- End of month data deluge to be accompanied by slew of Fed & ECB speakers,
key OPEC meeting, as solid Oz CapEx, mixed Japan Industrial Production,
China NBS PMIs pick-up are digested; politics and bitcoin spectacle the
overarching themes
- Eurozone CPI: modest upside risk on headline, but core likely to remain
way off ECB target
- India GDP: seen picking up after run of disappointments, GST introduction
disruption imparts some downside risks relative to consensus
- OPEC: 9 month extension in the bag, review contingencies likely to be key
- US Personal Income/PCE: focus as ever on deflators, core seen posting best
gain (though modest) in 6 months
- Charts: China NBS Manufacturing PMI, UK 10-yr Gilt Yield vs GBP/USD
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** EVENTS PREVIEW **
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It's the end of the month, which as ever brings a tidal wave of data, which will however have to contend with hefty competition from the as expected 25 bps lift-off on Korean rates, the much anticipated OPEC/Non-OPEC ministerial meeting, and a lot of ECB and Fed speak. Statistically there are the UK confidence surveys, Australian Q3 CapEx, the China official NBS PMIs and the as ever erratic German Retail Sales (the reported sharp fall is best dismissed) to digest, while ahead lies Eurozone CPI, German Unemployment, India GDP, US Personal Income, PCE and the Chicago PMI, while tonight brings Japanese CPI, Unemployment and Household Spending. In terms of the OPEC meeting, the expectation is that there will be an agreement to extend the current production cap for nine months, i.e. to the end of 2018, but the key aspect will be what contingencies are included to appease Russia, with chatter suggesting that the cuts are linked to the supply-demand balance on the global oil market, or the level of oil inventories, or making a clear reference to the fact that the deal will be reviewed again in June, which would in effect amount to a 3-month extension with the option of a further 6 months. If the latter is however more implicit rather than explicit, then it might mitigate the anticipated round of profit-taking ('buy the rumour, sell the fact'). But the overarching themes remain political, with markets putting an optimistic spin on suggestions that Brexit negotiations will be advanced at the December 14-15 meeting, as well as progress on the US tax reform bill.
For those interested in Bitcoin, above all the proposals to introduce Bitcoin Futures, this article by FT Alphaville chief Izzy Kaminska is a must read "Why Bitcoin futures and a shoddy market structure pose problems"
https://ftalphaville.ft.com/2017/11...-and-a-shoddy-market-structure-pose-problems/.
** Eurozone - November prov. CPI **
- A slightly higher than expected German CPI, in part offset by the lower than forecast Spanish reading, implies a small risk that headline Eurozone CPI turns out fractionally higher than the anticipated rise to 1.6% y/y from 1.5%. However that German upside miss was almost wholly down to Food and Energy prices, so Core CPI should be in line with a forecast of 1.0% y/y (Oct 0.9%). The latter inevitably invites the conclusion that the ECB still remains some distance away from being able to declare that inflation is on a sustainable uptrend towards its target of "just below 2.0%".
** India - Q3 GDP **
- India has been the disappointment of the global growth story in 2017, with IMF projections of 7.6% y/y for 2017 in October 2016 (pre-the demonetization shock) now scaled back to 6.7%, (though 2018 is still seen picking up to 7.4%). However if the forecast of 6.4% y/y for today's Q3 GDP (VS Q2 5.7% y/y) proves to be correct, then even the cureent IMF forecast for 2017 may prove to be optimistic. It would still be the first pick-up for 5 quarters, though the risks are perhaps to the downside of the consensus, given the start of Q3 disruption from the introduction of the GST (Goods & Sales Tax), and suggesting a reading close to the Q3 level. Optimism on the outlook does however look to justified as the government's fiscal stimulus package starts to get some traction.
** U.S.A. - Oct Personal Income / PCE **
- The consensus looks for a 0.3% m/m rise in both Personal Income and Spending, with the former looking rather better than the Average Hourly Earnings (Flat m/m), given the pick-up in hours worked, while PCE is seen largely mirroring headline Retail Sales (+0.2% m/m). As ever the headline numbers will likely be largely overlooked, with the focus on the PCE deflators, which in m/m terms are forecast to mirror the CPI readings with headline seen up 0.1% m/m and core up 0.2% m/m (best gain in 6 months), which in yr/yr terms see headline dip to 1.5% from 1.6%, and core edging up to 1.4% from 1.3%, though the 3-mth annualized rate on the latter would hit 1.6%. But with markets still firmly focussed on the progress of the tax reform bill, today's data will have to spring a surprise to distract therefrom.
from Marc Ostwald