Key Events And Issues In The Holiday-Shortened Week

Looking ahead at the week ahead, data watchers will be kept fairly occupied before Thanksgiving. Starting with today, we will see US pending home sales with the Treasury also conducting the first of 3 bond auctions this week starting with a $32 billion 2yr note sale later. We will get more housing data tomorrow with the release of housing starts, home prices as well as US consumer confidence. Durable goods, Chicago PMI, initial jobless claims and the final UofM Consumer Sentiment print for November are Wednesday’s highlights although we will also get the UK GDP report for Q3. US Equity and fixed income markets are closed on Thursday but US aside we will get the BoE financial stability report, German inflation, Spanish GDP and Chinese industrial profit stats. Expect market activity to remain subdued into Friday as it will be a half-day for US stocks and bond markets. As ever Black Friday sales will be carefully monitored for consumer spending trends. So a reasonably busy, holiday-shortened week for markets ahead of what will be another crucial payrolls number the following week.

Monday, Nov 25

• Israel MPC: Consensus has policy rate unchanged at 1.00%.
• Germany Bundesbank's Weidmann speaks at Harvard University
• US Pending Home Sales (Oct): consensus +2.0%, previous -5.6%
• Mexico CA Balance (Q3): GS USD-2.3bn, previous USD-6.0bn
• Taiwan IP (Oct): previous +1.1%yoy
• Also interesting: France Business Confidence (Nov)

Tuesday, Nov 26

• Hungary MPC: Consensus expects a cut of 20bps in policy rate to 3.20%
• US Consumer Confidence (Nov): Consensus 72.4, previous 71.2
• US Housing Starts (Oct): Consensus 920K, previous 891K
• US Richmond Fed Survey (Nov): consensus 3, previous 1
• South Africa GDP (Q3): Consensus +2.0%yoy, previous +2.0%yoy
• Hong Kong Trade Balance (Oct): consensus HKD-35.6bn yoy, previous HKD-42.0bn yoy
• Also interesting: US FHFA and S&P Case Shiller House Price Indexes (Sep)

Wednesday, Nov 27

• Brazil MPC: Consensus expect a hike of 50bps in policy rate to 10.00%yoy. The market will likely be looking for changes in the usually terse post-meeting policy statement for hints the Copom is getting ready to start to taper the pace of rate hikes to a more moderate 25bp at the January meeting. The odds are better than even that the central bank will keep the post meeting statement unchanged in order to maximize the market and credibility impact of the expected 50bp hike.
• Thailand MPC: Consensus has policy rate unchanged at 2.50%yoy
• US U. of Michigan Consumer Sentiment (Nov, final): Consensus 73.0, previous 72.0
• US Chicago PMI (Oct): Consensus 60.0, previous 65.9
• US Durable Goods Orders (Oct): Consensus -1.9%, previous +3.8%
• US Initial Jobless Claims: consensus 330K, previous 323K
• Japan Retail Sales (Oct): Consensus +2.1%yoy, previous +3.0%yoy
• UK GDP (Q3, rev.): Consensus +1.5%yoy, previous +1.5%yoy
• Mexico Trade Balance (Oct): previous USD+0.66bn
• New Zealand Trade Balance (Oct): Consensus NZD-350mn, previous NZD-1,234mn
• South Korea CA Balance (Oct): previous USD+5.7bn yoy
• Also interesting: Germany GFK Consumer Confidence (Dec)

Thursday, Nov 28

• UK CB issues Financial Stability Report followed by BoE governor Carney speech
• Sweden CB issues Financial Stability Report
• Germany Harmonized CPI (Nov, flash): consensus +1.2%yoy, previous +1.2%yoy
• Spain Harmonized CPI (Nov, flash): consensus +0.1%yoy, previous 0.0%yoy
• Euro Area Consumer Confidence (Nov, final): consensus -15.4, previous -15.4
• Japan Household Survey (Oct)
• Japan Core CPI (Oct): Exp. +0.9%yoy
• Japan IP (Oct): consensus +6.3%yoy, previous +5.1%yoy
• Brazil IGP-M Inflation (Nov): Previous 5.27% yoy
• Canada CA Balance (Q3): consensus USD-14.4bn, previous USD-14.6bn
• Switzerland GDP (Q3): Consensus +1.8%yoy, previous +2.5%yoy
• Philippines GDP (Q3): Consensus +7.1%yoy, previous +7.5%yoy
• Also interesting: Spain GDP (Q3, rev.), Italy Business Confidence (Nov), South Korea IP (Oct)

Friday, Nov 29

• Euro Area Harmonized CPI (Nov, flash): Consensus +0.8%yoy, previous +0.7%yoy
• France Consumer Confidence (Oct)
• UK GFK Consumer Confidence (Nov): consensus -10, previous -11
• Japan Housing Starts (Oct): consensus +5.0%yoy, previous +19.4%yoy
• South Korea IP (Oct): Previous -3.6% yoy
• Turkey Trade Balance (Oct): consensus USD-7.2bn, previous USD-7.5bn
• South Africa Trade Balance (Oct): consensus ZAR-13.5bn, previous ZAR-12.0bn
• Thailand Current Account Balance (Oct): previous USD-534mn
• Canada GDP (Sep): consensus +0.2%mom, previous +0.3%mom
• Sweden GDP (Q3): Consensus +0.4%yoy, previous +0.1%yoy
• Also interesting: India GDP (Q3), Taiwan GDP (Q3, final), UK Mortgage Approvals and Consumer Credit (Oct)

Visually, from SocGen:

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TOP ISSUES FOR THE WEEK AHEAD

FINALISING A GRAND COALITION DEAL

Chancellor Merkel Friday expressed hope that agreement on the Grand Coalition would be reach over the coming week. As we detailed last week, the  agreement is set to include a minimum wage. Although the sum of proposals under discussion amount to just under 2% of GDP, the Chancellor has already warned that measures must be funded. Once agreed, the 470,000 members of the SPD will then voted on the proposal. Media reports suggest that the result will only be known on 14 December. Our expectation is that the Grand Coalition will receive support from the SPD members, but it is not a foregone conclusion. Moreover, as we have highlighted on several occasions, there is a real risk that a Grand Coalition will not survive the full electoral term.

UK AUTUMN STATEMENT

As we detail inside this edition of the Week Ahead, the OBR is due to provide the next update of its UK public finance projections on 5 December, alongside  the government’s Autumn Statement. Special factors have helped flatter the number and the OBR should confirm its March judgement that while the deficit path is still met, the debt path is not. Gilt issuance should be revised down by £2bn to £153.7bn for the current 2013-14 fiscal year. 2014-15 issuance should be £152.7bn, far lower than the DMO’s previous illustrative projection of £178bn given at the March Budget.

US DURABLE GOODS TO CONTRACT

We look for a decline of 3.2% in October durable goods, erasing the bulk of the 3.8% gain in the previous month. Moreover, this decline will in our opinion not just be limited to the more volatile transportation component. US markets will thus head off for Thanksgiving in the expectation that there is little risk of tapering at the 17-18 December FOMC. The key report will be the employment report due the following week, but we believe the Fed will want more evidence than that provided by just one report to change policy and maintain our call for taper in March.

A FINAL 50BP RATE HIKE FROM BRAZIL

The COPOM is expected to deliver a final 50bp rate hike this week taking the Selic target rate to 10%. We then expect the BCB to pause. Once the Fed starts to taper, the BCB could again be facing the dilemma of stemming currency depreciation and its inflationary impact and not further dampen an already below trend economy.

Sources: Deutsche, Goldman, SocGen