Summary:
Last Week Review
• The US dollar continued flexing its muscles for another week, with the so-called ‘Trump trades’ showing no signs of cooling as the president-elect Republican party will control both chambers of the US Congress, which will make it very easy for Donald Trump to turn his pre-election promises into legislation. The newly elected US president has been advocating for massive corporate tax cuts and tariffs on imported goods from around the globe, especially China’s measures that are seen by the financial community as fueling inflation and thereby prompting the Fed to delay future rate reductions.
• With the US CPI data already pointing to some stickiness in price pressures during October and Fed Chair Powell noting just yesterday that they do not need to rush in lowering interest rates, more market participants are becoming convinced that the Fed may need to take the sidelines soon. They are assigning a decent 37% chance for this happening in December and a stronger 57% for a January pause.
This Week’s Outlook
• The U.S. economic calendar is quieter in the week ahead, but investors will get updates on the health of the housing sector, with reports on building permits, housing starts and existing home sales.
• Chipmaker Nvidia (NVDA), a bellwether for the AI craze that has boosted stocks this year is due to report third quarter earnings after the close on Wednesday. The results could well be a gauge for investors’ appetite for tech stocks, the AI trade and sentiment for equities broadly, after a post-election market rally stalled. Nvidia’s chips are seen as the gold standard in the AI-space and its shares have risen around 200% this year, overtaking Apple (AAPL) to become the world’s largest company by market capitalization. Investor expectations are high going into earnings, raising the chances for short term volatility.
• The calendar also includes the weekly report on weekly jobless claims, while manufacturing and service sector PMI data on Friday could give early indications on how companies are reacting to the threat of Trump’s proposed trade tariffs – a data point that will be closely watched by markets from here on.
• The UK is to release October CPI data on Wednesday with economists expecting the annual rate of inflation to have risen 2.2%, climbing back above the Bank of England’s 2% target. That would be an increase from 1.7% in September, the first time the annual rate of inflation dropped below the BoE’s target in more than three years. The BoE delivered a second 25-basis point rate cut earlier this month and said further cuts were likely to be gradual as it assessed the persistence of inflation pressures including from the first budget of Britain’s new government.
• Oil prices ended around 2% lower on Friday, adding to losses for the week as a combination of fears over weakening demand from China and the prospect of a slower pace of Fed rates cuts weighed.
• Bank Indonesia (BI) will hold its Nov-2024 decision on its BI Rate, Lending Rate, and Deposit Rate. On top of that, Indonesia’s Loan Growth YoY will also be released.
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