of the week ahead


Matt Jones

Welcome to "The Long & Short of the Week Ahead", a production of Eurizon SLJ Capital that takes a look at the macro-economic themes of the week ahead and has been recorded for professional investors.

My name is Matt, Head of Distribution for Eurizon SLJ Capital, and I'm joined by Neil Staines, Senior Portfolio Manager.

Welcome back, Neil. It's great to have you here with us again.

Neil Staines

Thank you very much Matt. It's great to be here.

Matt Jones

A big week next week, lots going on. Quite a broad geographic spread. Perhaps you can talk us through what you're going to have your eye on in the week ahead.

Neil Staines

Absolutely. Yeah. Thanks, Matt. It's been another complex week for financial markets as November month end rebalancing flows likely significant after the extent of market movement and even divergence on the month added to an already intricate global macroeconomic backdrop. Now, we discussed the anecdotal and data trends of the week further in this week's blog, where the downside miss in European inflation in November was a key theme. Now, as we move into December, and the thoughts of many commentators and analysts move to 2024, we retain acute focus on the near term with two huge weeks for data for policy and for the medium-term trends in global markets. So, we hold off on the mince pies and eggnog for now and retain focus on some key events of next week.

Firstly, after the bigger than expected drop in core CPI release for November, Europe will continue to be a central focus of next week. Markets will be looking for corroboration of and or opportunity to add to the rate repricing in Europe. Where this week saw markets fully pricing a rate cut by April of next year. With Germany at the center of growth concerns related to structural as well as cyclical factors and the added complexity of unexpected fiscal scarcity next year. The German data will continue to be key. Trade and factory orders in Germany will be closely watched for signs of stabilization and more broadly eurozone investor sentiment and retail sales will also be a focus next week. For us European expected weakness is already quite keenly priced by markets, risks may well be shifting towards a more stable outcome in the near term.

Secondly, there will also be a significant focus on Asia next week. The RBA is the only developed market central bank in action and of interest having last month resumed its hiking cycle with a 25-basis point hike to 4. 35 percent just as other central banks were becoming more dovish. Now, next week, we see if the more resilient labor market and property sector continue to drive action from the RBA, or if the November hike was more of a fine-tuning exercise, markets are minimally priced for action, but retrain a hawkish risk premium into Q1, 2024, that's the statement when the commentary from new governor Bullock will be key. Now, data from China on services and trade will also be very key as will any further support measures that may be announced to provide confidence to the local equity markets, which continue to disappoint. Asia is a key focus for race and equity sentiment next week.

Then lastly and perhaps most consequentially for markets next week is a huge week for the US. As Fed Chair Powell speaks into the close of this week and takes us into the Fed's blackout period ahead of the December the 13th policy meeting, the focus on US rate markets will continue their dominance for global sentiment. Services ISM will be the first big event of the week on Tuesday, with the proximity of the 50-expansion contraction boundary, adding to the importance of and implications from the data. For the rest of the week. It is all about jobs. JOLTS on Tuesday, ADP on Wednesday, claims on Thursday and all importantly non-farm payrolls on Friday. Markets are looking for a continuation of a more modest pace of job creation. But at a plus 200, 000 expectation leaves room for disappointment with labor supply improvements lightly continuing a tick up in the unemployment rate. If it were to happen would likely have significant market consequences. So therefore, a big week for the US, big week for jobs and a big week for markets.

Matt Jones

Thank you, Neil. A big week ahead indeed, and perhaps it's best to leave the mince pies just for a little bit longer. But, in the meantime, it is the weekend perhaps a slightly quieter one this weekend.

Neil Staines

Absolutely, yeah, thanks Matt. After an eventful week of European football, it's back to Premiership action this weekend with Newcastle versus Manchester United, and Manchester City versus Spurs, likely the pick of the action. However, against what's likely to be a very cold weekend, England's cricketers set to avoid the cold weather with a one day fixture against the West Indies at the Sir Vivian Richards Stadium in Antigua. Sounds lovely.

Matt Jones

Fantastic. Slightly warmer weather or perhaps considerably warmer weather would be very welcome right now, but thank you for joining us and outlining your thoughts on the week ahead. I look forward to catching up with you again next week.

Thank you so much for joining us and for outlining your thoughts on the week ahead. I look forward to catching up with you again soon.


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