In what was a relatively quiet Thanksgiving week, Trump signed two US bills supporting the pro-democracy protesters in Hong Kong, adding to trade complications. The UK election campaigning ensued, Fed Chair Powell reiterated the central bank’s hold position and China launched a USD 6bn four-tranche deal, which was 2.5 times oversubscribed. The yield on the 10-year benchmark US Treasury closed the week relatively flat at 1.78% and the DXY Index was marginally unchanged at 98.27. Oil prices came under pressure following OPEC+'s decision to maintain current production levels coupled with the US indicating increased supply; Brent fell 1.51% to $62.43pb.
Meanwhile, US data readings appeared mixed with the likes of the Chicago Fed National Activity Index falling to -0.71 in October, missing estimates for -0.20. Q3’19 GDP surprised to the upside at 2.1% qoq annualised, while the Fed’s favoured PCE core deflator missed expectations, released at 1.6%. Today’s US ISM (ISM manufacturing is expected to remain contracted) and PMI readings will be watched closely, as will the employment data dump at the end of the week. Before that, we have the durable goods and factory orders prints, non-manufacturing, and service readings. Staying with PMI readings, over the weekend China’s official composite, manufacturing and non-manufacturing readings all surprised to the upside in November, with the manufacturing reading jumping into expansionary territory. The Caixin manufacturing PMI released this morning also beat market expectations at 51.8.
China’s State Council unveiled its high-quality trade development guidelines, which noted a drive to shift from manufacturing and processing to more value added sectors such a marketing and brand management. The nation’s aim is to achieve a more optimised trade structure by 2022. China also published its 2019 financial stability report last week. The main highlights include: the PBoC’s comments that the nation has managed to gradually reduce financial risks in recent years, however, the household leverage ratio has jumped, and there is limited room to loosen national property tightening measures.
Sino-US trade rhetoric will remain at the forefront for markets, especially as China remains insistent on a rollback of tariffs, with the US appearing to not back down. Trump’s comments at the NATO summit (its 70th anniversary) in London will be followed closely, especially as the impeachment inquiry hangs over the US president. Also, UK political parties will continue their campaigning ahead of the general election in 10 days’ time. Ahead of that, ECB President, Lagarde will testify at the European Parliament and Madrid hosts the annual UN climate talks today. Tuesday is expected to be fairly quiet with little in the way of key data releases aside from US auto sales. The US ADP reading, China’s Caixin composite, and services data prints on Wednesday will be of interest as could the SpaceX Falcon 9 rocket’s launch to the International Space Station from Cape Canaveral. OPEC+ are due to meet in Vienna on Thursday. As mentioned earlier, deeper cuts are not expected to be announced. The much awaited Aramco IPO is scheduled for Thursday; the Saudi government expects to raise ~$25bn through a 1.5% stake in the world's largest oil producing company valued at USD1.6-1.7tn. The main features for Friday include the above-mentioned employment prints, Germany’s IP reading and the BBC’s head-to-head between Boris Johnson and Jeremy Corbyn.