A solid if uneventful week for most of the developed equity markets. The one exception was the Chinese market, as the Shanghai Composite gained almost 8% on the week. The big talking point last week was the fall in the oil price and its impact on energy related companies, which took a real battering on Friday in particular. The oil price fall had some impact on the gold price, which fell back to $1164 an ounce, a previous support level. One would suggest there was quite a lot of capitulation in the oil sector on Friday, not only in the commodity but in equity related stocks as well, and one may see some consolidation from here.
The fall in the oil price appeared to lead to a spike in the Vix on Friday, having traded below 12 during the week; it finished almost unchanged on the week just above 13. Bond yields continue to fall across the globe as bond investors expect the continuing fall in the oil price will add to the deflationary pressures. We will speculate during the week how the falling oil price may actually have an inflationary impact on the global economy.
The week ahead will be dominated in the UK by the Chancellors Autumn statement on Wednesday, the last one ahead of next May’s general election. On the one hand George Osborne will refer to the strength of the UK economy as well as the falling unemployment rate but he will also have to discuss what measures he intends to introduce to reduce the ever-increasing budget deficient. On Thursday we get he latest UK rate decision, no change to interest rates is anticipated
In Europe the fun will also be on Thursday as we get the latest ECB rate decision announcement, as in the UK no changes are expected. Post the announcement we get the monthly conference where Mario Draghi fights back the lions of the press eager to know what further measures the committee has discussed. To be fair this may be a slightly more straight forward meeting as the recent European data for choice has been no worse than expected and at times modestly better.
The US will provide its usual selection of data points, but there will be quite a focus on employment data, on Friday we get to hear the latest us unemployment rate. Signs of continued strength in the labor market may bring back interest rate rise speculation
In China we get the final reading from the HSBC manufacturing purchasing managers index, opinion remains that the Bank of China may be prepared to cut rates again, a revision down particularly below 50 may well increase that view.