Major Events of Last Week

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The US Stock Markets slipped lower last Friday at the start of the vital US Christmas shopping season. The last two months of any year are always critically important for many retailers as this period generates between 20% and 40% of their total annual sales. Global central banks should now take central stage during the next month as a number of them are on the verge of implementing historical changes in their monetary policies. An ominous development did occur towards the end of last week resulting in Chinese equities plummeting. A prominent regulator advised that it has extending its investigations to include the fourth biggest securities company in China. The leading US indices produced mixed reactions last Friday illustrated by the Dow Jones Industrial Average dropping almost 15 points; the S&P500 inching higher by 1 point and the NASDAQ rising by nearly 12 points.

Investors will now turn their attention to the start of the US Xmas season which was initiated by Black Friday at the end of last week. Expert consensus is currently predicting that sales, during this vital period, will expand at a slower rate of 3.7% compared to last year’s 4.1%. This viewpoint immediately garnered support from initial reports which confirmed that consumers were assessing seasonal discounts with excitement but caution.

Traders were also starting to mentally gear themselves to cope with December since a number of significant events will occur during this month. For example, speculation has escalated recently that the European Central Bank (ECB) will introduce a new bout of monetary easing in order to counter the faltering European economy and the persistent threat of deflation. Specifically, the ECB is presently considering both lowering its interest rates and enhancing its extensive monthly bond-buying program in order to achieve these objectives. In direct contrast, the US Federal Reserve is widely anticipated to start monetary tightening during December by instigating its first rate hike in practically a decade.

Investors were definitely stunned late last week after Chinese shares plunged by over 5% during Thursday night. The primary catalyst behind this unexpected bearish movement was news disclosing that the China Securities Regulatory Commission had widened its current probe by commencing an investigation into the operational activities of China Haitong Securities; the fourth largest firm of its type in China. Insider sources advised that the major objective of this task was to uncover any regulatory violations.  This announcement undoubtedly shocked traders who were already nervous about a pending decision of the International Monetary Fund (IMF) to determine if the Chinese Yuan should be added to its global basket of international currencies.

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What to Expect This Week

Italy will commence proceedings by presenting its Consumer Price Index (CPI) for last month on Monday. Economists will be hoping for a better result than the previous 0.2% in order to confirm that European inflation is on track to meet the ECB’s target of 2%. Japan will next disclose its latest Project Managers Index (PMI). The Yen could come under pressure if this parameter misses the anticipated 52.4. The Reserve Bank of Australia will complete the session by announcing its latest monetary policies. Although no changes are expected; there is still room for surprises following a recent batch of disappointing Australian economic data.

On Tuesday, the Eurozone will reveal a sequence of key PMI manufacturing indices which are predicted to deliver a rebound this time around. Later, Canada will post its monthly Gross Domestic Product (GBP), which should hover about the 0.1% mark. The US Institute of Supply will then issue its Manufacturing Index which should support expansion by recording a value of 50.1. Australia will terminate the day by publishing its Gross Domestic Product for the third quarter of 2015. Expert consensus is favoring growth of 0.2% for this period.

The United Kingdom is scheduled to release its PMI construction on Wednesday which needs to beat its prior 58.8 reading in order to verify that the British economy continues to improve. Later, the Bank of Canada will proclaim its latest monetary policies and decisions. No serious modifications are presently on the table.

On Thursday, the Eurozone will print a batch of key Composite PMIs which should all validate states of expansion by printing values above 50. The ECB is then expected to substantially augment its present monetary easing policies by increasing its monthly bond buying program and/or trimming interest rates. As such, this occasion could be market moving producing a significant increase in volatility. Next, the USA will provide its latest ‘Jobless Claims’ number which should confirm that the US labor market continues to strengthen.

The pivotal event of the week will then occur on Friday when the US Department of Labor posts its all-prevailing Labor Report for November. US employers are expected to have created just over 270,000 new jobs during last month. Canada will bring the week to a close by releasing its own employment figures, which should advise that almost 45,000 new posts were produced during November.

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