An enormous week is over, with banks slowing the pace of tightening moves and flagging that more tightening is likely to come next year. There is still however the Bank of Japan next week, but this could once again be largely ignored. The clarity on rate hikes and central bank policy could support the markets as we move to the year’s end, however the beneficiary seems to be US Dollar as the NO RATE CUTS in 2023 looks to dominate the attention. Bigger picture, this week could inject more pressure for the equity market. In the meantime, the economic calendar ahead includes GDP releases from the US, Inflation for Canada and the US Retail sales and US Durable goods.
Monday – 19 December 2022
IFO Business Climate, Assessment & Expectations (EUR, GMT 09:00) – The German IFO Business Climate is forecasted to rise to 87.2 in December from 86.3, with Business expectations also a bit more optimistic, at 82.00 from 80.00.
Tuesday – 20 December 2022
RBA Minutes (AUD, GMT 00:30) – The RBA minutes should repeat once again that more tightening is underway. In the last meeting, the RBA flagged that more interest rates are likely to come, while stressing that it is “not on a pre-set course”.
Interest Rate Decision, Statement and Conference (JPY, GMT 03:00) – The Japanese economy contracted in Q3, while it still highlights that recession risks are also extending to Japan. The BoJ is expected to keep the economy supported with an ultra-accommodative policy stance, despite the impact policy divergence has had on the currency.
Building Permits & Housing Starts (USD, GMT 13:30) – Housing starts are expected to fall -1.8% to a 1.400 mln pace in November from 1.425 mln in October and a 2-year low of 1.377 mln in July. Permits are expected to ease to a 2-year low of 1.500 mln from 1.526 mln in October. Pending home sales fell -4.6% in October to a 30-month low after a -8.7% plunge in September to a prior low.
Retail Sales (CAD, GMT 13:30) – Canadian retail sales for October are expected to fall to -0.3% m/m from -0.5%, while ex-Autos are expected to increase at 0.8% m/m from -0.7% m/m.
Wednesday – 21 December 2022
Consumer Price Index and Core (CAD, GMT 13:30) – Canada CPI is expected to have remained hot in November. The headline rate is anticipated at 7.4% y/y from a 6.9% y/y pace, higher than August’s 7.0% y/y and down from the 8.1% y/y clip from June which was the highest since 1983. But it is still very elevated, and barring the prior three months, this would have been the fastest pace in 39 years. The monthly clip could ease a bit to 0.4% from 0.7% previously.
CB Consumer Confidence & Existing Homes Sales (USD, GMT 15:00) – Consumer confidence is expected to fall to 98.0 from 100.2 in November, versus a 17-month low of 95.7 in July. The existing home sales figures are expected to fall -4.5% to a 2-year low pace of 4.230 mln in November from a prior low pace of 4.430 mln in October, versus a 14-year high of 6.650 mln in January of 2021. In Q4, we expect an average sales pace of 4.287 mln, after a 4.770 mln rate in Q3. The months’ supply of homes will likely continue to rise from 3.3 in October, versus a deep all-time low of 1.6 in January.
Thursday – 22 December 2022
Gross Domestic Product (USD, GMT 13:30) – The Q3 GDP growth should show a boost to 3.0% from 2.9%, with hikes of $14 bln for nonresidential construction and $5 bln for public construction, but trimmings of -$4 bln for exports and -$1 bln each for imports, residential construction, and factory inventories. We expect Q4 GDP growth of 1.0%. The Q3 GDP data depict a quarter with a huge net export contribution to growth as it further reverses the massive hit to growth in Q1, alongside an associated further pull-back in the inventory accumulation rate from a Q1 peak.
Friday – 23 December 2022
Durable goods (USD, GMT 13:30) – Durable goods orders are expected to fall -0.4% in November with a -2.0% decline for transportation orders, after a 1.1% headline rise in October that included a 2.2% transportation orders increase. Durable orders ex-transportation are pegged to rise 0.5%, after a 0.5% October increase.
Personal Income/Consumption (USD, GMT 13:30) – Personal income is expected to rise after a 0.7% October gain. We expect a 0.4% rise in compensation after a 0.5% gain, given a -0.2% November decrease for hours-worked but a 0.6% rise for hourly earnings. We expect a 0.3% rise for consumption after a 0.8% October increase. We expect the savings rate to hold at the 17-year low of 2.3%, which marks the second lowest monthly rate since the series began in 1959.
United Kingdom – Christmas – Early close at 12:30 GMT
United States Stock & Bond Market – Early Close at 18:00 & 19:00 GMT respectively.
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Andria Pichidi
Market Analyst
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