Divergence between the rosier outlook on economic fundamentals of central banks and the darker omens signalled by the tightening up of the financial markets and deterioration in the commodity sector has grown.
Holiday-thinned staffing in Europe, Asia and the US in the first half of the week will severely curtail trade, though what this means for volatility is anyone’s guess.
United States:Christmas week will be light on the data front and will include consumer confidence, new home sales and the advance indicator numbers. The Chicago Fed National Activity Index (Monday) will be followed by the MBA Mortgage Market Report (Wednesday), along with the Case Shiller Home Price Index and Richmond Fed Index. Initial jobless claims (Thursday) are estimated declining 4k to 210k in the week ended December 22, after rising 8k to 214k in the week of December 15. Consumer confidence (Thursday) is expected to slip to 135.0 in December, from 135.7 in November and new home sales (Thursday) should rise 2.9% to 560k in November. EIA energy inventories are also due to be released. Advance indicators for December (Friday) should reveal an improvement in the trade balance for goods. NAR Pending Home Sales (Friday) may rebound to 103.0 in November from 102.1, while Chicago PMI (Friday) is set to sink to 61.0 in December from 66.4.
Canada: For Canada, activity picks up in the first week of 2019, with the December employment report due on January 4. There is nothing from the Bank of Canada until the January 9 policy announcement.
Europe: There aren’t many full trading days left for 2018, with German, Swiss, Scandi and many other European markets already closed on Monday for Christmas Eve and early closures in Paris and London, followed by a nearly full shutdown for Christmas on Tuesday as well as Wednesday. The shortened calendar week focuses on preliminary inflation data out of Germany and Spain on Friday. With import price inflation falling back sharply in November on the back of a sharp deceleration in energy price inflation we see the headline HICP rate for Germany falling back to just 1.9% y/y from 2.2% y/y in the previous month.
Meanwhile, the ECB’s economic bulletin on Thursday is likely to be a close repeat of Draghi’s introductory statement at the last press conference and still send a cautiously optimistic message on the outlook.
UK: London will be open for a half day on Monday before closing through to Thursday for the Christmas and Boxing Day holidays. Sterling markets will be as good as dormant until the new year, when the frustratingly unresolved Brexit solution will be back in sharp focus. The parliamentary vote on the Brexit deal and outline for a future relationship will take place in the week of January 14, before the legislated deadline of January 21.
Japan: Japan is closed Monday for Emperor’s Birthday. The economic calendar kicks off on Tuesday, with November services PMI (Tuesday), which is seen at a 1.2% y/y rate from 1.3%. The remainder of the docket comes on Friday and features December Tokyo CPI, which is expected to slow further to a 0.4% y/y pace, after sliding to 0.8% y/y in November from October’s 1.4% y/y. November unemployment is forecast at a steady 2.4%, with the job offers to seekers ratio unchanged at 1.62.
Australia: The calendar is empty in the final week of 2018, lacking economic releases or RBA speakers. The markets are closed Monday, Tuesday and Wednesday for Christmas. The next RBA meeting is on February 5, where no change to the 1.50% setting for the cash rate, is expected.
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