Macroeconomics: The Day Ahead for 20 November

What will be a quiet week will also get off to a subdued start, with the sharp swing to the far right anarcho-capitalism in Argentina’s presidential election to be digested along with German PPI, Thai Q3 GDP and Malaysian Trade, and the expected no change in China’s Loan Prime Rates. Ahead lie the US Leading Index and Chile’s Q3 GDP, and a busy run of central bank speakers which features ECB’s Lane and BoE’s Bailey. The US gets its run of debt auctions underway with $16 Bln of unloved 20-yr, and a close eye will also have to be kept on the ongoing and increasingly wild ride in crude oil futures ahead of the OPEC meetings next weekend.

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As the result of the Argentine presidential election on Sunday is digested, the new week will see some liquidity disruption from the US and Thanksgiving holidays on Thursday. The modest data schedule highlights include flash G7 PMIs, US Existing Home Sales and Durable Goods Orders, German Ifo and numerous other surveys, while the UK awaits the Chancellor’s Autumn Budget Statement and PSNB data, Canada and Japan look to CPI, while China has the monthly Loan Prime Rate fixing on Monday (no change in rates expected). There will also be ECB and FOMC minutes; Swedish, CEE and EM rate decisions, and plenty more central bank speakers. Next weekend sees the OPEC+ meeting, at which an extension of current agreed and voluntary production cuts until the end of Q1, subject to review at monthly meetings. While even deeper cuts have been mooted, OPEC+ will a) be wary of sparking yet another artificial short squeeze that fizzles briefly before another retreat, and b) only last week talked up the global demand outlook, and per se would be guilty of paradoxical messaging if they cut production, particularly as any such move would amount to a blatant attempt to put a floor under prices, rather than the credibility challenged claim of trying to keep supply and demand in balance. Of interest remains how much more market share OPEC+ is willing to sacrifice, given that the increase in supply is coming out of the US, Brazil and Guyana, and potentially and more modestly OPEC member Venezuela. Outside of that commodity markets will look to a handful of conferences, and the run of USDA livestock market monthly reports.

Statistically ‘flash’ PMIs are published over two days due to the holidays in the US and Japan, with Eurozone and UK readings expected to show Manufacturing deep in contraction and Services slipping more modestly, though in both cases fractionally better or unchanged from October, while US and Japan are seen flatlining. Germany’s Ifo survey is also expected to edge higher, but remain at depressed levels, as it the Order component of the UK CBI Industrial Trends survey. US Durable Goods are forecast to decline 3.2% m/m on the back of aircraft orders (reversing the aircraft orders-led surge in September), but continue to post modest core Orders gains, while Existing Home Sales are seen declining a further 1.5% m/m, with low inventories still as much to blame as high mortgage rates. Canada’s CPI is expected to post a rise of just 0.1% m/m, thus enabling energy related base effects to drive the y/y rate down to 3.1% y/y from 3.8%, though core measures are seen only 0.1/0.2 ppt lower at 3.6% y/y, enough to keep the BoC hold, but not to ease back from a hawkish bias. Japan’s national CPI should echo Tokyo CPI in seeing a rise in headline and ex-Fresh Food measures, but perhaps eking out a small fall in core to a still very high 4.1% y/y.

It is highly doubtful that UK Chancellor Hunt can offer anything in the way of tax cuts, outside of inheritance tax, at this week’s Autumn (budget) statement, as there is little or nothing in the way of fiscal headroom, and possibly even less if the OBR were to modestly reduce its estimate of the UK’s potential growth rate (which it has consistently overestimated). Measures to stimulate growth will likely be fiscally neutral, and largely a case of smoke and mirrors ‘tinkering’, with the idea that departmental spending cuts would be anything other than a cause for outrage given the pace of inflation.

The Fed and ECB minutes will likely be more a case of how markets choose to interpret them, above all in terms of the revival of rate pivots, in no small part due to data released since those meetings. Of interest in the FOMMC minutes will be the extent to which FOMC members echoed Powell’s comments about the prior meeting’s ‘dot plot’ had been overtaken by ensuing data and indeed the signals on waning credit demand in the Senior Loan Officers survey. As for the ECB ‘account’, the primary question is how far it attests to the hawks pulling in their horns on the potential need for further rate hike(s). The modest array of Fed, ECB and BOE speakers will doubtless continue to push back on markets moving to discount rate cuts in the first half of 2024.

In terms of this week’s central bank meetings, the focus will be on whether Sweden’s Riksbank opts for a further rate hike of 25 bps to 4.25% as the majority of forecasters expect, or decides to hold, but attempts to offset any resulting additional downward pressure on the SEK, by increasing the pace of QT and very hawkish rhetoric. Turkey’s TCMB is seen opting for a further aggressive, though more modest rate hike of 250 bps to an eye-watering 27.50%, while expectations for Nigeria’s CBN range from 75 bps to 200 bps as new governor Cardoso takes the reins of his first policy meeting. By contrast, Hungary’s MNB is expected to deliver a further 75 bps cut to 11.50%, after initiating cuts to its official policy rate in October with similarly size moves.

The earnings schedule for the week is unsurprisingly light, with the highlights according to Bloomberg News likely to include: Agilent Technologies, Airports of Thailand, Analog Devices, Autodesk, Baidu, Compass Group, Deere, HP, Kuaishou Technology, Lowe’s, Medtronic, Nvidia and Xiaomi.