Another reasonable week for equity markets, particularly around Thanksgiving, meaning the developed markets of Europe, the US and UK all finished with small gains over the past five days. They did however fail on Friday to push on once again from the top of the recent trading ranges. The resource sector had a poor week, particularly mining, despite a small rally in the oil price. The oil price move was probably caused more by the increased political tensions in the Middle East, than change in demand sentiment. The Reuters broader commodity index remained fairly flat on the week.
For the Ftse 100 in particular, one would imagine their needs to be a change in sentiment to the banking and mining sectors if the index is going to break above this level. Likewise the S&P 500 is often driven higher by the technology sector. Again there will become a time for other areas to perform to drive the S&P 500 above current levels.
As we enter the month of December, expectations are that the Federal Reserve will look to raise rates for the first time in 7 years, and the ECB will increase its existing bond purchase program. The ECB will announce any new measures this Thursday at its monthly rate-setting meeting, and December the 16th for the Fed rate announcement.
Ahead of the ECB’s decision there is a fair amount of macro data for the European Central Bank committee to ponder on. On Tuesday we get the latest Markit Manufacturing Purchasing Manager’s (PMI) Index reading for November, as well as the latest unemployment rate. On Wednesday the November inflation rate, and ahead of the announcement on Thursday retail sales and further Markit PMI reports.
Aside from the ECB meeting on Thursday it’s an eventful week for economic data. For the US more employment data, should the latest US employment rate announcement on Friday show unemployment fell to below 5%, one would expect that the market will all but completely discount a move by the Federal Reserve on December the 16th. Earlier in the week Fed Chair Janet Yellen appears before a joint committee of Congress to discuss the US economic outlook.
As for the UK post the autumn statement, which as one further reflects on last week’s announcements appears to be more of a pitch by George Osborne to take over Number 10 than a serious attempt to tackle the countries debt problem. The headlines at the start of the week will be dominated by the decision of the House of Commons whether it will permit the Prime minister to bomb Syria.
Later today the IMF board meets and it is expected to decide to include the Chinese Yuan to its Special Drawing Rights reserve-currency basket alongside the dollar, sterling the euro and the yen. The inclusion of the Yuan would mean central banks, which tend to hold their foreign exchange reserves in dollars or euros would have an alternative.