With the Thanksgiving holiday in the US on Thursday, markets may be slow towards the end of the week.
Friday is also a half-day in for markets in the US. However, that also means that if there is a surprise in the markets, things could get volatile.
The upcoming week is not setting up to be the most exciting week of the year, however there are still some bits that can move the markets and need to be watched. The RBNZ meets on Wednesday and is expected to hike rates by 75bps. Could they raise more? In addition, the PMIs will tell us which, if any, countries may be heading towards a recession. And don’t forget about Black Friday! Will consumers be out spending on Friday or will the hold back and conserve funds?
For the most part, events of the upcoming week will be focused on Wednesday, with the RBNZ Interest Rate decision meeting, European PMIs, and the FOMC Minutes. And don’t forget that Friday is “Black Friday”, which is the unofficial kickoff to the holiday shopping season. In addition, there are still some names that need to be watched this week regarding earnings, such as Zoom and Dell.
FOMC Releases Meeting Minutes
On Wednesday, the U.S. Federal Reserve will release the meeting minutes for the Federal Open Market Committee’s (FOMC) latest policy meeting conducted earlier this month. The transcript could provide clues as to how far Fed officials are willing to raise interest rates in order to tame high inflation. The U.S. central bank has raised its benchmark federal funds rate by a cumulative 375 basis points (bps) since March, with Fed policymakers expected to conduct another 50-bp increase in December. This would put the fed funds rate in a range of 4.25% to 4.5% by year-end—the highest level since 2007, just prior to the Global Financial Crisis.
Consumer Sentiment Update
Also on Wednesday, the University of Michigan will release the final November reading of its Consumer Sentiment Index (MCSI). Economists are projecting a reading of 54.7, unchanged from the initial estimate released earlier this month, and down steeply from 59.9 in October. Rising interest rates, persistently high inflation, and uncertainty over the 2022 midterm election results have contributed to declining consumer confidence in recent weeks. The current index reading marks the lowest since July, and is just above an all-time low of 50 hit in June.
The Reserve Bank of New Zealand will meet on Wednesday this week to decide on interest rate policy. At the previous meeting on October 5th, the RBNZ hiked rates by 50bps to bring the OCR to 3.5%. One of the most important items from the Minutes of the meeting showed that a 75bps rate hike was discussed. Ultimately though, the Committee decided only to hike rates by 50bps. A week after the last RBNZ meeting, New Zealand released it’s Q3 CPI data. The headline print was 7.2% vs an expectation of 6.6% and a Q2 reading of 7.3%. Although expectations for the Q3 print were much lower, the actual print was roughly unchanged from the previous quarter. Food inflation for October also increased from 8.3% YoY to 10.1% YoY. This will most likely give the Committee reason to hike by 75bps at the upcoming meeting, which would bring the official cash rate to 4.25%.
The day after Thanksgiving in the US is the unofficial kickoff to the holiday shopping season, with companies offering large discounts on many items. The sales data is used to gauge holiday spending over the next month. With an increase in interest rates over the last year, one should consider how willing people will be to take on additional debt (credit card spending) at higher rates. The most recent Retail Sales data in the US for October was up 1.3% vs a September reading of 0%. Will the strong spending continue into the holiday season? Walmart beat earnings estimates last week and gave an upbeat holiday shopping season outlook. Meanwhile, rival target missed earnings and said that it plans for rapidly softening demand as borrowing options for consumers run out. Amazon also gave a less favorable outlook and is bracing for a tough holiday season. Amazon recently announced it was laying off 10,000 workers as well. However, one thing most retailers are noting is that they still have a backlog of inventory. Therefore, investors will be watching how many “sales” are offered and how much items are discounted.
Commitment of Traders report (COT)
Third quarter earnings may be ending, however there are still some big names to watch out for this week. A few of these names are Zoom, Dell, and Baidu. For complete analysis of earnings due out this week, see my colleague Josh Warner’s preview here. Other important earnings this week are as follows:
ZM, DELL, SNEX, BBY, BIDU, DLTR, HPQ, DE
As we head towards the end of the month, the economic calendar is light. The calendar will pick up again as we hit the end of November and the first week in December. But for this week, the PMIs and the FOMC Minutes will highlight the week. The European PMIs will tell the markets whether the EU is headed in the direction of a recession. The FOMC Minutes will give more clarity to the meeting on November 2nd. Other important economic data due out this week is as follows:
ECB President Lagarde Speech
China: Loan Prime Rate 1Y
China: Loan Prime Rate 5Y (NOV)
Germany: PPI (OCT)
US: Chicago Fed national Activity Index (OCT)
New Zealand: Trade Balance (OCT)
Australia: RBA Gov Lowe Speech
Canada: Retail Sales (SEP)
Canada: New Housing Price Index (OCT)
EU: Consumer Confidence Flash (NOV)
US: Richmond Fed Manufacturing Index (NOV)
Global Manufacturing and Services PMIs Flash (NOV)
New Zealand: RBNZ Interest Rate Decision
US: Building Permits Final (OCT)
US: Durable Goods Orders (OCT)
US: New Home Sales (OCT)
US: Michigan Consumer Sentiment Final (NOV)
US: FOMC Minutes
US: Thanksgiving Holiday
Japan: Manufacturing and Services PMI Flash (NOV)
Sweden: Riksbank Interest Rate Decision
Germany: Ifo Business Climate (NOV)
UK: CBI Industrial Trends Orders (NOV)
Mexico: Mid-month Inflation Rate (NOV)
South Africa: Interest Rate Decision
New Zealand: ANZ Roy Morgan Consumer Confidence (NOV)
New Zealand: Retail Sales (Q3)
Germany: GfK Consumer Confidence (DEC)
Germany: GDP Growth Rate Final (Q3)