Per Goldman Sachs
Week in Review:
It was another week of nervousness, choppy price action and gradually rising risk aversion. Most of the concerns were linked to the evolving European sovereign debt crisis, the gradual escalation of the conflict on the Korean peninsula and China policy tightening in response to rising inflationary pressures. Macro data was mixed to good, with outstanding European business surveys, further improvements in the US labour market with a sharp drop in weekly claims below the range but also a worrying drop in durable good orders.
In response to these developments pro-cyclical currencies dropped across the board, including the EUR, the AUD and many NJA currencies, whereas the USD strengthened notably. Since the Fed QE announcement, the broad trade weighted USD has now rallied by about 3%, correcting half of the 6% sell-off which occurred in anticipation of the Fed decision.
The upcoming week will be dominated by the same key themes as last week. News on the European sovereign debt crisis, China tightening, the Korean conflict and macro data will remain in the limelight. However, with key US releases including Chigaco PMI, ISM and payrolls data watching may become relatively more important in the coming week. Then again, there is always the trust old FRBNY, which kicks off the reflation trade with not one but two POMOs tomorrow: altogether $39 billion in monetizations coming up in the next week.
Hungary MPC – policy rate to stay unchanged at 5.25% according to GS and consensus forecasts.
Swedish GDP (Q3) – GS and consensus expect a +1.2% increase qoq.
Euroland Business confidence (Oct) – After the good PMIs recently, we expect this to increase to +3 compare to +2 for the consensus and 0 in the last reading.
US Dallas Fed business survey (Nov) – Given the huge range of surprises in the Philly Fed and Empire surveys, there is probably more focus on the other regional surveys than normally. Consensus expects a moderate increase to 3.0 from 2.6.
Also interesting – Swedish retail sales (Oct), Korean industrial production (Oct).
Chicago PMI (Nov) – GS and consensus expect a 60 reading, virtually unchanged from 60.6 in October.
Conference Board Consumer Confidence (Nov) – Consensus expects a small uptick to 52.6, similar to the last U Michigan survey.
Case Shiller Home Price index (Sep) – With home prices on the slide again, this release could be interesting. The last mom reading was -0.28% and markets a -0.4% deterioration.
Poland GDP (Q3) – GS expects a +3.7% yoy increase, slightly stronger than +3.6% consensus expectations (last +3.5%)
India GDP (Q3) – Consensus expects a slowing in the annual growth rate from 8.8% in Q2 to 8.2% in Q2.
Also interesting –Norway retail sales (Oct), several property and real estate related data points from Australia, Euroland unemployment rate (Oct), Korea CPI (Nov)
US Manufacturing ISM (Nov) – Survey indexes of industrial activity are apt to remain firm, hence we believe the ISM will remain broadly unchanged at 57.0, slightly better than consensus expectations of 56.2 and higher than the previous 56.0 reading.
US ADP Employment Survey (Nov) – We have no forecast but consensus is looking for +68k. The number will help fine tune our NFP forecast.
US Construction Spending (Oct) – Our forecasts are reasonably optimistic at+1.2%, compared to -0.4% for the consensus and +0.5% last month.
US Fiscal Commission to report on proposals to stabilise US government debt levels.
Global PMIs – Advanced Eurozone PMIs have already been very strong, and we think other European surveys will follow this trend. However, there will be focus on the Chinese PMI in particular given the potential negative impact from announcements on tighter monetary policy. We expect no significant change in the China PMI.
German Retail Sales (Oct) – Consensus expects an increase by 1.2% mom after a very surprising 2.3% drop last month.
Australian GDP (Q3) – GS expects a notably lower reading of +0.1% compared to +0.5% for the consensus
Also interesting -Thailand CB Meeting, Fed Beige Book, Indonesian CPI (Nov)
US Initial Jobless Claims – This will be a key release after the much better than expected reading last week of +407k. The continuing claims will be important of the payrolls release the following day.
ECB Meeting – No change in rates. We think they’ll announce a continued gradual withdrawal of the very accommodative monetary policy stance which will include an end to full allotment for anything longer than 7-day money, to be phased in gradually during 2011 (probably 2011’H1). The risk is toward a slightly more uncommitted tone because of Ireland. The bank will also publish updated forecasts for 2010-11 and the first cut at 2012.
Australia Retail Sales (Oct) – We expect an increase of +0.6%, about twice what consensus expects.
Brazil Industrial Production (Oct) – We expect IP to rise by 0.7%mom.
UK Construction PMI – combined with the manufacturing PMI released the day before, the construction and services PMIs are among the best predictors of UK GDP data.
Also Interesting – US pending home sales, Swiss retail sales
Indonesia CB Meeting – Consensus expects unchanged policy rates at 6.5%
US Nonfarm Payrolls (Nov) - With claims for jobless benefits showing more substantial improvement, we tentatively look for nonfarm payrolls to rise by about 125,000 in November. Consensus currently anticipates a +145k increase. We and consensus expect and unemployment rate of 9.6%.
US Non-Manufacturing ISM (Nov) – We expect a small, above consensus rise from 54.3 in October to 55.0. Consensus is at 54.6.
US Factory Orders (Oct) – After the disappointingly weak durable goods report, the broader and partially revised factory orders report will be interesting. We expect a drop of -1.5% after the 2.1% increase in September. Consensus anticipates a smaller drop of -0.7% in October.
Spain Industrial Production (Oct) – Normally not that important, the Eurozone crisis will likely increase the market focus on Spanish activity data. We forecast a +0.2% mom increase.
Euroland Services PMI (Nov) – Updating and completing the information from the advanced reading, the Euroland services PMI is expected to look strong at 55.2.