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The Market Week Ahead
Global Manufacturing
Global manufacturing data kicks of a busy week for financial markets and is set to dominate the economic calendar on Monday. PMI manufacturing figures from the European economy, and in particular Germany and France are not expected to throw up any surprises on Monday morning.
It should be noted that the Chinese Caixan Manufacturing PMI for the month of December came in weaker-than-expected earlier this morning. The official number was 53.00, marking a big drop from November, but critically marked expansion and contraction.
Markets will be intensely focused on the PMI figures coming from the UK, United States, and Canada. The UK manufacturing figures will be fascinating on many levels, not least because of the effects of the economy pre-Brexit and the stronger sterling exchange rate. The recent series of Tier-4 lockdowns could also impact the December numbers.
In the United States and Canada COVID-19 infections have increased in December, and likely hampered economic activity, and indeed output. Traditionally, December is seen a solid month for US and Canadian manufacturers. Market participants will be watching these PMI’s closely, and the release of the ISM report later this week, which historically has been a major market mover when it deviates from consensus expectations.
US Politics
US politics is set to be a major driver for financial markets this week, as traders and investors look to the outcome of the Georgia run-off, and a major protest in Washington DC on Tuesday and Wednesday.
The Georgia run-off has far reaching implications for the US Senate and could send the US dollar’s decline into overdrive if the Democrat party get a clear majority in the House of Representatives. Watch out for moves in the US dollar index, gold, bonds, and US equity markets as just two seats from one state are set to dictate the control of US senate.
Markets are currently playing down the potential implications of the planned 1 million plus march against the 2020 US Presidential election result. President Trump is set to give a scheduled speech at the protest on January 6th. Again, watch out for a major market reaction if President Trump fails to concede the US election, and pledges to remain in the White House and overturn the result.
FOMC Minutes
The FOMC minutes threatens to be a non-event, given that the US stimulus package has been passed through Congress since the FED last met, and the central banks recent commitment to QE4 until the economy stabilizes. The recent dour US retail sales numbers and rising weekly jobless claims should give the central bank some concern in January.
The central bank could lay out some much-needed clarity on the long-term yield curve inside this week’s minutes release.
Non-farm Payrolls
The Non-farm payrolls job report is intriguing on many levels this week. Despite the unemployment rate ticking lower to 6.7 percent, economists have very real concerns that all is not well with the US economy.
Perhaps the biggest risk this week is a return to a negative headline number. Although not widely predicted, rising infection rates of COVID-19, state-wide lockdowns, all the ability to derail the US employment situation.
Market expectations are set fairly low for December, at around 100,000. A key point to note is that the trajectory of US job creation has been to the downside over recent months. Once again, the recent lockdowns and high levels of COVID-19 infections do not bode well for this Friday’s number.
We also have to consider the political implications of a negative number. President Trump will no doubt underscore the fact that the low number Is due to the harsh lockdowns in Democrat run cities, while Joe Biden will of probably go on the offensive, and blame the Trump administrations policies and the delay in getting stimulus to Americans.
Earnings
Morrisons stock price could become volatile as the company releases its Q3 earnings results this week. The supermarket sector in the UK has been going from strength to strength since the start of the COVID-19 pandemic.
The UK supermarket giant’s sales saw their biggest ever jump in November, setting the stage for what could be an important week for the company. With the stricter lockdowns in the UK over Christmas, it is likely that the supermarket continued to enjoy stellar business in December, and potential record Q3 earnings.
NEXT’S Q4 earnings should be extremely interesting, as the company attempts to avert a loss of earnings with its online shopping platform. Investors will be watching closely to see if the company learnt lesson from March 2020, when sales plummeted over 50% due to COVID-19 lockdowns.
The risks are currently to the downside for NEXT, following the Tier-4 lockdowns that went into place almost two-week before Christmas. Many retailors rely on the holiday season and indeed the holiday sales season as the time of year when spending kicks into overdrive.
