With macro concerns back to the forefront of investors’ minds, there will be plenty of economic data to drive sentiment next week, particularly from Europe. In addition, we will have US inflation figures and Canadian employment data to look forward, as well as minutes from both the ECB and FOMC’s last policy meetings. Oh, and the US-China trade talks are expected to start next week, too. Meanwhile, Asian investors will be keeping an eye on the situation in Hong Kong, where the Transport Department closed all transportation and urged the public to stay indoors over the weekend. In the event of violent protests, local markets could potentially gap lower at the open.
Here’s what is on the agenda next week:
- Monday: German factory orders and Eurozone Sentix Investor Confidence
- Tuesday: German industrial production and US core PPI
- Wednesday: FOMC Meeting Minutes
- Thursday: German trade figures and industrial production from France and Italy; ECB Monetary Policy Meeting Accounts; UK GDP, manufacturing production, construction output and a couple of other macro pointers, and US CPI
- Friday: Canadian employment report and US UoM Consumer Sentiment and Inflation Expectations
So, next week’s focus will primarily be on the global economy and US-China trade talks. It could be a rather volatile period for the markets depending on the outcome of these events. Given this week’s sharp falls in the stock markets, President Trump will be keen to send out positive messages regarding trade, to divert attention from what looks to be a slowing economy under his leadership.
Meanwhile if next week’s data releases continue to paint a bearish picture, then this could increase the calls for more monetary stimulus from major central banks. Consequently, gold could stand to benefit as a potential fall in stock prices and bond yields would boost the appeal of the noninterest-bearing asset.
Meanwhile, crude prices will also be in focus after dropping sharply of the past couple of weeks. Oil has been hit by a double whammy of bearish news this week. The fact that Saudi has managed to restore its production back to original capacity after those attacks on its infrastructure by Houthi rebels sooner than expected means investors have had to price out raised supply risks at a faster clip than would have otherwise been the case. On top of this, we had a handful of soft global macro data – particularly from the US manufacturing sector – which has raised fears that oil demand might not grow as fast as it had been expected. But now that some of these factors have been priced in, oil prices may fall less sharply going forward or at best start to form a base. However, if next week’s data releases continue to disappoint, then oil prices will likely struggle to head higher.