The markets conclude the year with central bank publications on the economy and monetary policy. Among the incoming macro data are US consumer confidence, German import prices and indications from Chinese companies.
Unless there are any surprises, the end of the year should be downhill in the financial markets.
Not least because the last two weeks have already offered many ideas, which will unfold their effects in the coming months: an initial agreement on tariffs between the United States and China, the green light from the British Chamber on the plan agreed by Johnson with the European Union for Brexit, the impeachment of Trump and the setting of a cruising speed for monetary policies.
2019 was a roaring year for financial activities. Global stocks rose 24% according to the Msci World index, the most modest rise was in Hong Kong (+7.6% Hang Seng), weighed down by political tensions with the motherland China, while the most munificent was in Moscow (+42% Rts in dollars), also graced by mining and energy stocks. In between, there are the continuous Wall Street records (+33% Nasdaq and +28% S&P 500) and the leap to Business Square (+29% Ftse Mib).
But also bonds toasted the return of central banks to expansive monetary policies: government bonds in the area with an overall return (between coupons and capital appreciation) of 8%, American bonds of 10%. The BTp, however, is suffering from contrasts in the executive, with prices falling, yields rising and spreads widening.
These are the main statistics coming in on global markets which, together with the volatility due to reduced trade, could affect investors:
The ECB’s economic forecasts
On Friday 27th the European Central Bank is publishing the Economic Bulletin. The last meeting of the year, the first one chaired by Christine Lagarde, kept the bar set by Mario Draghi straight towards a new expansionary phase, which injects twenty billion euros per month into the system, until a date to be set. That is, until the European cycle will not be out of the ford of the German contraction and anaemic inflation (for which, however, a new target other than the current 2% can be established). With the Bulletin, investors will try to reconstruct the scenario outlined by the ECB and its position for the future. Even if the framework already available with forecasts from the OECD, European Union, individual governments, independent research institutes and anticipatory data from the real world traces different grey areas, to be coloured according to the global development and the resolution of geopolitical tensions.
Expectations for consumption and prices in Germany and for Spanish GDP
In the euro area, the main surveys come from the Union’s locomotive. On Monday 30, German import prices and retail sales are released. Both in October were negative, respectively at -0.1% and -1.9%), due to the impact of the trade war and the internal slowdown that followed. Thomson Reuters estimates a recovery on both sides (+0.4% and +1%), which would instil more confidence in operators for a return to growth.
On the same day there are the last tests of the year for the Spanish economy, which has experienced a slowdown: the second reading of the GDP in the third quarter – glided to 2% from the peaks of over 3% touched in 2017 – and inflation, which in November was back down to 0.2% (from +1% in October). Friday 27, however, is the turn of retail sales in the Iberian Peninsula, which still have a good pace (+2.6% in October).
Lens on the Fed meeting
On Friday, the American central bank will publish the minutes of the December meeting. The governors of the Federal Reserve indicate stable rates for the whole of 2020, with an increase in 2021 and one in 2022. The market, which discounted three slits in twelve months, has revised downwards the probability of cuts. But the market will be interested above all in the views expressed in the Committee on the resilience of the US economy.
Durable goods, confidence and US subsidies
The stars and stripes cycle is measured on Monday 23rd from the orders for durable goods, a precursor to the strength of the manufacture. Decreasing inventories and good news from regional surveys among companies (with the notable exception of Kansas, in the Midwest industrial zone) point to a good outcome. More uncertain, instead, is the series of unemployment benefits, which has marked some leaps. The holiday period may have influenced applications; otherwise, an increase in applications for public support could mean a turning point in employment, which is at an all-time low.
News from Chinese companies
New Year’s Eve brings directions from Chinese enterprises. The index of the manufacturing sector in November had reached the threshold of contraction of 50 points, while that of services was still above 54 points. Hsbc analysts’ forecasts are for a stability of parameters, also because they do not totally incorporate the initials of the trade agreement between Washington and Beijing, which in ten days has raised the shares of Shanghai by 3%.