Investors may finally get an answer to the question plaguing Britain since summer 2016 – deal or no deal?
UK: Pound prepares for final Brexit deal or no deal answer
Come Monday morning the markets should know the outcome of the long-running Brexit saga. The pound, assumedly, will suffer if a no deal separation is announced. What is unclear is whether the FTSE will join sterling in drowning its sorrows, or whether their usual antagonist dynamic will apply, with the UK index rising as the currency falls.
In terms of data, the jobs report is on Tuesday, with inflation and flash PMIs on Wednesday, the final Bank of England meeting of the year on Thursday, and retail sales on Friday.
Of those, only the Bank of England meeting has a chance of really making an impact. And what is said will be dictated by what happens Brexit-wise, something acknowledged by governor Andrew Bailey.
As for the corporate calendar, a fairly quiet week includes Purplebricks on Tuesday, and Dixons Carphone on Wednesday.
US: Can the Dow find a fresh injection of energy?
Still not completely comfortable with closing above 30,000, it is currently hard to see where the Dow Jones is going to get its latest injection of energy.
Approval for the Moderna vaccine, which the FDA meets to discuss on December 17th, could be a shot in the arm. The green light for the Pfizer/BioNTech preparation failed to garner a positive reaction, but that’s arguably because the UK and Canada had got their first. With the Moderna vaccine, the USA will likely be the first nation to make a decision on its emergency use authorisation.
It will also be interesting to see how the overall market mood is impacted by the Brexit news – already there has been evidence of widespread concern in the last couple of sessions, so that could count against the Dow this week.
Even if investors are keen to ignore it, covid-19 is always lurking in the background ready to sour the mood, especially since daily deaths recently crossed the 3,000 mark in the States.
Data-wise, Tuesday has the Empire State manufacturing index, import prices and industrial production readings. That’s followed on Wednesday by flash manufacturing and services PMIs and the latest retail sales numbers, the usual unemployment claims figure on Thursday, and the updated bank stress test results on Friday.
Though less pressing than in months prior, when investors were desperate for signs of recovery out of China, Tuesday morning’s fixed asset investment, industrial production and, most importantly, retail sales readings could all could to dictate trading in the first half of the week.
The Eurozone will likely be drawn into the aftermath of the Brexit negotiations, even if only by a reaction to a strengthening euro in the case of a no deal outcome.
There’s also industrial production on Monday, flash PMIs on Wednesday, inflation on Thursday and the German Ifo business climate number on Friday.
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