News & Analysis

Week Ahead – NFP Sets a Positive Tone!

January 7, 2019

By Deepta Bolaky
 @DeeptaGOMarkets

Market Overview

 It was all about the NFP!

It was an impressive turnaround to what was a very volatile first few days of the new year. The Non-farm payrolls surpassed expectations and surged to 312k instead of 177k forecasted. The robust figures reassured investors on the near-term economic outlook. On Friday, Powell also pledged to remain “patient” and watch how the economy evolves. It was “the green light” the stock markets needed to reverse the risk-off sentiment.

2019 started with a bang-Apple the Bellwether issued a rare warning, a Flash Crash in the FX markets and a Robust NFP!

Week Ahead

The positive sentiment is expected to flow in through the start of the week following the relief rally on Wall Street. This week’s busy calendar will provide investors with more information on the global economy and help them to brace for 2019.

 US: FOMC minutes and CPI stands out

Traders will keep an eye on the ISM Non-manufacturing survey on Monday following recent recession fears. However, across the week, the FOMC minutes and the inflation figures will be in the limelight. Investors will scrutinise the FOMC minutes to gauge the views of the different FOMC members and see if there are any divergences of opinions.

The CPI figures will be released on Friday and are expected to remain steady at 2.2% for the month of December. We will also see a series of FOMC speeches from influential members during the week who will provide more insights on the economy and the markets.

Bank of Canada (BoC)

The Bank of Canada will announce its interest rate decision and monetary policy report this Wednesday. It will be followed by a Press Conference. No change in interest rate is expected, but markets participants will eye the tone of the BoC. The rout in the oil markets has put downward pressure on the Canadian dollar, and we have even seen the Loonie dropping to 19-month low.

US-Sino Trade Talks

The news that the US and China will hold vice-ministerial level negotiations over trade in China early next week had reassured the markets. The way the meeting will unfold will surely have an impact on risk appetite which means that the details of the meeting will be heavily eyed. It may also set the tone of how the trade negotiations will progress during the temporary trade truce on tariffs.

Brexit Debate

With UK Parliament returning from holidays, Brexit headlines will be the dominant driver of the Sterling pairs and the UK stock market. MPs will resume debate on Brexit deal on Wednesday. As of now, there are little signs that the Prime Minister has won the sceptical lawmakers.

Will Theresa May delay the vote again?

Will EU offer minor tweaks to please sceptics or wait until the vote fails to offer changes?

There are many uncertainties around Brexit and therefore, these coming days will be the most important ones in the UK history given that the deadline for Brexit is on the 29th of March 2019.

On the data front, the major event will start on Wednesday with Governor Carney’s speech, followed by Retail Sales and Credit Conditions on Thursday. The week will end with Manufacturing Production and trade balance figures.

Commodities Markets

Oil markets recovered a semblance of normality and rebounded sharply on the back of productions cuts and the positive oil reports that had shown a reduction in inventories. The latest positive trade news is expected to help oil prices to maintain the bullish momentum ahead of fresh reports this week. API Weekly Crude oil stock will be published on Tuesday while EIA Crude oil stocks will come out on Wednesday. The oil rig counts will be released on Friday.

Volatilities in the equity markets and rising fears of an economic slowdown gave base metals the safe-haven boost last week. However, improved market sentiment may weigh on the yellow metal this week. As the week progresses, the price action of Gold will likely be focused on geopolitics and trade talks.

 

Tuesday, 08 Jan 2019
Indicative Index Dividends
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ASX200 WS30 US500 US2000 NDX100 CAC40 STOXX50
0 0 0.056 0.04 0 0 0
ESP35 ITA40 FTSE100 DAX30 HK50 JP225 INDIA50
0 0 0 0 0 0 0