Week Ahead: A Low Volume Week with Focus on Washington and South Africa

Last week, the focus among investors was central banks and Washington. As expected, the Fed raised rates and forecasted three more in the coming year. In Europe, BoE, ECB, and SNB left rates untouched and forecasted no rate hikes in the coming year. In Washington, tax reform talks progressed in the conference.

In the U.S., the Dow gained by 1.35% continuing its track record of 4 records in 5 days and its 68 record for the year. The S&P 500 rose by 0.92% posting records in 3 days while the NASDAQ gained by 1.155. Cryptocurrencies became legit with bitcoin being listed in the CBOE. This week, it could be listed in the CME.

This week, investors will continue focusing on cryptocurrencies with Bitcoin expected to hit $25,000 following a potential listing in the CME. In addition, it could be a week of rallies for other cryptocurrencies like Ethereum and Litecoin whose futures could be listed.

Investors will also focus on Washington where republicans are expected to pass the biggest tax reform package in decades. On Friday, Marco Rubio and Bob Corker who posed a threat to the package agreed to vote for it. As a result, the president could sign the bill into law any day before Christmas.

In South Africa, investors will pay close attention to the ongoing ANC meeting. The meeting is expected to name Jacob Zuma’s successor as the ANC chair who will be expected to take over as president after 2019. The two major opponents are Jacob Zuma’s ex-wife, Dlamini Zuma and the current vice president, Cyril Ramaphosa.


In the last week provincial votes, Ramaphosa gained more votes than Zuma and so, there is a likelihood he will succeed Zuma. Last week, the Rand rose from $13.67 to $13.09 on hopes of a Ramaphosa victory. They hope he will help rebuild the country after years of destruction by Zuma who currently faces multiple corruption claims.

This week, we expect several economic data. On Monday, we will get the Australian CPI numbers with investors expecting a flat growth of 1.5%. On Tuesday, the RBA will release its minutes which will explain their recent rate decision. Traders focused on the AUD should pay close attention to this.

On the same day, we will get the German IFO Business climate data with traders expecting a 4 point growth to 117.6. We will also get the November’s business permits which are expected to reduce to 1.27M.

On Wednesday, we will get Germany’s data on PPI which traders expect to fall from 0.3% in October to 0.2% in November. We will also get existing home sales from the United States with investors expecting a growth of 5.54M from 5.4M in the previous month.

On Thursday, we will get the interest rate decision from Japan with traders expecting the BoJ to leave rates unchanged at minus 0.1%. The market moving data will be in the statement which will explain the thinking behind the decision. In the U.S., we will receive a confirmation of the QoQ GDP growth of 3.3% and the Fed Manufacturing Index which is expected to slow to 20.6.

On Friday, we will get New Home Sales and the Core Durable Orders from the U.S. and Canada’s GDP growth.

Traders will also watch out for the earnings coming from the U.S with top companies expecting to release their quarterly earnings. Of key importance will be companies like Micron (MU), Red Hat (RHT), FedEx, Darden Restaurants, and FactSet Research which will release on Tuesday. On Wednesday, Blackberry and General mills will release and on Thursday, Accenture, CarMax, Nike, and Paychex will release.

This week, expect volumes to be slightly down as investors break for the Christmas holidays. Still, expect large movements as investors do what is known as tax harvesting.




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