Inflation data and a rates decision in SA, the US's looming fiscal cliff and ongoing trouble in the Middle East will make for a hectic week ahead.
Here is your guide to the central bank meetings, data releases and other events likely to move markets over the coming days.
Markets in the United States will be closed on Thursday and half of Friday in observance of the country’s Thanksgiving holiday. In the shortened trading week ahead, analysts are expecting low volumes and, with the country still careening toward its “fiscal cliff”, downward pressure on stocks.
President Barack Obama met with Congressional leaders on Friday to begin negotiations aimed at averting the combination of roughly $600-billion in tax increases and spending cuts scheduled to come into effect automatically in January if leaders fail to act.
Although both sides sounded upbeat after their meeting, no grand plan – unsurprisingly – emerged. Economists fear that if negotiations falter, the combined effect of the tax rises and spending cuts would throw the American economy into recession next year.
Although this threat will linger in the background, markets may take their more immediate cues from a series of data releases scheduled for the coming days.
On Monday, economists surveyed by Dow Jones expect existing home sales data from the National Association of Realtors to show that sales dropped 1.1% in October. And on Tuesday, markets expect government data to show that builders broke ground on 4.2% fewer homes last month than in September. Permits for new construction are forecast to fall 2.8%. New construction is expected to surge this month in the wake of last month’s massive storm.
Finally, on Wednesday, the Reuters/University of Michigan consumer sentiment index is expected to fall to a final reading of 84.0 from an initial read of 84.9.
The deteriorating situation in the Middle East and disagreements between European leaders and the International Monetary Fund (IMF) over what to do with Greece may keep European trading thin and volatile in the week ahead.
Eurozone finance ministers and representatives of the IMF will gather in Brussels on Tuesday to discuss Greece. Jean-Claude Juncker – chair of the Eurogroup – believes that the target of reducing Greece’s debt to 120% of gross domestic product (GDP) should be postponed from 2020 to 2022. Christine Lagarde – head of the International Monetary Fund – does not. In order for Greece to receive its next €31.5-billion aid tranche, one side or the other will need to blink.
On the economic data front, three purchasing managers’ indices (PMIs) are expected to add to the pessimism over Europe’s growth prospects this week. These closely followed indicators – scheduled for release on Thursday – are forecast to signal continuing contraction in the eurozone and its two largest members, Germany and France.
Elsewhere on the calendar, investors will be watching for two business confidence measures on Friday. France’s National Institute of Statistics and Economic Studies (INSEE)’s business confidence index is expected to rebound slightly to a reading of 87.0 this month from October’s reading of 85.0, a three year low.
Germany’s Ifo Institute’s business confidence index, however, is not likely to fare as well. Markets expect the gauge to drop for the seventh month in a row to a reading of 99.5 from last month’s 100.0, the lowest reading since February 2010.
On Tuesday, all eyes will turn to the Bank of Japan (BOJ) for its latest policy announcement. Economists surveyed by Bloomberg News unanimously expect Governor Masaaki Shirakawa and his colleagues to leave the bank’s overnight lending rate on hold and refrain from providing additional stimulus to the world’s third largest economy after expanding the bank’s asset purchase programme by ¥11-trillion at their previous meeting.
The BOJ is expected to come under increased pressure to act after next month’s elections in the country. Prime Minister Yoshihiko Noda dissolved Parliament last week and polls suggest that his ruling Democratic Party will lose the elections scheduled for mid-December. Shinzo Abe – leader of the opposition Liberal Democratic Party – has called for the BOJ to pursue unlimited stimulus to end deflation (falling prices) and bolster the country’s struggling economy.
Japan has long battled with deflation and recent data showed that consumer prices fell for a fifth straight month in September. The country’s economy, meanwhile, is expected to contract in the current quarter. If forecasts prove accurate, this would indicate the third recession for the island nation since 2008.
Elsewhere in the region, Thailand will release gross domestic product (GDP) figures on Monday. Australia’s central bank will release the minutes of its previous meeting and Taiwan will report its latest export orders and current account figures on Tuesday.
On Wednesday, Malaysia will report on consumer inflation. Similar figures will follow from Hong Kong on Thursday. The Philippines and Taiwan will report GDP data on Friday.
Monday is a full day for data from Latin America. Argentina will report unemployment and budget balance figures. Chile will release current account and gross domestic product (GDP) data. Colombia will report on tax revenue. And Brazil – the region’s largest economy – will release tax collection data, economic expectations survey data, job creation figures, trade figures and two measures of inflation.
Industrial production and retail sales figures will follow from Colombia on Tuesday along with Venezuela’s latest GDP data. Markets expect Columbia’s industrial output to post a 0.8% year on year gain in September following a 1.9% fall-off in August. Retail sales growth is expected to accelerate from 1.2% to 2.1% annual growth over the same period. Venezuela’s GDP data is forecast to show a 5.5% expansion in the third quarter, up slightly from 5.4% in the second.
On Wednesday, Mexico will report retail sales figures and Argentina will issue industrial production statistics. Mexico’s retail sales growth is expected to have slowed from 4.8% annual growth in August to 3.5% growth in September. Argentina’s industrial production is expected to have fallen 0.7% last month, an improvement on September’s 4.4% decline.
On Thursday, Brazil will report unemployment, current account and foreign investment numbers. Argentina will release shop centre sales, trade balance and consumer confidence readings.
Finally, on Friday, Argentina will report supermarket sales. Mexico will release unemployment, current account and GDP figures. And Colombia’s central bank is expected to leave the country’s benchmark overnight lending rate on hold at 4.75%.
Inflation readings and rates decisions from South Africa and Nigeria – the continent’s two largest economies – will dominate Africa’s economic calendar this week.
Nigeria’s National Bureau of Statistics will release last month’s consumer price index (CPI) readings on Monday. Annual inflation slowed for the third straight month in September – to 11.3% from 11.7% in August – but remained above the central bank’s 10.0% target. Food prices – which accounts for more than half of the CPI – rose by 10.2% over the same period, up from 9.9% in August.
Speaking in Lagos last week, Central Bank of Nigeria Governor Sanusi Lamido Sanusi said that food inflation continued to accelerate in October, but did not specify the rate or how the price rises may have affected the overall index. Naira (local currency) appreciation probably helped to offset some of the effects of food price rises in the overall index.
Inflation will undoubtedly play a major role in the central bank’s monetary policy decisions. The bank’s monetary policy committee will meet for the final time this year on Monday and Tuesday. Markets expect the committee to leave the monetary policy rate (MPR) on hold at 12.0% for the seventh straight month.
South Africa will release CPI numbers on Wednesday. Markets expect the data to show that annual inflation fell slightly to 5.4% in October from 5.5% in September. Analysts expect the Reserve Bank’s monetary policy committee to keep the repo rate on hold at 5.0% at the conclusion of their three day meeting on Thursday.
Matt Quigley writes a weekly economic preview for the Mail & Guardian. You can follow him on Twitter at @mattquigley.