Week ahead – PMI’s, Speeches and GDP
Week ahead – PMI’s, Speeches and GDP
As the news cycle slows, with the election in the past alongside initial vaccine hype fading away, it is essential to realize that not only is the Coronavirus continuing to ravage the economy, it continues to ravage the families and lives of many around the world.
Many have turned the Coronavirus into a statistical exercise, looking into the future when we eventually look past the Coronavirus. However, it is currently a present problem, with present consequences. Keep this in the back of your head when you trade and invest. Here is your week ahead.
Monday, 23rd November – Germany PMI (November)
Like many countries in Europe, Germany is experiencing a spike in cases larger than the first wave. They recently recorded 23,000 new cases yesterday. This has directly affected service sector activity, with HIS Markit’s flash services PMI’s fell to 46.2 from 49.5 in the previous month. Remember, a print below 50 entails a contraction in manufacturing. Analysts forecast Germany to post its deepest recession since World War Two.
Monday, 23rd November – UK’s PMI’s
In terms of the most frustrated, I am at a country in terms of their Coronavirus response; I am most frustrated in the UK. They had the resources to implement a robust early Coronavirus response. However, Bureaucracy and trying to balance economic damage and human life has placed the UK on its knees. At its peak, the UK recorded over 34,000 daily Coronavirus cases.
After placing a lockdown on citizens, Prime Minister Boris Johnson plans to end the lockdown on 2nd December. However, daily Coronavirus cases still rack up, around 20,000 per day. For reference, New Zealand and Australia lifted restrictions once there were consistently zero community Coronavirus cases. However, the second lockdown could not push the UK’s PMI’s further down, printing 45.8 with an analyst consensus for 42.5. However, a third wave will push this figure further down.
Tuesday, 24th November – Australia’s Trade Balance
While the Coronavirus stops many businesses from operating, one sector that was affected less was freight. However, with Australia heightening tensions with China, their largest trading partner, their Trade Balance may see a drop in the next print. Canberra’s Officials stated that reports on Chinese authorities telling Chinese buyers to stop purchases of Coal, copper, wine barley, sugar, lobster, and timber as “deeply troubling.
“On the other side of the bond, Beijing has accused Australia of “anti-China hysteria,” about Australia prompting an investigation into the origins of the Coronavirus vaccine in China. The previous trade balance was 5.63 Billion.
Tuesday, 24th November – Bank of Japan’s Governor Kuroda Speech
Japan is one of the only countries that are experiencing the third wave. Each consecutive wave has been larger than the previous in Japan. The method they have adopted, called the “Japan Model,” has effectively curbed the spread of the virus in the country.
However, as the third wave is currently in full swing, experts state that the strategy is approaching its limits. Kuroda predicts that “the economy is likely to hit bottom around April-June and is expected to continue improving as a trend” and that it “will help price growth turn positive and gradually accelerate toward [their] 2% inflation target.” He further stated that if they hit their 2% target, an “exit from [their] massive stimulus program will come into sight.” However, he believes it’s currently premature to do so at this stage.
Tuesday, 24th November – RBNZ’s Adrian Orr speech
Having beaten the Coronavirus, New Zealand is well on its way to its recovery. With the RBNZ removing LVR’s and lowering interest rates earlier this year to cushion the economic effects of the Coronavirus, they have placed it back, quoting “financial stability”. Interest rates continue to be at record lows, allowing investors and first home buyers to attain record-low mortgage rates. This has pushed the average house price of over a million dollars in Auckland for the first time.
House prices have been a heated topic with politicians and citizens of New Zealand, with buyers struggling to get into the market and owners going all to increase their assets. However, the RBNZ refuses to implement policy to house prices, stating that “that is not their mandate”, and that their mandate is employment and inflation. Orr’s speech this week ahead may further see him cement RBNZ’s stance on house prices.
Wednesday, 25th November – GDP and FOMC minutes
The United States recorded 198,585 new cases of the Coronavirus on the 20th November, just shy of the somber record of 200,000. With the country recording an annualized rate of 33.1% during the third quarter showing the effects of government stimulus and quantitative easing by the Federal Reserve, many analysts predict a slowdown in the couple of quarters to come. Aneta Markowska, Chief Financial Economist at Jefferies, wrote in a report to clients on Thursday that “The outlook for Q4 is very shaky in our view” and that “The economy has already lost a lot of momentum over the summer.”
Not as a busy week ahead compared to previous weeks. However, news on a Coronavirus vaccine should be watched out for, as it could trigger a risk-on / risk-off event in all assets across the markets. Stay safe, trade safe.
Trump skipped the G20’s “Pandemic Prepardness” event to play Golf on that beautiful, cloudy day.
Four years have passed, and now we usher in a new United States President: Joe Biden. A complete U-turn from what Donald Trump stood for. Nationalism is now replaced with Progressive politics. The question arises, how will President Joe Biden’s 100-day agenda affect the markets?
Stocks coming into 2021 – Boom or Bust?
Here are two fun facts from equities in 2020.
· The NASDAQ returned 46% from the start of 2020. If you purchased at the peak of the recessionary period in mid-March, you would’ve made a return on investment of 85%.
· Meanwhile, the S&P500 only returned 17% from the start of 2020.
· The average price/earnings ratio for stocks in the NASDAQ was pushing 23
· The best performing stock that is in the S&P 500 and NASDAQ was Tesla, providing a 743% Return.
With that in mind, what are we expecting for stocks coming into 2021?
The Dollar has been experiencing some love coning into the new year, with the DXY up just under 1%. However, is this just a technical rebound, or is there substance for a further rally?
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