While the last few weeks were much about monetary policymakers’ meeting and speeches, this month is due to be more data-driven as the Bank of Japan (BoJ) is the only major central bank having a meeting scheduled for the remainder of November. Although the BoJ meeting could be material for markets as its macro commentary could provide hints of upcoming additional monetary stimulus (QE) and growth/inflation risks for economies elsewhere, at this stage this already appears to be a consensus view. To put it differently, in my opinion words won’t be enough to change sentiment and only a surprise decision to uptake the QE programme this month will do so. The first to benefit would probably be the European assets as speculations for a similar decision by ECB next month would raise in this context.
Until the 19 November BoJ meeting though investors will have to contend with a flurry of Chinese data. As soon as next week, we will get to know the latest figures for inflation, producer price index (PPI), new loans, industrial production and retail sales. While retail sales have been fairly resilient over the last few months, with annual growth rates consistently above 10%, the growth in industrial production has been glowing down and PPI was a recurrent disappointment. Regarding the latter, the figures for September showed a 5.9% annual fall, the worst since 2009. Such figures have kept alive worries that the global inflation continues to face downside risks as falling producer prices and subdued global demand make a dangerous combination in the current environment. To be more specific, when demand is strong a fall in production costs would likely improve margins more than anything else but when demand is anaemic the result is likely to be lower selling prices (i.e. lower inflation). As things stand today, although there is evidence that consumption is gradually picking up in the US and Europe, there is little conviction that the second scenario can be avoided.
On a similar note, one can consider the rather subtle hint provided by Draghi who said that although it is often said that the low oil price reflects supply conditions, demand factors appear to be at work as well.
Moving away from China, other pivotal upcoming data releases include the US employment-related figures. To start with, later today we will have the latest figures for unemployment and hourly earnings; both of these are expected to show improvements but the details behind the headline figures will be important as well. For instance, analysts will be looking into the breakdown of employment change by sector and region to get a feeling of the impact that a stronger USD and a lower oil price are having.
In addition, next Wednesday, the Bureau of Labour Statistics will be disclosing the number of job openings as well as related figures such as the hiring rate and the quitting rate. These are among the indicators watched by Fed as they provide a more accurate picture of the labour market dynamics; persistent high job opening numbers coupled with rather low hiring rate can signal for instance that there is a skills mismatch and that the fall in unemployment will be slower than otherwise.
Apart from this, markets will closely watch the numbers for retail sales at the end of next week to get a feel of the momentum ahead of the Christmas season.
All in all, the next few days will be quite data-rich and surprises could lead to a new bout of volatility as it is yet uncertain what is priced in at this stage, particularly when it comes to US monetary policy.
Have a nice day!
The Calamatta Cuschieri Traders Blog is available daily on CC WebTrader. Other market coverage including coverage of the International Bond Markets is also available.
The information provided on this website is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Similarly any views or opinions expressed on this website are not intended and should not be construed as being investment, tax or legal advice or recommendations. Investment advice should always be based on the particular circumstances of the person to whom it is directed, which circumstances have not been taken into consideration by the persons expressing the views or opinions appearing on this website. Calamatta Cuschieri & Co. Ltd. (CC) has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website. You should always take professional investment advice in connection with, or independently research and verify, any information that you find or views or opinions which you read on our website and wish to rely upon, whether for the purpose of making an investment decision or otherwise. CC does not accept liability for losses suffered by persons as a result of information, views or opinions appearing on this website.
This website is owned and operated by Calamatta Cuschieri & Co. Ltd (Co. Reg. No. C13729) of 5th Floor, Valletta Buildings, South Street, Valletta VLT 1103, Malta. CC is licensed to conduct Investment Services in Malta by the Malta Financial Services Authority.