By Deepta Bolaky
The relief rally in the equity markets was short-lived, and investors are currently reflecting on the tumultuous year. Amid a thinned-economic calendar and holiday period, markets participants struggled to find a direction towards the end of last week.
As we head into the last day of the year 2018, investors will likely be busy digesting the phone call between President Trump and Xi occurred during the weekend. Even though investors are unable to dodge the lingering effects of trade tensions on the economy, it does provide a more optimistic outlook on trade negotiations for the year 2019.
Traders will probably kick off the new year with the release of the US Non-farm payrolls. The markets are expecting the labour market to stay robust and the unemployment rate to remain steady at 3.7%. The US labour market is tightening, and investors will be keen to see if the figures will alter the dovish expectations recently adopted by the Fed.
The FOMC and Jerome Powell speeches which are scheduled after the release of the employment report will also be scrutinised. It will be interesting to see what the Fed will be signalling to the market during the first week of the new year 2019.
A few countries namely China, US, UK, Germany, EZ will be publishing their PMI figures for the month of December. We will start the week with China’s manufacturing activity which is expected to have weakened. Trade tensions have pushed down the manufacturing activity. We have seen the contraction over the months with a slight pick-up from September onwards. We expect the manufacturing to stay depressed due to the scepticism around trade negotiations.
The PMI figures for the UK, US and Eurozone area, will be published towards the end of the week.
The CPI figures in the Eurozone area will help investors to gauge the bloc’s economy which has been losing momentum over the months. The preliminary inflation data will be released on Friday and investors are expecting headline inflation to drop from 1.9% to 1.8%. Core inflation is expected to remain steady at 1%.
The US government shutdown will extend into this week. President Trump remains firm on a no-deal until Congress funds a wall on the Mexican border. While the shutdown is partial and may not have severe repercussions on the markets, a prolonged shutdown can dampen risk sentiment since the financial markets are already fragile and vulnerable to the current headwinds. The shutdown can definitely add another layer of uncertainty.
The fears of slower global growth will likely drive the markets’ sentiment in the commodities markets. We have seen that the base metals are finding support on the fears and uncertainties in the markets. The yellow metal is back to the same levels seen in June 2018.
Oil markets continue to remain vulnerable to the oil glut and the slowing global growth. EIA reports helped oil prices to be steady. Given the current conditions, traders will probably rely on the reports from fresh trading impetus.
|Wednesday, 02 Jan 2019
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