Weekly Market Movers: EU Debt, China Tightening; Calendar Could Play Secondary Role

Cliff Wachtel submits: Last Monday and Tuesday fear over spiking PIIGS bond yields that drove markets lower; Except for some better than expected Chinese, UK, and US manufacturing PMIs and German retail data Wednesday, the rest of the week was dominated by optimism from leaked news of ECB PIIGS bond purchases. THAT was the event which sent markets rallying and erasing losses of the past month in only 3 days. So what can we expect from this week’s far less potent calendar? How does it fit into the likely big market moving forces of the coming week? Big Themes As we note here, given the prior week’s driver’s and this coming week’s relatively quiet scheduled event risk, there is an excellent chance that the calendar could once again play a secondary role. That does not mean it will remain irrelevant, however. So here’s what you need to know: CENTRAL BANK RATE DECISIONS From Australia and Canada on Tuesday, New Zealand, and England on Thursday, details below. None expected to yield major surprises or move markets. BoE decision has some potential for surprise. As noted by John Kicklighter at dailyfx.com, it’s only a matter of time before austerity measures bring slower growth, so it’s possible the BoE could decide to get ahead of that slowdown with some early loosening, though the consensus view is that it will not announce any changes. SPECIFICS TO NOTE ON THESE INCLUDE Tuesday Australia’s RBA: Downside data (Q3 GDP was +0.2 against expectations of +0.4%), possible fading Chinese commodity demand as a result of new tightening, and dormant Q3 inflation suggest that the RBA keeps the target rate unchanged at 4.75%. However, this is likely a mere pause in the RBA’s tightening cycle and we expect continued rate hikes early next year. The Bank of Canada also announces rates Tuesday and is likely to keep them steady at 1% given that economic growth has stalled. Stagnant job creation in the U.S., Canada’s largest trading partner, as shown by the very disappointing US monthly jobs reports results is also likely to influence the BoC’s moves. In addition, a surprisingly weak 3Q GDP growth of +1% annualized may have Governor Carney wondering if he was too early with his tightening policy earlier in the year. Thursday New Zealand’s rate is likely to stay at 3% with post-earthquake reconstruction and recent policy shifts pressuring the NZ economy. Later that day the BOE is up, and is likely to leave policy unchanged as inflation risks are offset by the weakening outlook ahead of government austerity measures beginning in 2011. A likely non-event because the BOE usually does not comment unless there are policy changes. Highlights By Region In Chronological Order US Monday – Fed’s Lacker speech on Economic Outlook Tuesday – Dec. IBD/TIPP Economic Optimism, Oct. Consumer Credit, Dec. ABC Consumer Confidence Wednesday – Dec. MBA Mortgage Applications Thursday – Weekly Jobless Claims, Oct. Wholesale Inventories Friday – Oct. Trade Balance, Nov. Import Price Index, Dec. Preliminary U. of Michigan Confidence EZ Monday – Euro-Area Finance Ministers meet in Brussels, Dec. Sentix Investor Confidence Tuesday – Oct. German Factory Orders Wednesday – Oct. German Current Account, Oct. German Trade Balance, Oct. German Industrial Production Thursday – Nov. German Consumer Price Index Friday – EU’s Rehn speaks UK Tuesday – BRC retail sales monitor, Oct. Industrial Production, Oct. Manufacturing Production Wednesday – BRC shop prices, Nov. Halifax House Prices Thursday – BOE Interest Rate Announcement, Oct. Trade Balance Friday – Nov. PPI Input & Output Japan Monday – Nov. Official Reserve Assets Tuesday – Oct. Coincident Index, Oct. Leading Index, Oct. Current Account Total, Nov. Bank Lending, Oct. Trade Balance, Oct. Machines Orders, Nov. Bankruptcies Wednesday – 3Q Final GDP (Q/Q & Y/Y) Thursday – Nov. Machine Tool Orders, Nov. Domestic CGPI Friday – Nov. Consumer Confidence Canada Monday – Oct. Building Permits, Nov. Ivey Purchasing Managers Index Tuesday – BoC Interest Rate Announcement Wednesday – Nov. Housing Starts Thursday – Oct. New Housing Price Index Friday – Oct. International Merchandise Trade Australia & New Zealand Monday – Australia Nov. AiG Construction Index, , Nov. ANZ Job Advertisements Tuesday – Australia RBA Interest Rate Announcement, New Zealand Nov. House Prices Wednesday – Australia Oct. Home Loans and Investment Lending, New Zealand 3Q Manufacturing Activity Thursday – Australia Nov. Employment Report, RBNZ Interest Rate Announcement, NZ Nov. Card Spending Friday – NZ 3Q Terms of trade index China: Thursday – Nov. Trade Balance CONCLUSION The calendar bears watching, but it’s the EU and other sources of wildcard events detailed in Weekly Market Drivers: ECB Bond Buying Was Key And Confidence In It Could Decide This Week that are more likely to move markets. Though again we suspect markets will remain range bound given the lack of fundamental justification to move much higher. If the EU can stay quiet, markets are most likely to be pulled between the following forces: Bullish Technical indicators of strong momentum on the monthly S&P 500 chart as detailed in the above noted weekly market movers article. Bearish Bearish multiple resistance just above where most risk assets have reached, plus a fundamental picture for the global economy that is on balance bearish given the ongoing EU mess, austerity spending cuts in the EU, China policy slowing growth, and slow to stagnant growth in the US and Japan. DISCLOSURE & DISCLAIMER: AUTHOR SHORT THE EUR FOR PERSONAL PORTFOLIO. THE ABOVE IS FOR INFORMATIONAL PURPOSES ONLY AND NOT TO BE CONSTRUED AS SPECIFIC TRADING ADVICE. RESPONSIBILITY FOR TRADE DECISIONS IS SOLELY WITH THE READERComplete Story »