1. Themes for the Week
Emerging markets still weak & no bottom is yet in sight; this is the largest risk factor present. More EM weakness will likely pressure equity markets and I still prefer shorting Dax/Eurostoxx instead of US boards. China official PMI will also be influential in this context.
Main focus will likely be on the US employment report and slew of Fed speakers: Dudley (Mon, Wed), Evans (Mon), Fed Chair Yellen (Wed), Brainard (Thu) and Vice Chair Fischer (Fri). Other speakers include Williams (Mon, Thu) and Bullard (Wed). NFP is expected to show continued strength, with a 200K+ print. As we’ve seen recently, average hourly earnings will likely be more important. Currently the market is pricing in a hike in December…but we’re in data dependant territory and things can get volatile. US data & Fedspeak both important factors for USD performance, which is still poised to the upside.
Eurozone flash CPI risks falling into negative territory. This could cap the Euro against it’s trading partners, along with the growing speculation of an ECB QE extention.
UK index of services and manufacturing PMI are due. Regarding Gbp, there appears to be conflicting views inside the MPC…so until the market can get a better read on the (future) path of interest rates, USD developments will likely overshadow domestic developments. Gbp is still in the weak pack.
Nzd…surprizing but true: it’s one of the best performers into the week’s close, and thus is worth watching into this week.
2. Charts Illustrating these themes