Week up front : Looking forward to December

Week up front : Looking forward to December

Macro
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

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 /

  • Equity outlook: The high cost of global fragmentation for US portfolios

    Quarterly Outlook

    Equity outlook: The high cost of global fragmentation for US portfolios

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
  • Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Quarterly Outlook

    Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Jacob Falkencrone

    Global Head of Investment Strategy

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • 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

None of the information provided on this website constitutes an offer, solicitation, or endorsement to buy or sell any financial instrument, nor is it financial, investment, or trading advice. Saxo Capital Markets UK Ltd. (Saxo) and the Saxo Bank Group provides execution-only services, with all trades and investments based on self-directed decisions. Analysis, research, and educational content is for informational purposes only and should not be considered advice nor a recommendation. Access and use of this website is subject to: (i) the Terms of Use; (ii) the full Disclaimer; (iii) the Risk Warning; and (iv) any other notice or terms applying to Saxo’s news and research.

Saxo’s content may reflect the personal views of the author, which are subject to change without notice. Mentions of specific financial products are for illustrative purposes only and may serve to clarify financial literacy topics. Content classified as investment research is marketing material and does not meet legal requirements for independent research.

Before making any investment decisions, you should assess your own financial situation, needs, and objectives, and consider seeking independent professional advice. Saxo does not guarantee the accuracy or completeness of any information provided and assumes no liability for any errors, omissions, losses, or damages resulting from the use of this information.

Please refer to our full disclaimer for more details.

Saxo
40 Bank Street, 26th floor
E14 5DA
London
United Kingdom

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. 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
Additional Key Information Documents are available in our trading platform.

Saxo is a registered Trading Name of Saxo Capital Markets UK Ltd (‘Saxo’). Saxo is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.

©   since 1992