Week of November 21

The equity rally has accelerated, looking through a missile landing in Poland and the FTX meltdown. UK markets survived Jeremy Hunt’s tax-rising Autumn budget. Could Fed minutes spoil the party this week?

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The week in review

• Indices generally trended lower through the session as optimism from US CPI figures got a dose of reality. 
  
  
• Positive comments after Xi met Biden on the side-lines of the G20 meeting, but then adverse reaction to Xi's remarks later in the week in the context of the APEC meeting.
   
• The middle of the week was disrupted when reports of a missile landing in Poland surfaced, but tensions were diffused as Polish authorities said it wasn't deliberate. US authorities said it resulted from an air defence launch from Ukraine. The initial spike in crude prices and safe haven assets faded by the end of the week.
   
• Chancellor Hunt announced the contents of the Autumn budget, which was slowly leaked in the hours leading up to the formal presentation. The budget includes tax hikes and spending cuts, including lowering the threshold for tax brackets and increasing windfall taxes on energy companies.

TOP EVENTS IN The week ahead

Black Friday

Black Friday sales could put retail shares in focus, especially Amazon after it became the first company to lose $1 trillion in market value. The likes of Next, JD Sports, Kingfisher and AO World have been laggards amid the rise in the cost of living and this week’s budget isn’t likely to help in that regard. Strong Black Friday sales could push aside some of the pessimism for these shares and for the UK economy as a whole, which has been holding back the GBP, while weak numbers will likely continue the status quo.

Thanksgiving

The trading week will be somewhat shorter for Americans, with the markets closed on Thursday and only open half a day on Friday. Neither day is expected to have significant releases from North America. 

On Wednesday, the US reports durable goods orders for October, which are expected to slow down in all categories except for durable goods, excluding transportation. A little later, the University of Michigan reports its consumer sentiment metric, which is expected to remain in expansion territory, despite taking a 5-point drop. Then the FOMC releases the minutes from the last meeting, with extra focus on expectations for the December meeting in light of the latest CPI figures.

USD/JPY continues to trade mixed around the 140.00 area, with the bias being more bearish than bullish as 140.50 has not been breached, and on the downside, prices have support from  137.80.

Global PMIs

The focal point for the week is likely to be Wednesday, with the release of global flash PMI figures. European Manufacturing PMIs are expected to fall further into contraction. Australia and the US are expected to remain the exception in expansion but also lose some ground. After both the BOE and the Chancellor admitted the UK was in recession, PMIs are expected to fall to the lowest level since the pandemic and be the worst on the continent.

EUR/USD faces stiff resistance at $1.04 with $1.03 as a short-term base, in a tight consolidation needing a breakout. GBP/USD, on the other hand, trades within a more extensive range between $1.18 and $1.20.

Other events and earnings

Germany reports PPI on Monday, which is expected to slow down from the extraordinary rates seen in recent months. Tuesday has Eurozone consumer confidence, which is expected to be slightly less negative. Wednesday sees US new home sales. On Thursday, the Ifo releases its German business climate barometer, and New Zealand retail sales round out the week. Some corporate reports include Dell, Best Buy, Deere and Kingfisher.