The markets humbled several bulls last week; US equities continued to falter; Bitcoin and other cryptos got whacked and Oil- whether you call it the “Khashoggi effect” or credit Mr. Trump’s political jawboning (as Mr. Trump does) or simply take the over-supply argument- took a mighty fall. Let us not forget that less than a year ago, Bitcoin was approaching $20,000 and has since lost nearly 80% of its value; that less than two months ago, crude oil was touching $77 a barrel and has lost a third of its value in a matter of weeks; and that the Nasdaq has lost about 15% of its value since touching highs of 8,109 in August. Seen it all before? Sadly, yes! And what I feel we are seeing is greed turning into fear and confidence being usurped by uncertainty. Hubris might explain why day-traders or speculators are starting to be wiped-out, but nobody can say they weren’t warned. US 10-year treasuries yields first broke 3 % in February and the US Federal Reserve Bank has been consistent with its message and implementation of raising interest rates, the concomitant effects of which are weaker emerging markets and falling stock prices.
The Federal Reserve is where we turn our attention this week and in addition, we have Central bankers from around the World giving speeches as well as some important economic announcements, not to mention a pre-G20 meeting scheduled between US President Trump and Chinese Premier Xi Jinping.
The Federal Reserve minutes of its recent interest policy meeting released on Thursday will be analyzed in great detail to see if there will be any wavering from its current policy of measured incremental interest rate increases in the US. Traders will look for clues as to whether the much-expected December hike will occur or whether there is a hope of a small pause due to market weakness since its last hike. Today, we have speeches from ECB President Draghi and from Bank of England Governor Carney and Ex Fed Chair Alan Greenspan. These men will all beat the same drum. That is, they will call for more Worldwide wide cooperation and warn of impending Global risks. On Wednesday, current Fed Chair Jerome Powell will speak to the Economic Club of New York. His speech is very important as it precedes Thursday’s monetary policy minutes.
On the data side, it is a big week for US data. On Tuesday, we have US consumer confidence for November expected at 136. In light of the current market weakness, I feel this may be shy of the mark. On Wednesday we have the second reading of US 3rd quarter GDP expected at 3.6 % annualized and on Thursday we have Core Personal Consumption Expenditure (Y.o.Y) for October expected at 1.9%. One number each for Confidence, growth and inflation and well worth paying attention to them all.
Elsewhere, on Friday, we have Eurozone Consumer Price Index expected at 2.1% (Y.o.Y) for November and Canadian GDP expected at 2.5% (Y.o.Y) for September. In the UK, Prime Minister May will be earnestly trying to gather support for her Brexit agreement scheduled to be voted on by Parliament in December. Irrespective of economic announcements expect some hostile confrontations in the UK political arena and more uncertainty for the pound. The meeting of Mr. Trump and Mr. Xi rounds off a very exciting week.
Good luck and good trading. Watch out for me on video on Wednesday and Friday. Ben Robson