A massive spike in payroll figures in Friday’s Department of Labor release was welcome news for the U.S. economy and a signal that the Federal Reserve is likely to remain on course. With greater consensus on monetary policy, one new factor with which U.S.-centric investors may grapple through the end of the year is the market influence of the incoming Congress, which will have a Republican majority in both the Senate and the House of Representatives. In a note to clients issued yesterday, Nicolas Colas, a market strategist at ConvergEx in New York, reflected on his recent trip to meet with lawmakers in Washington D.C. According to Colas, the GOP has a clearly defined plan for the first 100 days of the next session with the Keystone XL pipeline and reforms on corporate tax and housing finance. Also on the GOP’s agenda are moves to curb what the party perceives to be excessive regulation by the Commodity Futures Trading Commission, Consumer Financial Protection Bureau, Environment Protection Agency and Internal Revenue Service. While ferocious partisan politics are nothing new to the investment universe, any failure to find a middle ground on key issues may confirm a consensus view of gridlock that will delay badly needed structural reforms that would secure long-term U.S. economic recovery.
Monday, December 8: A series of critical data points will be released in Japan, with October trade, November bank lending and revised third-quarter gross domestic product on the schedule. Consensus forecasts call for an improvement in the final growth reading for the nation, but not sufficient to bring the economy out of recession. In Beijing Chinese trade data will be released for November with expectations for a sequential contraction in both exports and imports as low fuel prices and a high dollar weigh on trade. The meeting of the Eurogroup, the finance ministers of the euro zone, will bring political divisions within the European Union into focus as leaders discuss long-delayed structural reform.
Tuesday, December 9: German trade data for October will be closely watched after the strong factory orders released December 5. Although the index picked up on domestic demand, orders from abroad remained paltry as Russian sanctions keep depressing outbound shipments. October trade data from France will also be released on Tuesday as will U.K. industrial production for the month, with expectations for a slowdown in factory activity. In the U.S. wholesale inventories for October are forecast to register flat for the month.
Wednesday, December 10: Big data points will emerge in Asia, with November corporate goods prices in Japan providing another opportunity to judge the progress of Bank of Japan easing efforts as well as consumer price data from China for the month. Consensus forecasts call for a marginal rebound in October industrial output data scheduled for release in France as that nation’s economy continues to flounder. Meanwhile U.K. trade data for October is expected to register a modest reduction in deficit on the back of softer oil costs. With oil prices at the forefront of investors’ minds, the weekly Energy Information Administration inventory price will be a focus as clues to the impact of the Saudi supply glut on North American production levels.
Thursday, December 11: October machinery order levels due in Japan are predicted to contract for the month according to polled economists. In China, critical new loan data for November from the People’s Bank of China will provide investors with a gauge on the impact of recent targeted liquidity moves by the central bank on private sector borrowing. November consumer price index data for Germany and France will precede the ECB monthly report and LTRO release. Further weak inflation in the primary EU economies is likely to spark even more speculation that ECB president Mario Draghi will announce a new asset purchase facility in January. In the wake of last week’s spectacular employment release, initial jobless claims in the U.S. will take a back seat to seasonally important November retail sales figures.
Friday, December 12: October industrial production in Japan, as well as November industrial production and fixed investment figures for China, will dominate Asian market narratives. Forecasts are for softer regional activity in aggregate. In Europe the big data points for the day are euro zone third-quarter employment data and industrial production for October. In the U.S., a marginal uptick in the producer price index is forecast for October while University of Michigan consumer sentiment data is expected to indicate an improved mood among shoppers.
