20171204-大华银行-Markets_Overview_5页_265kb

Global Economics & Markets Research Summary (04 December 2017)

Core Content

This report provides an overview of global economic and financial market developments, focusing on key events, data releases, and central bank activities in the week of 4 December 2017. It also highlights the impact of US political developments on market sentiment and outlines expectations for future economic performance and monetary policy decisions.

Main Highlights

US Market Focus

• Political Developments: The US special investigation into Russian interference with the 2016 election continued to influence market sentiment, with former National Security Advisor Flynn pleading guilty to lying to the FBI.
• Tax Bill: The Senate passed the Republican tax bill (51-49 vote) and will begin negotiations with the House to form a unified bill. The Senate will vote on the nomination of Jerome Powell as Fed Chair on 5 December.
• Government Shutdown Risk: With the current funding deadline on 8 December, the risk of a partial government shutdown remains high, and the Senate needs 60 votes to approve a continuing resolution (CR).
• Economic Data: The November labor market report is expected to show strong job creation, reinforcing the likelihood of a Fed rate hike in December. Key data points include:
  • US Factory Orders & Durable Goods Orders (4 Dec)
  • US ISM Non-Manufacturing Index (5 Dec)
  • US Trade Balance (5 Dec)
  • November labor market report (8 Dec)
• Market Reaction: US stocks experienced high volatility, with the Dow Jones down 0.17%, S&P 500 down 0.20%, and Nasdaq down 0.38%. The CBOE Volatility Index (VIX) slightly increased to 11.43.

Central Bank Outlook

• Bank of Canada: The only G7 central bank with a monetary policy decision this week (6 Dec), expected to keep the policy rate unchanged at 1%.
• Fed Policy: The Fed will be in focus due to the Senate vote on Powell's nomination, with the blackout period starting on 5 December. The Fed is expected to hike rates in December, with a 95.9% probability.
• Reserve Bank of India: Will hold its final monetary policy meeting of 2017 on 6 December, with expectations of a 25bps rate cut to 5.75% due to recent economic fundamentals.

Asian Market Activity

• Japan: Released November monetary base growth (13.2% y/y) and October loans (3.54% y/y). The Nov consumer confidence index will be released later in the Asian afternoon.
• Singapore: Will report its November manufacturing PMI on 5 December.
• Malaysia & Indonesia: Markets were closed for holidays on 1 December. Data on November PMI for Malaysia and Indonesia will be released on 5 December.
• Philippines & Taiwan: Expected to report November inflation data, with Philippines at 3.2% y/y and Taiwan at -0.20% y/y.
• Thailand: Markets will be closed for the King's Birthday holiday on 5 December. Expected to report November consumer confidence and foreign reserves.

European Market Focus

• UK: PM Theresa May is expected to meet with European Commission President Juncker to discuss trade and ECJ concessions.
• Eurozone: The Dec Sentix investor confidence survey and Oct PPI will be released.
• UK Construction PMI: Expected to be released on 5 December.

Key Events

• 5 Dec: Senate votes on Powell's Fed Chair nomination; India's final monetary policy decision; Singapore and Hong Kong PMI; China and India's PMI data.
• 6 Dec: Bank of Canada policy decision; South Korea's exports and imports data.
• 8 Dec: US November labor market report; Thailand and Indonesia's foreign reserves; China and Taiwan's trade data.

FX Market Summary

• USD/JPY: Rebounded to an intraday low of 111.41 and ended at 112.10.
• USD/CAD: Dropped by -1.64% to 1.2684.
• SGD/USD: Traded in a range of 1.3420-1.3503, closing at 1.3464.
• SGD NEER: Expected to trade between 1.0% and 1.5% above the midpoint, implying a USD/SGD range of 1.3490-1.3424.
• PBoC Midpoint: Set at 6.6033/USD.

Commodity Market Summary

• Crude Oil: Prices increased due to OPEC's decision to extend production cuts.
  • US Nymex WTI closed at $58.36 (+0.96%)
  • London Brent closed at $63.73 (+0.16%)
• Gold: Rose slightly to $1,268.50 due to heightened political risk in the US.

Economic Data Highlights

• US ISM Manufacturing Index: November reading at 58.2, slightly below expectations.
• Canada: Unemployment rate dropped to 5.9%, the lowest since 2008. 3Q GDP growth at 1.7%.
• South Korea: 3Q GDP growth revised to 3.8% y/y, CPI fell to 1.3% y/y, and exports increased by 9.6% y/y.
• Thailand: November headline inflation at 0.99% y/y, core inflation at 0.61% y/y.
• India: 3Q GDP growth at 6.3% y/y, and PMI at 52.6.

Stock Indices

• US Indices: Dow Jones at 24,231.59 (-0.17%), S&P 500 at 2,642.22 (-0.20%), Nasdaq at 6,847.59 (-0.38%).
• Asia Indices:
  • Nikkei 225 at 22,819.03 (+0.41%)
  • TAIEX at 10,600.37 (+0.38%)
  • Shanghai Composite at 3,317.62 (+0.01%)
  • Hang Seng at 29,074.24 (-0.35%)
  • KOSPI at 2,475.41 (-0.04%)
  • FTSE Straits Times Index at 3,449.54 (+0.47%)

Interest Rates Forecast

• USD Fed Funds Rate: 1.00-1.25%, next meeting on 12-13 Dec, forecasted to rise to 1.25-1.50%.
• EUR Refinancing Rate: 0.00%, next meeting on 14 Dec.
• GBP Repo Rate: 0.50%, next meeting on 14 Dec.
• AUD Official Cash Rate: 1.50%, next meeting on 5 Dec.
• KRW Base Rate: Expected to rise to 1.50% by 30 Nov.
• THB 1-Day Repo Rate: 1.50%, next meeting on 20 Dec.
• TWD Discount Rate: 1.375%, next meeting on 15 Dec.

Conclusion

The week is marked by a mix of political uncertainty, economic data releases, and central bank decisions. US politics and the Fed's rate hike expectations remain central to market movements, while Asian and European markets are expected to see a range of economic indicators that could influence policy decisions and investor sentiment. The report suggests continued volatility and cautious optimism as markets prepare for year-end economic performance and potential rate adjustments in the near future.