor and member of parliament after 2021, dispelling any fears of an immediate resignation.
Back from the dead...
Italy has averted a crisis (for now) with S&P lowering the country's outlook to negative on Friday but opting to keep the overall sovereign rating unchanged, two notches above junk. The recent decisions from Moody's and S&P were critically important for Italy given their investment grade status is pivotal for the financing of the country and to remain a benefactor of the ECB's bond buying programme. As such, IT yields have declined this morning providing some light relief with the 10-yr spread over German bunds moving back below 300bps.
Although short-term this is a net positive, in the medium-term it may serve to be quite the opposite as the politicians in Rome will know they have more room to manoeuvre in confronting the European Commission on the terms of its unfavourable budget proposals. However, with finance minister Tria saying this weekend that the government would intervene in a banking crisis, is Italy too big to fail and as such how fearful should we be?.
Will the FAng's paint the market red...
There are 136 S&P 500 companies reporting this week, with 6/30 Dow components also on the docket. Highlights include GE, Pfizer, GM, Exxon, Chevron, but the ones we are monitoring most closely will be Facebook, due after-market on Tuesday, and Apple on Thursday evening.
Facebook have had a rough few months with some $200bln in market-cap lost since the record high hit in July. A combination of data privacy issues, threats of regulation change and departures of key executives have all been notable for the recent decline and three months ago the company saw the biggest one-day post earnings decline in US corporate history after announcing its profit margin was likely to fall for more than two years. As such, it may be a case that just not being terrible is enough to lift the company's shares on Tuesday night.
As for Apple, although we will see sales numbers tied to the latest inception of the iPhone, price action may well be derived largely from the company's outlook for the festive period, a key seasonal period for the firm.
WTI crude remains at an impasse with overall market sentiment remaining fragile amid concerns on whether recent market events may escalate into something more meaningful for global demand. In addition, the latest update from Baker Hughes on Friday showed that the number of active rigs in the US edged up another 2 to 875, following two weeks of consecutive increases. Our thoughts remain fairly neutral for the moment with stronger fundamental biases in other assets, so we take a conservative stance for the time being.
Catch our full market briefing from this morning HERE.
Have a great week ahead.
Anthony & Sam