By Deepta Bolaky
 @DeeptaGOMarkets

Market Overview

Donald Trump’s comments on China’s trade deal has lifted sentiment and encouraged Wall Street to advance higher after a week of being mostly in the red. The drop in the fear gauge on Friday shows that bulls are still hovering around, despite the gloomy outlook for the equity markets. In Europe and the UK, investors expecting updates on the no-confidence vote for Theresa May and the Italian budget, which had overshadowed the alleged signs of progress on the US/China trade front.

Week Ahead: Equity Markets – Trade headlines will remain the dominant factor

Despite the slight rebound on Wall Street on Friday, the equities markets spent the majority of last week in the red. The different headwinds engulfing the markets highlight its fragility, and investors are questioning whether or not positive headlines will really save stocks.

• Peaked earnings
• Rising borrowing costs
• Slow growth in China
• Reduction in global demand
• Italy’s budget woes
• Brexit jitters
• The rout in the oil markets

Friday was a reminder of how the markets are reacting to every conflicting trade headline. There are varying emotions of fear and panic instilled in the stock markets at the moment where slight positive/ negative news has a higher chance of triggering a more significant movement than normal.

Trump’s trade speech was ambiguous but enough to raise hopes. However, we note that the US wants concrete tariff plans from China. Investors will continue to remain rattled by the stand-off between both countries.

Currencies Markets – Politics in focus amongst a lighter calendar.

A lighter calendar this week together with US Thanksgiving holiday will likely shift the focus towards geopolitics and trade tensions. There are many questions left unanswered on the political front, therefore Italy, Brexit and US/China negotiations will remain the most significant events.

United States- FOMC Member Williams Speech & Durable Goods

The US economic calendar is relatively low key with a few major events scheduled across the week. Mixed data received last week remain broadly supportive of the ongoing growth, and Chair Powell remains confident about the US economy. Heading into a holiday period, the US dollar will rely on Durable goods and PMI figures for price traction, which can potentially reaffirm the inflationary pressures on the US economy. Any downbeat data may prompt traders to rethink the bets around a dovish situation. In an interview on Friday, Patrick Harder, President of Federal Reserve Bank of Philadelphia stated that:

“At this point, I’m not convinced a December rate move is the right move but I need to watch the data over the next few weeks before determining whether it is prudent to boost the cost of borrowing again.”

After those dovish talks, the markets will be gearing up for FOMC Member, John Williams, to discuss further insights.

Europe and the UK- Italy’s Budget and Brexit

Brexit and the Italian budget will remain at the forefront this week. Italy is willing to work with the EU in finding an appropriate solution, with Deputy Prime Minister Luigi Di Maio declaring that they have plans to introduce safeguard clauses to ensure that the deficit will not exceed the target rate. Maio then goes on to affirm the belief that “..the big reforms of this budget law need to remain in place.” The current dispute places more emphasis on the Eurogroup meeting scheduled on Monday, ahead of the European Commission decision on Italy on Wednesday.

A vote of no-confidence is casting dark clouds on Theresa May’s leadership. At least 21 MPs submitted letters of no-confidence, meanwhile, the Prime Minister is sticking to her case, claiming that replacing her as a leader will not make Brexit talks any easier. Negotiations have been difficult and are unlikely going to resolve any time soon, but Brexit headlines will likely be taking the local currency on a volatile ride.

On the calendar front, ECB minutes and PMI figures in the Eurozone area will be the main events. PMI figures have been soft, and investors will closely monitor the November figures as they want to establish whether the weaker activity remains persistent.

Asia & Australia – Australian Jobs Report

The Aussie calendar is much quieter this week. The Antipodean found fundamental support on the business conditions and labour reports, and the positive bias might continue to extend this week. In Asia, Japan will be in focus with the releases of imports, exports and trade balance on Monday. The Governor Kuroda speech will also be of key significance. Japanese CPI figures will come out on Thursday.

Commodities Markets

Oil prices remain wobbly – Deteriorating demand and rising global output are the main factors dampening the bullish sentiment. Oil prices rose slightly higher after a volatile session on Friday. Reports that oil rigs rose to 888 erased some recovery gains. Traders will likely monitor the struggles of the OPEC countries to find a common purpose of tackling the slump in oil prices.

Gold and Silver bolstered by cautious comments from the Fed and a weaker greenback. Trade tensions, Brexit jitter and Italian budget uncertainties are also boosting the safe-haven bid. If the US dollar stays weak, it might bode well for the bulls.

Tuesday, 20 Nov 2018 Indicative Index Dividends Dividends are in Points
ASX200	WS30	US500	US2000	NDX100	CAC40	STOXX50
0	0	0.2	0.024	0.27	0	0.193
ESP35	ITA40	FTSE100	DAX30	HK50	JP225	INDIA50
0	0	0	0	0	0	0

 

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