What mattered last week and a preview of the week ahead 2nd December

What mattered last week:

  • Renewed optimism around the U.S. – China trade deal propelled the U.S. stock market to another all-time record high last week.
  • After China indicated that it could introduce stronger IP protection laws and President Trump said that a trade deal is close.
  • Some of the goodwill was undermined later in the week after President Trump signed a bill to support the Hong Kong protestors.
  • Data wise, U.S. September quarter GDP was revised higher to 2.1% and in Germany, IFO business conditions rose as did German consumer sentiment.
  • In Australia, the soft economic data continued as business investment, credit growth and construction data disappointed.
  • An influential local economist forecast two more interest rate cuts in the first half of 2020 taking the cash rate back to 0.25%, followed by the introduction of Quantitative Easing (QE) in the second half of 2020.
  • This resulted in the AUDUSD slumping towards .6750 and the ASX200 making new all-time highs, closing the week near 6850.
  • The rally in the ASX200 was all the more impressive as the banking sector remains out of favour after another money laundering scandal at a big bank.

For the week ahead, the key events are:

Australia: Building approvals, business inventories and company profits (Monday), current account and RBA interest rate meeting (Tuesday), GDP Q3 (Wednesday), balance of trade (Thursday).

  • RBA interest rate meeting (Tue): The RBA is expected to leave interest rates on hold at 0.75% and maintain a strong easing bias in its last board meeting until February 2020.

New Zealand: Terms of trade Q3 (Monday), global dairy trade auction (Wednesday).

China: Caixin manufacturing PMI (Monday), Caixin services and composite (PMI), foreign exchange reserves (Saturday).

Japan: Reuters Tankan index (Thursday), leading economic index and coincident index (Friday).

U.S.: ISM manufacturing PMI (Monday), balance of trade and factory orders (Thursday), non-farm payrolls (Friday).

  • ISM manufacturing PMI (Wed): The market is expecting to see ISM rise for a second consecutive month from 48.3 to 49.2 to support for the idea that the worst of the manufacturing slowdown is in the rear vision mirror.
  • Non-Farm Payrolls (Fri): The market is expecting to see a gain of 180,000 jobs and the unemployment rate is expected to remain steady at 3.6%.

Canada: Markit manufacturing PMI (Monday), Bank of Canada (BoC) interest rate meeting (Thursday), Ivey PMI (Friday).

  • BoC interest rate meeting (Thur): The BoC is expected to keep rates unchanged at 1.75% on Wednesday. The statement is expected to be dovish highlighting global risks and the need for consumption, housing and the government sectors to help boost growth.

Euro Area: German factory orders (Thursday), German industrial production (Friday).

UK:Construction PMI (Tuesday), new car sales (Thursday), Halifax house price index (Friday).

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