A review of the week past and the week ahead

Charts (3)

What mattered last week:

  • The S&P500 reversed all the previous week’s loss and more, closing up over 7% following the U.S. election.
  • Which resulted in a Joe Biden Presidency and a split Congress, bringing with it a more friendly trade policy, and makes tax increases, the unwinding of Trumps' tax cuts, and potential unfriendly legislation on tech companies more difficult to implement.
  • Offsetting a continued rise in new COVID19 cases.
  • Volatility, as measured by the VIX index, closed 35% lower near 24.9.
  • U.S. 10-year yields closed 6bp lower near 0.82%.
  • Gold closed over $72.00 higher near $1951.
  • Crude oil closed 4.25% lower near $37.14/bbl.
  • The ASX200 closed almost 4.45% lower at 6190.2, following the rebound in global shares and a further easing in monetary policy from the RBA.
  • In FX, the AUDUSD closed 3.30% higher near .7260 as the U.S. dollar weakened after the election.

For the week ahead, the key events are:

Australia: NAB business confidence (Tuesday), Westpac consumer confidence (Wednesday), consumer inflation expectations (Thursday).

New Zealand: RBNZ interest rate decision (Wednesday), business NZ PMI (Friday).

  • RBNZ interest rate decision (Wednesday): The RBNZ isn’t expected to move the cash rate until March/April next year. The main feature of this meeting will be a renewed commitment to keep interest rates low, and details of the Funding for Lending Program (FLP) which is expected to be around $20-50bn in size and targeted at business lending.
  • CPI (Tuesday): CPI is expected to fall to 0.8% y/y reflecting slower growth in food prices with underlying inflation remaining soft at 0.3%.

China: CPI, new yuan loans, total social financing, M2 Money supply.

Japan: Reuters Tankan index, machine tool orders (Wednesday), machinery orders (Thursday).

U.S: Jolts job openings (Tuesday), CPI (Thursday), PPI (Friday).

Canada: Nothing of note.

Euro Area: German balance of trade (Monday), EU industrial production (Thursday), EA balance of trade, and employment (Friday).

UK: Employment (Tuesday), GDP (Thursday).

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