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Global Economics & Markets Research Summary (27 November 2017)

Core Content Overview

This report provides a comprehensive analysis of global economic and financial market trends for the week starting 27 November 2017. It covers key economic indicators, central bank outlooks, FX rates, equity indices, commodities, and bond yields across major economies, including the US, Eurozone, UK, Japan, Australia, New Zealand, India, Thailand, Indonesia, Malaysia, and South Korea. The report also highlights upcoming market events and potential impacts on currency and asset prices.

Main Highlights

Markets Overview

• US Market: The week is marked by a busy calendar with several key economic data releases, including October new home sales, Dallas Fed manufacturing activity index, trade deficit, retail and wholesale inventory data, and consumer confidence.
• Eurozone: Inflation remains the central focus, with Germany's flash HICP and Eurozone HICP data due. The EC's economic sentiment indicators and final manufacturing PMIs are also expected to be closely watched.
• UK: Limited economic data until Friday, when November's manufacturing PMI is released. Brexit-related news, including potential Irish political developments, may impact market sentiment.
• Asia: Japan has a heavy data release schedule, while Australia and New Zealand have less significant data. Malaysia and South Korea are expected to have economic events that could influence their currencies and markets.

Central Bank Outlook

• US: The week includes the confirmation hearing of Jerome Powell and the last testimony of Janet Yellen. The Fed is expected to maintain a cautious stance on rate hikes, with potential for three hikes starting in March 2018.
• South Korea: The Bank of Korea (BoK) is expected to raise rates by 25 bps to 1.50% on 30 November, marking the first rate hike since 2011. The report suggests a gradual tightening path, with USD/KRW forecasted to rise to 1,070 by end 1Q18 and potentially 1,110 by end 2018.
• Other Central Banks: The Bank of Canada will release its Financial System Review, while the UK's BoE will issue its financial stability report.

FX Rates

• The USD fell significantly last week due to reduced expectations of 2018 rate hikes.
• EUR/USD rose above 1.19, supported by momentum in German coalition talks.
• GBP weakened against the EUR due to potential Irish political instability.
• Asian currencies like MYR and CNY fell, while USD/SGD remained relatively stable.
• USD/KRW is expected to strengthen due to BoK's rate hike, but long-term gains may be limited by US rate hikes.

Equities

• US major indices rose sharply on Friday, with the Nasdaq Composite posting a 1.6% weekly gain.
• European shares ended the week under slight pressure, with the STOXX 600 down 0.13%.
• UK's FTSE 100 fell 0.10%, while France's CAC 40 and Germany's DAX showed modest gains.

US Treasuries

• US Treasury yields rose slightly, with the yield curve between 2-year and 10-year notes at 59 basis points.
• The Treasury is expected to sell $88 billion in short- and intermediate-dated bonds, which may lead to bond buying for month-end extensions.

Commodities

• Oil prices surged to a two-year high due to the partial closure of the Keystone pipeline.
• Gold prices dipped as investors locked in profits, but there are expectations of a rebound next week.

Key Economic Indicators and Data Releases

• US:
  • October new home sales and Dallas Fed manufacturing activity index on Monday.
  • October trade deficit, retail and wholesale inventory data, and consumer confidence on Tuesday.
  • Revised 3Q GDP, pending home sales, and jobless claims on Thursday.
  • November ISM manufacturing index, auto sales, and construction spending on Friday.
• Eurozone:
  • Flash HICP in Germany on Wednesday, followed by Eurozone HICP on Thursday.
  • Final manufacturing PMIs on Friday, expected to be closely watched.
• UK:
  • November manufacturing PMI on Friday.
• Japan:
  • Retail sales, industrial production, and inflation data throughout the week.
• New Zealand:
  • November ANZ Business Outlook survey, the first after the new centre-left government's formation.
• Singapore:
  • Industrial production growth of 14.6% y/y in October, slightly below consensus.
  • Electronics cluster saw the fastest growth in three months.
• Malaysia:
  • November Nikkei Malaysia PMI and economic sentiment indicators.
• Thailand:
  • November CPI and trade balance data, along with the Nikkei Thailand PMI.
• Indonesia:
  • November CPI and core CPI data, as well as the 3Q CAPEX survey.
• India:
  • 3Q GDP and GVA data, indicating continued economic growth.
• China:
  • November manufacturing PMI and October retail sales data.

Market Holidays & Events

• Philippines: Bonifacio Day on 30 November.
• Malaysia: Birthday of Prophet Muhammad on 1 December.
• Indonesia: Maulid Nabi Muham on 1 December.
• Thailand: King's Birthday on 5 December, Constitution Day on 11 December.
• Singapore & Malaysia: Christmas Day on 25 December.

Summary of Key Data

• SGD NEER (as of 27 November 2017):
  • Lower-End: 1.3896
  • Upper-End: 1.3352
  • Mid-Point: 1.3619
• Interest Rates:
  • USD Fed Funds Rate: 1.00%
  • EUR Refinancing Rate: 0.00%
  • GBP Repo Rate: 0.50%
  • AUD Official Cash Rate: 1.50%
  • NZD Official Cash Rate: 1.75%
  • JPY Official Cash Rate: 0-0.10%
  • KRW Base Rate: 1.25%
  • HKD Base Rate: 1.00%
  • CNY 1-Yr Working Capital: 4.35%

Conclusion

The week ahead is expected to be data-driven with a focus on economic indicators and central bank decisions. The US and Eurozone remain central to the market's attention, with the BoK's rate hike in South Korea potentially influencing USD/KRW. The report highlights the importance of monitoring inflation, employment, and manufacturing data, as well as the political climate in the UK and Ireland, which may impact market dynamics.