covid_M

Week up front : Looking forward to December

Macro
Picture of Christopher Dembik
Christopher Dembik

Head of Macroeconomic Research

Summary:  This week, the market focus will still be on COVID-19 and the second wave hitting the United States, but investors will also need to deal with a range of central bankers' speeches and the usual topic of Brexit.


 

 

What to watch

President-elect Joe Biden today on plans for a post-Covid economic recovery today (at 18:45 GMT TBC), a range of Fed speeches all week long regarding the future of the current monetary policy and further discussions on a Brexit deal between London and Brussels, with a renewed focus on fisheries and level playing field. Market’s attention will remain on COVID-19 numbers and vaccine news as the second wave is hitting the American continent forcing some states to implement very strict restrictions. In the previous week, the United States recorded one million new cases, which has prompted a spate of new restrictions across the country. As of today, about thirty one states have decided to enact new COVID-19 rules.

 

Key data releases and events

Tuesday: RBA Minutes, Lowe’s speech, Bailey’s speech, Lagarde’s speech

Wednesday: building permits in the US (October)

Thursday: Philadelphia Fed manufacturing Index (November), existing home sales in the US (October)

Friday: Lagarde’s speech

16_CDK_1

1 – Japan: looking forward to a third stimulus package

In Asia, the spotlight of this week will be the unveiling of the third stimulus package in Japan, with a market focus on any measures devoted to stimulate private-sector investment. This morning, the first preliminary GDP estimates for 2020 Q3 has been released, showing a QoQ annualized growth reaching 21.4%, which is slightly above market consensus. Despite this strong rebound, the growth in Q3 is still 40% below its pre-crisis level. The rebound has been mostly fueled by a strong increase in real personal consumption and real exports, both components showing a very large recovery, while private-sector investment, which includes housing and capex, is still declining. The environment remains still challenging for the Japanese economy, especially given the negative outlook in terms of private investment, but, on the bright side, it should benefit in coming quarters from the incomplete V-shaped recovery in China and from a comparatively better COVID-19 management than in many other developed economies.

2 – RCEP: building the future of free trade without the United States

Still in Asia, over the weekend, fifteen Asian countries representing 30% of the global economy and 2.2 billion people have signed one of the largest free trade deals in history, the RCEP (Regional Comprehensive Economic Partnership). As it is the case with the successor to the Obama-led TPP (Trans-Pacific Partnership), the United States is absent from the RCEP. By focusing disproportionately on security issues in the region, the United States has neglected in recent years another pillar of American leadership, which is its role as economic leader and standard-setter. American firms will continue to be active in the region, but they will need to adapt to someone else’s rules (saying differently, to Chinese inspired-rules). This new trade agreement confirms that globalization is not dead, but it is now driven by growing dispersion and regionalization, often under Chinese leadership.

3 – Europe: TLTRO at the core of the new stimulus package

As Europe is in the middle of a second lockdown, the need for new monetary stimulus is becoming more urgent. Last week, the ECB forum gave a clear indication that new monetary policy measures are coming. We anticipate that TLTRO will be at the core the next stimulus package expected in December (with very favorable terms, i.e. a 3-year period at minus 1%) along with a likely extension of the PEPP programme but without intensification of the purchases. These new measures should help mitigating the negative consequences on business and consumer confidences due to the lockdown. In this regards, the ECB will certainly pay close attention to Friday’s release of consumer confidence which will give some insights how much the new restrictions have impacted sentiment.

4 – Brexit: approaching the deadline of late November

As we are approaching the deadline of late November, the coming sessions could be very volatile for the GBP. So far, little progress has been made on key issues like fisheries and a level playing field. The hot topic of fisheries has been for a long time subject of frustration in Paris and in London. To work around this problem, the EU has proposed concessions on the United Kingdom’s future access to the single energy market in return for fish, but it is considered as an insufficient effort by the UK government. We think that a deal can still be reached in the coming weeks but it will require political intervention, mostly likely from Germany, to convince France to make decisive concessions on fisheries.

5 – United States: Fed speakers this week

This week, we have a range of Fed speeches, starting today with Clarida and Daly, that could reveal more insights regarding Fed’s plans to extend the current emergency programmes beyond the end of this year, as the second wave of the pandemic is hitting the United States and there is still no fiscal deal between Democrats and Republicans in sight. We will also pay attention later today to President-elect Joe Biden’s speech at 18:45 GMT (TBC). He is expected to unveil its plans for a post-Covid economic recovery and longer-term growth.

Quarterly Outlook

01 /

  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Chief Investment Strategist

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

  • FX: Risk-on currencies to surge against havens

    Quarterly Outlook

    FX: Risk-on currencies to surge against havens

    Charu Chanana

    Chief Investment Strategist

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo...
  • Equities: Are we blowing bubbles again

    Quarterly Outlook

    Equities: Are we blowing bubbles again

    Peter Garnry

    Chief Investment Strategist

    Explore key trends and opportunities in European equities and electrification theme as market dynami...
  • Macro: Sandcastle economics

    Quarterly Outlook

    Macro: Sandcastle economics

    Peter Garnry

    Chief Investment Strategist

    Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p...
  • Bonds: What to do until inflation stabilises

    Quarterly Outlook

    Bonds: What to do until inflation stabilises

    Althea Spinozzi

    Head of Fixed Income Strategy

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ...
  • Commodities: Energy and grains in focus as metals pause

    Quarterly Outlook

    Commodities: Energy and grains in focus as metals pause

    Ole Hansen

    Head of Commodity Strategy

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15
2900
Hellerup
Denmark

Contact Saxo

Select region

International
International

Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.