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Last week was about vaccine optimism and month-end rebalancing. Stocks ended the week higher, with Comm-Dolls getting a boost, while the USD underperformed. GBP also underperformed on Brexit uncertainty.
This week should be filled with action: Brexit negotiations basically have to end this week or there will be no time to implement the transition; the start of OPEC+ meetings could lift or rock energy markets; Black Friday/Cyber Monday tracking will highlight consumer fatigue; Congress will twice confront Fed Chair Powell and Treasury Secretary Mnuchin; the OECD delivers a fresh round of global forecasts; RBA meets; Non Farm Payrolls top things off.
Themes for the Week
- Covid-19: restrictions in the US continue as Covid-19 cases continue to rise. As such, markets are estimating only 520K jobs were added last month.
- Brexit: time is running short. Over the weekend, the EU said it is ready to compromise on fisheries. On the bright side, the UK could become the 1st country to approve a Covid-19 vaccine (Pfizer) with injection starting Dec 7th possibly.
- OPEC: the group is expected to delay output increase plans by at least 3 months. Crude Oil will react positively to any extension of the output increases.
- Central Bankers: markets will pay attention to ECB’s Lagarde, and Fed’s Powell this week.
Data in the Week Ahead:
- CNY Manuf. PMI (Mon)
- ECB’s Lagarde Speech (Mon)
- OPEC meetings (Mon)
- Eurogroup Meetings (Mon)
- RBA Decision (Tue)
- CAD GDP m/m (Tue)
- FED’s Powell Testimony (Tue)
- US ISM Manuf. (Tue)
- Ecofin Meeting (Tue)
- ECB’s Lagarde Speech (Tue)
- RBA’s Lowe Speech (Wed)
- AUD GDP (Wed)
- Fed’s Powell Testimony (Wed)
- ISM Services PMI (Thur)
- CAD Employment Change (Fri)
- US Non-Farm Payrolls (Fri)
Correlation Report:
Comment: Risk-on remained the key theme last week as Equities rallied in unison, bonds remained inversely correlated and the USD declined further.
On the Radar:
As of Friday’s close, the strength-weakness relationships in FX were unchanged: NZD and AUD lead the way, with USD and GBP lagging. Equity markets remain in their uptrend alongside Crude Oil, while Gold broke down through an important support.