Fed Vice Chairman Clarida acknowledged that there is some evidence of global economic slowing. Though very upbeat overall, Chairman Powell also expressed concern regarding global growth, as well as housing weakness, the firm Dollar and corporate borrowing. Negative prints on Japan and German GDP growth provided some concrete evidence that the emerging market slowdown is spreading back to the G8.
United States: Housing indicators will be in sharp focus this week. The underlying trend for housing was weak in Q2 and Q3, but we see a modest rebound for housing starts and existing home sales to start the fourth quarter. The US economic calendar is compacted into the early half of the week as the markets gear up for the long Thanksgiving holiday weekend in the latter half. The NAHB Housing Market Index (Monday) is forecast to hold steady at 68 in November. Housing starts are estimated to rebound 0.7% to a 1.210 mln pace in October (Tuesday), partially reversing a 5.3% drop to 1.201 mln in September that was likely due to Hurricane Florence. The flurry comes Wednesday with the MBA Mortgage Market Report, an expected Durable Goods orders drop of 3.5% in October after a 0.7% gain in September and initial jobless claims that are estimated to inch up 1k to 217k in the week ended November 17.
Canada: Wholesale shipments (Wednesday) are expected to rise 0.3% in September after dipping 0.1% in August. CPI (Friday) is projected to hold steady (0.0%) in October after the 0.4% drop in September. The flat reading for the month comparable measure will leave the annual growth rate slowing to 2.1% y/y in October from 2.2% in September. The core CPI measures are projected to hold around 2%. Retail sales (Friday) are anticipated to grow 0.1% in September after slipping 0.1% in August. The ex-autos retail sales aggregate is seen expanding 0.3% in September after a 0.4% contraction in August.
Europe: With the data calendar calming down, the focus remains on Brexit developments and the political turmoil in the UK. Brexit aside, Italy, still defiant on its budget targets, will face Eurozone Finance Ministers at the Eurogroup meeting on Monday. The data calendar highlights are towards the end of the week, with final German Q3 GDP numbers likely to confirm that the economy contracted -0.2% q/q in the third quarter of the year.
Officials continue to maintain a cautiously optimistic view on the overall outlook and the Bundesbank is seeing a rebound in German growth in the last quarter. Against that background, preliminary November PMI readings (also Friday) will be watched very carefully, with German manufacturing PMI anticipated to rise 52.3 (median estimate is 51.9) from 52.0 in October.
ECB speak comes from Nowotny (Tuesday), Weidmann and Mersch (Thursday) among others. Events also include the account of the last ECB policy meeting.
UK: Brexit will remain the only show in town, with Prime Minister May facing the possibility of a no confidence vote following a string of senior level resignations from the government over her “worst of both worlds” Brexit plan. Most of the UK political punditry seem to think she would survive if there is a vote, as the majority of Tory Party MPs do not want the distraction of a leadership contest at such a critical time. If May holds on, which we expect, it still remains highly uncertain that the Brexit plan will pass a parliamentary vote. The House of Commons will be voting on it in early December. If the plan fails at parliament, then a new referendum or a general election would likely be called. This backdrop should keep the Pound under pressure for now.
The data calendar this week is quiet, featuring the CBI’s November Industrial Trends Survey (Tuesday) and monthly government borrowing data (Friday). The data is not likely to have a bearing on Sterling markets.
Japan: The September All-Industry Index (Wednesday) should fall 0.5% versus the prior 0.5% rise. National October CPI (Thursday) is forecast at 1.3% y/y from 1.2% overall, and steady at 1.0% on a core basis. Japan is closed on Friday for Labor Thanksgiving Day.
Australia: The thin docket has the minutes to the RBA’s October meeting (Tuesday). Governor Lowe (Tuesday) speaks on “Trust and Prosperity.”
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