News & Analysis

Week Ahead – Trade Remains in Focus

November 11, 2019

Week Ahead

Trade Remains in Focus

Trade headlines have sent markets swinging last week. Despite mixed messages, the three major US equity indices had posted record closing highs buoyed by the overall trade progress. We expect markets participants to remain fixated on the trade developments and dissect every trade comments.

The Rolling Back of Tariffs

The United States and China have both been trying to de-escalate the two-year-long trade war. Negotiations have been promising and Phase One of the trade deal is scheduled to be signed within weeks. Investors are also optimistic that the mini trade deal might even be secured before the US imposed more tariffs on China on December 15.

Both sides are also considering removing tariffs in phases depending on the progress of the negotiation. Even though President Trump mentioned that a “complete rollback” on tariffs was off the table, investors are hanging on to the partial removal of existing tariffs.

At this stage, Phase 1 looks set to include some removal of tariffs. We, therefore, expect the optimistic tone to continue driving the markets at least until the mini deal is signed.

Any concrete confirmation of the removal of some tariffs from both sides may push stock and trade-sensitive currencies like the Australian dollar higher while safe-haven assets like the Gold and Japanese Yen may come under pressure.

Brexit

The election campaign is in full swing in the UK. Brexit will remain at the forefront in this election while plans, strategies and policies will likely take a backseat. The latest polls indicate that the Conservatives are leading against its rivals. Prime Minister, Boris Johnson continues to enjoy an upper edge over the Opposition Labour Party which is a pound-positive for markets.

In other words, the downside in the British Pound is being cushioned by the high probability of a majority-win for the Conservative Party. Even so, we do not see the Pound rallying significantly higher as there are still uncertainties around the election and the relationship with the EU post-election.

On the economic front, it will also be a big week for the UK:

Monday

Manufacturing Production
Industrial Production
Gross Domestic Product

Tuesday

Claimant Count Change
Unemployment Rate
Average Earnings

Wednesday

Consumer Price Index
Producer Price Index
Retail Price Index

Thursday

Retail Sales

Reserve Bank of New Zealand (“RBNZ”)

Among several key central bank speeches, the RBNZ will be the only major bank to decide on interest rates this week. The central bank is expected to slash its interest rates from 1% to 0.75% on Wednesday. Ahead of the interest rate decision, we expect the Kiwi Dollar to be sensitive to the quarterly inflation expectations numbers which will be released on Tuesday.

The inflation survey could reset the tone regarding the expectations of the rate cut.

A Series of Economic Data

Eurozone & Germany

There are fears that the German’s economy is on the brink of recession. On Thursday, Germany will release its third-quarter GDP figures and there is a high chance the growth figures show that Europe’s largest economy and the world’s fourth-largest economy has gone into a technical recession.

However, it should be highlighted that exports in September have rebounded which may avoid Germany from going into a technical recession.

Tuesday will provide more insights on investors’ sentiment with the release of the ZEW Surveys. Industrial Production and CPI figures for the Eurozone will be released on Wednesday and Friday respectively.

United States

It will be a muted start of the week for the US due to the public holiday on Monday for Veterans Day. The first batch of key economic data will be released on Wednesday – the CPI data, Fed’s Chair speech and the Monthly Budget Statement.

On Thursday, aside from a few Fed Speeches, we will have jobless claims and PPI figures. Investors will end the week with Retail Sales figures which is expected to bounce back from last month’s surprise drop of -0.3%.

Australia & China

The main events for Australia will be released mid-week with Westpac Confidence, Wage Price Index, Inflation Expectations and Unemployment data.

In China, Industrial Production and Retail Sales will be released on Thursday.

Tuesday, 12 November 2019 Indicative Index Dividends ^{Dividends are in Points}
ASX200	WS30	US500	US2000	NDX100	CAC40	STOXX50
10.771	0	0.16	0.142	0.457	0	0
ESP35	ITA40	FTSE100	DAX30	HK50	JP225	INDIA50
0	0	0	0	0	0	0

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