In the Global Week Ahead, it’s all about monetary policy.
But this huge talking wave is NOT likely to wash ashore and be market-moving.
Nearly all of what is about to happen has already been communicated. And well.
Wednesday, the Fed becomes the leader. Here comes that 25 basis point hike.
After that fait accompli, four western European central banks surf into global risk markets. They issue policy decisions starting Thursday. Expect none to alter their stances or offer meaningful market effects.
Another four Latin American central banks get on their boards after the Fed — to offer their latest decisions for that region. Maybe Mexico gets interesting. But it is not likely.
The FOMC meeting on Tuesday into Wednesday culminates in the policy statement at 2 pm ET, along with the Summary of Economic Projections.
That summary includes the revised ‘dot plot’ of future rate projections.
Any comment on weak U.S. Consumer Price Inflation (the CPI) will be closely watched, to see if there is any change to sentiment.
I see penciled in 3 rate hikes for 2018, but 2 is another likely call.
This will be Chair Yellen’s last press conference at the helm.
A 25 basis point hike in the Fed Funds rate, from 1.25% to 1.5% is in the cards from the meeting itself.
The first order of business is to congratulate Chair Yellen. I agree with covering analyst sentiment. She deserved a second term after a fine performance and can go out with her head held high regarding the leadership she has provided.
While she will be back to chair the January 31st 2018 meeting, that will be a statement only event, making this December meeting her last command performance.
The Bank of England (BoE) is nearly universally expected by traders to leave policy unchanged at 0.5%.
Governor Carney has already guided. A pair of rate hikes through to 2020 may be about the limit to this tightening cycle.
His exact quote about a month ago was: “We’ll see how the economy evolves. If it evolves broadly in line with our projections we would probably raise interest rates a couple of times over the next few years.”
Tuesday’s U.K. CPI report may further inform BoE policy risks. The expectation is for inflation to be topping out at about 3% and thereby averting the over-3 data that triggers the hand wringing by central bankers the world over.
The European Central Bank (ECB) head Mario Draghi is also expected to jawbone while keeping his various ECB policy measures intact.
Europe’s central bank is unlikely to be terribly exciting to watch for some time. It has already moved for extending bond purchases through to next September 2018 at a diminished pace — while guiding that rate hikes would follow much later.
The ECB is likely to reduce its bond market portfolio reinvestment well after that — if it follows the Fed’s path of reinvesting.
All of this will happen — until the ECB rate normalization process is well underway, in just a few years time.
In other words, be patient.
This global rate ‘normalization’ thing is going to take awhile.
Top Zacks #1 Rank Stocks—
For active stocks, I am watching info tech plays and mining closely.
DXC Technology Company (DXC - Free Report) : This is a $27 billion market-cap stock. The company plays in the Computer-IT services space. It is based in Virginia. The long-term Zacks VGM score is A.
Anglo American (NGLOY - Free Report) : This is a $26 billion market-cap mining company. Its global mine portfolio includes iron ore, manganese, metallurgical coal, copper, nickel, platinum and diamonds. The Zacks VGM score is A here, too.
Western Digital (WDC - Free Report) : This is a $24 billion market-cap computer storage maker. It has a big settlement talk scheduled to end this week with joint venture partner Toshiba. Again, the long-term Zacks VGM score is A, led by an A in Value and Growth.
If those settlement talks go well, WDC stock will move up hard and fast.
Key Global Macro—
This week, as I have already written, it’s all about central bank meetings.
Watch for monetary rate decisions on Wednesday — in the USA, in the UK, and in Switzerland and Sweden — and on Friday in Europe at the ECB.
On Thursday, in Latin America, Banxico is expected to hike another 25 basis points down in Mexico. Watch out for lesser news from three other central bank meetings in Latin America. Chile, Columbia and Peru are the others.
On Monday, Mexico’s ANTAD (the National Association of Auto-service, Specialty and Department Stores) same store sales is forecast to grow +6.5% y/y, well above the prior +2.1% y/y data.
On Tuesday, Argentina’s 7-day rep rate (their policy rate) should stay at 28.75%. There is still-high inflation in that Latin American country. The City of Buenos Aires shows +22.9% y/y.
The U.K. CPI looks to be +2.9%, up from +3.0%. The cheap Brexit pound has been having an effect here, making imports expensive.
The influential ZEW indexes come out. The Eurozone current conditions should go from 47.8 to 45.0. The economic sentiment should go from 30.9 to 33.0.
The NFIB small business optimism index for the USA comes out. 103.8 was the prior.
On Wednesday, we get the latest OPEC monthly oil market report. The latest Declaration of Cooperation is the news to check up on here.
The ILO unemployment rate for the U.K. is 4.3%. The new data may show 4.2%.
The latest month of data for the U.S. CPI (ex-food and energy) comes out. Look for the usual +0.2% m/m gain.
The Argentine unemployment rate is likely to get to 7.8% from 8.7%.
There is a FOMC meeting in the USA.
There is a BoE monetary policy committee meeting and rate decision from the U.K.
There is a SNB monetary policy assessment meeting in Switzerland.
On Thursday, Australia’s unemployment rate is out. It has been 5.4%.
Mainland China’s retail sales will grow +10% y/y. They always do!
The German manufacturing PMI has been red hot at 62.5. We get a fresh reading.
The composite (preliminary) PMI for the Eurozone comes out. It is likely to go from 57.5 to 57.8. That’s more good news for European GDP growth. It’s now tracking +2.3%y/y.
On Friday, the European Central Bank (ECB) deposit rate (now at -0.4%) and the main refi rate (now at 0.5%) get a fresh look.
Mr. Draghi holds a press conference after the latest rate decisions.