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At the end of this Global Week Ahead, the world’s major stock exchanges enjoy a long Christmas break.
Most central banks already wrapped up their final meetings for this year. Their collective decisions (made last week) raised questions for traders to ponder over the holidays.
A bit of fresh U.S. macro data can shed light on how consumers are holding up, given soaring goods prices, and the very transmissible Omicron variant.
Here are Reuters’ final five world market themes for 2021, reordered for equity traders.
(1) Where Did the Major Central Banks Leave Us?
With December's deluge of central bank meetings done and dusted, markets can cruise into year-end, right?
Not quite. The Bank of England, for one, has left investors confounded for the second time in six weeks, as a surprise rate hike again raised questions about its communication style.
The European Central Bank, in the spirit of Christmas perhaps, gave something to everyone – ending emergency stimulus next year cheers the hawks, opting for an open-ended existing asset purchase scheme makes the doves happy. Rising peripheral bond yields suggest some discomfort over easing support.
And by raising rate hike prospects, the Federal Reserve appears to have set the agenda for a tumultuous 2022 as central bankers chart their paths to the exit, albeit at dramatically different paces.
(2) Watch Macro Data for Signs of Holiday Spending Worldwide
'Tis the season to be shopping, but just how cheerful are U.S. shoppers in the face of soaring prices and Omicron?
Clues should come from the December U.S. consumer confidence index on Wednesday and November new home sales, consumer spending and durable goods orders on Thursday.
U.S. consumer prices grew at their fastest pace in around four decades in November. Any signs that rising living costs and pandemic fatigue are weighing on spending — which accounts for over two thirds of U.S. economic activity — will not make for comfortable reading at the Fed.
After all, the central bank just doubled the pace at which it will cut bond purchases and signaled as many as three rate hikes for 2022.
(3) Time for a New British Prime Minister?
Two years after British Prime Minister Boris Johnson's party swept elections, his tenure in office is wobbly.
A revolt by 100 lawmakers, scandals, the loss of a parliamentary seat his party had dominated for 200 years, and a stuttering economy mean bookies are offering even money that he will be replaced in 2022. A majority of voters think he should resign, one poll found.
Already, Brexit had capped Britain's post-pandemic rebound. Now an Omicron "tidal wave" (Johnson's words) spells more trouble. Private-sector growth plunged in December to a 10-month low, PMIs showed, yet 5%-plus inflation may force the Bank of England into several rate hikes next year.
On Dec. 22, final Q3 GDP readings may confirm Britain's economy falling behind G7 peers. Unsurprisingly, British stocks’ 35% price discount versus global peers has not stopped investors from voting with their feet.
(4) Chile Chose a New President
Chileans headed to the polls on Sunday, ending a year full of political risk in Latin America — a region already haunted by income inequalities, volatile leaders, disappointing growth and a disproportionately high COVID-19 toll.
Chile's second round election pitched ultra-conservative Jose Antonio Kast against leftist former student leader Gabrial Boric. With 99.95% of the vote in hand, the 35-year-old Boric won easily by 55.87% to 44.13%. This was the first presidential decider since the world's top copper producer was rocked by protests two years ago.
The regional election cycle continues in 2022.
Colombia is scheduled to hold congressional elections in March and a presidential ballot in May.
Brazil's general vote in October will dominate investors' focus, given the country's economic weight in the region. So far, former leftist leader Luiz Inacio Lula de Silva has a comfortable lead in polls.
(5) How Does China Factor into a New Year?
Investors are trying to work out just what China’s top leaders meant when they said recently that next year would be all about economic stability and prudent monetary policy.
The likes of JPMorgan peg growth estimates around 5%, close to what government advisers recommend. Possibly, policy will be tailored to fit the goal of "common prosperity" before the Communist Party's 20th national Congress next year.
But bond markets are confused. The central bank has infused cash into banks while trying to rein in a strong yuan. Yet, expectations for a cut in its main money market operation rate this week came to naught.
Beijing's goals of stability and deleveraging could mean banks' lending benchmarks won't change next week either.
Top Zacks #1 Rank (STRONG BUY) Stocks
Let’s look at Financial Sector stocks:
(1) The Blackstone Group (BX - Free Report) : This is a $123 a share stock with a market cap of $85B. I see a Zacks Value score of F, a Zacks Growth score of C and a Zacks Momentum score of C.
(2) Bank of Nova Scotia (BNS - Free Report) : This is a $67 a share stock with a market cap of $82.7B. I see a Zacks Value score of D, a Zacks Growth score of F and a Zacks Momentum score of D.
(3) Carlyle Group (CG - Free Report) : This is a $52 a share stock, with a market cap of $18.4B. I see a Zacks Value score of D, a Zacks Growth score of D and a Zacks Momentum score of F.
Thinking about buying the Financials, after the hawkish Fed, BoE and ECB news?
Given the lousy Zacks Value scores, here, you are late.
Key Global Macro
Looks like a light holiday week schedule here.
On Monday, there is a People’s Bank of China (PBoC) rate decision. 3.85% is the policy rate now.
Image: Bigstock
Merry Christmas: Global Week Ahead
At the end of this Global Week Ahead, the world’s major stock exchanges enjoy a long Christmas break.
Most central banks already wrapped up their final meetings for this year. Their collective decisions (made last week) raised questions for traders to ponder over the holidays.
A bit of fresh U.S. macro data can shed light on how consumers are holding up, given soaring goods prices, and the very transmissible Omicron variant.
Here are Reuters’ final five world market themes for 2021, reordered for equity traders.
(1) Where Did the Major Central Banks Leave Us?
With December's deluge of central bank meetings done and dusted, markets can cruise into year-end, right?
Not quite. The Bank of England, for one, has left investors confounded for the second time in six weeks, as a surprise rate hike again raised questions about its communication style.
The European Central Bank, in the spirit of Christmas perhaps, gave something to everyone – ending emergency stimulus next year cheers the hawks, opting for an open-ended existing asset purchase scheme makes the doves happy. Rising peripheral bond yields suggest some discomfort over easing support.
And by raising rate hike prospects, the Federal Reserve appears to have set the agenda for a tumultuous 2022 as central bankers chart their paths to the exit, albeit at dramatically different paces.
(2) Watch Macro Data for Signs of Holiday Spending Worldwide
'Tis the season to be shopping, but just how cheerful are U.S. shoppers in the face of soaring prices and Omicron?
Clues should come from the December U.S. consumer confidence index on Wednesday and November new home sales, consumer spending and durable goods orders on Thursday.
U.S. consumer prices grew at their fastest pace in around four decades in November. Any signs that rising living costs and pandemic fatigue are weighing on spending — which accounts for over two thirds of U.S. economic activity — will not make for comfortable reading at the Fed.
After all, the central bank just doubled the pace at which it will cut bond purchases and signaled as many as three rate hikes for 2022.
(3) Time for a New British Prime Minister?
Two years after British Prime Minister Boris Johnson's party swept elections, his tenure in office is wobbly.
A revolt by 100 lawmakers, scandals, the loss of a parliamentary seat his party had dominated for 200 years, and a stuttering economy mean bookies are offering even money that he will be replaced in 2022. A majority of voters think he should resign, one poll found.
Already, Brexit had capped Britain's post-pandemic rebound. Now an Omicron "tidal wave" (Johnson's words) spells more trouble. Private-sector growth plunged in December to a 10-month low, PMIs showed, yet 5%-plus inflation may force the Bank of England into several rate hikes next year.
On Dec. 22, final Q3 GDP readings may confirm Britain's economy falling behind G7 peers. Unsurprisingly, British stocks’ 35% price discount versus global peers has not stopped investors from voting with their feet.
(4) Chile Chose a New President
Chileans headed to the polls on Sunday, ending a year full of political risk in Latin America — a region already haunted by income inequalities, volatile leaders, disappointing growth and a disproportionately high COVID-19 toll.
Chile's second round election pitched ultra-conservative Jose Antonio Kast against leftist former student leader Gabrial Boric. With 99.95% of the vote in hand, the 35-year-old Boric won easily by 55.87% to 44.13%. This was the first presidential decider since the world's top copper producer was rocked by protests two years ago.
The regional election cycle continues in 2022.
Colombia is scheduled to hold congressional elections in March and a presidential ballot in May.
Brazil's general vote in October will dominate investors' focus, given the country's economic weight in the region. So far, former leftist leader Luiz Inacio Lula de Silva has a comfortable lead in polls.
(5) How Does China Factor into a New Year?
Investors are trying to work out just what China’s top leaders meant when they said recently that next year would be all about economic stability and prudent monetary policy.
The likes of JPMorgan peg growth estimates around 5%, close to what government advisers recommend. Possibly, policy will be tailored to fit the goal of "common prosperity" before the Communist Party's 20th national Congress next year.
But bond markets are confused. The central bank has infused cash into banks while trying to rein in a strong yuan. Yet, expectations for a cut in its main money market operation rate this week came to naught.
Beijing's goals of stability and deleveraging could mean banks' lending benchmarks won't change next week either.
Top Zacks #1 Rank (STRONG BUY) Stocks
Let’s look at Financial Sector stocks:
(1) The Blackstone Group (BX - Free Report) : This is a $123 a share stock with a market cap of $85B. I see a Zacks Value score of F, a Zacks Growth score of C and a Zacks Momentum score of C.
(2) Bank of Nova Scotia (BNS - Free Report) : This is a $67 a share stock with a market cap of $82.7B. I see a Zacks Value score of D, a Zacks Growth score of F and a Zacks Momentum score of D.
(3) Carlyle Group (CG - Free Report) : This is a $52 a share stock, with a market cap of $18.4B. I see a Zacks Value score of D, a Zacks Growth score of D and a Zacks Momentum score of F.
Thinking about buying the Financials, after the hawkish Fed, BoE and ECB news?
Given the lousy Zacks Value scores, here, you are late.
Key Global Macro
Looks like a light holiday week schedule here.
On Monday, there is a People’s Bank of China (PBoC) rate decision. 3.85% is the policy rate now.
Micron (MU - Free Report) reports AMC.
On Tuesday, the Reserve Bank of Australia (RBA) publishes its latest minutes.
We get U.S. current account (aka trade) data. Look for -$204B here.
On Wednesday, U.S. existing home sales for November should be 6.5M, up +0.8% m/m.
On Thursday, the U.S. core personal consumption expenditures (PCE) price index for NOV should be +4.5% y/y, up from +4.1% y/y in OCT.
On Friday, it is Christmas Day in Europe. Saturday is Christmas Day in the USA.
Conclusion
That’s it for me.
Have a safe and enjoyable Christmas holiday.
Warm regards,
John Blank