Turkey being hit by another terrorist attack is likely feel the pressure over markets on Monday but will tend to move in line with international markers thereafter. With quite thin volume at the final week of the year, CDS spreads reflecting country risk premium have narrowed down from 281.3 a week ago to 273.2 on Friday. BIST100 closed at 78,139 on a 1.5% weekly gain (1.2% in $ terms) while lira was down 0.3% against $ to 3.522. Bond yields were also higher. 5y and 10y benchmark bond yields picked up to 11.21% and 11.40% respectively from 11.09% and 11.13% at the market close of December 30.
Main release of the week inside will be inflation while non-farm payrolls will be the main market mover in the remainder of the week. Besides, PMI in China, Japan, Eurozone and UK will also be widely followed.
You can find the details of data releases and events of the week below.
Turkey – 10:00 Manufacturing PMI (Dec): Manufacturing PMI numbers for Turkey will be announced on Monday by Markit/ISO. There is no market consensus about the data however market will follow whether realization will stay above previous month’s 48.8. Any index level below 50 points to a weakness and deterioration in manufacturing industry does not bode well with expected recovery in GDP growth in the final quarter of the year.
Turkey – Preliminary Exports by Turkish Exporters’ Assembly (TEA) (Dec): TEA will announce preliminary exports on Monday. Note that main difference between official Turkstat exports and TEA exports is that the latter does not include gold exports. TEA exports registered 5.0% y/y rise in November and some recovery is expected with expected growth in Europe and improving relations with Russia.
China – 4:00 Manufacturing and Service PMI (Dec): Data regarding Chinese economy continues to weigh on both Asian and global markets. PMI as one of the most widely followed is expected to show some weakening in December compared to a month ago. Manufacturing PMI is expected to slightly ease to 51.7 from 51.5. There is no consensus over service PMI but market will closely follow whether the index level exceeds its previous reading.
Turkey – 10:00 Inflation (Dec): December and hence annual inflation data will be released by Turkstat on Mondayat 10:00 a.m. local time. Market consensus on m/m inflation is 0.9% while y/y inflation is expected to riseto 7.6% from 7.0% in November. Inflation expectations may improve should headline CPI inflation remains below 7.0%. Bond yields may negative be affected though general consensus is a pick up in inflation in the final quarter of the year. Core inflation in the meantime is expected to slightly edge up to 7.1% from 7.0%.
UK –12:30 Manufacturing PMI (Dec): Manufacturing PMI in UK to be announced on Tuesday at 12:30 Turkey time is expected to remain above critical threshold 50 but index level is expected to come down to 53.3 in December from 53.4 a month ago. Any realization pointing to weakness in economic activity after Brexit would pressurize GBP/USD further.
US – 18:00 ISM Manufacturing (Dec): ISM manufacturing which allows us to follow production, employment, inventories and new orders in manufacturing industry will be announced on Tuesday at 18:00 Turkish time. Index level in December is expected to exceed critical threshold of 50 and stay at 53.7 compared to 53.2 registered in November. A worse than expected realization would disappoint markets about recovery in US economy and may lead to an ease in DXY and US bond yields.
Japan – 3:30 Nikkei Manufacturing PMI (Dec): Manufacturing PMI in Japan which will be announced on Wednesday at 3:30 (GMT+3) is still above critical threshold at 50, pointing to economic expansion. There is no market consensus about December manufacturing PMI but index level was 51.9 in November. Market will follow whether PMI remains above 50 by October.
Turkey 14:30 Real EffectiveExchange Rate (Dec): Real effcetive exchange rate which shows the inflation adjusted value of lira against currencies of Turkey’s trading partners. Index level was 95.2 and we may see real depreciation in lira continue in December as well as we saw further nominal depreciation. Note that deceleration in the index level refers to real depreciation.
Eurozone – 12:00 CPI Expectation (Dec): Inflation expectation for Eurozone in December is 1.0% y/y. It was 0.6% a month ago. Core inflation in the meantime is expected to remain constant at 0.8%. A higher than expected realization would raise hopes for growth and support EUR/USD however market impact may remain mixed as non-farm payroll data will be weighing on markets.
Japan – 3:30 Nikkei Service PMI (Dec): Service PMI in Japan which will be announced on Thursday at 3:30 (GMT+3) is still below critical threshold at 50, pointing to economic contraction. There is no market consensus about December service PMI but index level was 51.8 in November. Market will follow whether December PMI will exceed November value.
Eurozone – 11:00 Retail PMI (Ara): As another indicator that gives a hint over the fate of European economy, retail PMI stood at 48.6 in November. As there is no market consensus for the data, market will watch whether realization will stay over the previous realization. Any number better than November will be considered positive for European economy and support EUR/USD.
US – 16:15 ADP Employment Change (Dec): ADP employment change which shows private employment increase on monthly basis is an important indicator of private sector payrolls and usually provides a hint over the official data. It is expected to decline to 170k in December from 216k registered in November. A deviation from expectation may lead to a negative impact, albeit limited, as markets will be expecting non-farm payroll data to be announced on Friday.
US – 16:30 Initial Jobless Claims (Dec 31): Initial jobless claims which showed the lowest level since 1973 in Nov 12 with 235k is expected to stay at 263k in the week to Dec 31 whereas it was 265k in the previous week. A better than expected amount will convince investors that initial jobless claims have dropped to a lower level permanently. Recall that initial claims have been under 300,000 for 95 straight weeks, the longest streak since 1970. Hence, a realization lower than 250k would have a positive market impact on dollar and US bond yields.
US – 18:00 ISM Services (Dec): Contrary to ISM manufacturing ISM services is expected to show some weakening in December compared to November. Index level is expected to decline to 56.5 from 57.2 and any realization better than consensus may support DXY and US bond yields.
Eurozone – 12:00 Economic Confidence (Dec): Economic confidence in December is expected to rise to 106.8 from 106.5 a month ago. It is expected that industrial confidence carried the economic confidence to a higher level. Industrial confidence index is expected to rise to -0.4 from -1.1 while service and consumer confidence indices in November at 12.1 and -5.1 respectively eased to 12.0 and -5.3.
Eurozone – 12:00 Retail Sales (Nov): Retail sales as one of the main growth indicators in Europe is expected to drop 0.4% m/m in November, following 1.1% rise in November. Y/Y increase is expected to slow down to 1.9% from 2.4% within the same period. Any realization pointing to a weakness in retail sales will lower EUR/USD.
US – 16:30 Nonfarm payrolls (Dec): As the main driver of Fed monetary policy decisions, non-farm payroll will be the main market mover of the week. Market consensus is a 175k increase in December non-farm payrolls, almost the same as November realization of 178k. Average hourly earnings growth which usually weighs on markets more than non-farm payroll itself is expected to rise to 2.8% from 2.5%. Such realization would lead to a rise in dollar index and US bond yields.
ABD – 18:00 Fabrika Siparişleri (Kas): İmalatçıların yolladıkları mallar, stoklar ve siparişlerinden oluşan fabrika siparişlerinin Kasım ayındaki %2.7’lik artışın ardından Aralık ayında %2.2 düşüş göstermesi bekleniyor. Tarım dışı istihdamın ardından sınırlı piyasa etkisi olsa da orta vadeli makro görünüm açısından piyasaların önem verdiği bir veri olacaktır.
US – 18:00 Factory Orders (Nov): Factory orders which is built via goods that manufacturers transport and manufacturers’ orders is expected to post 2.2% drop in November, after 2.7% rise in October. Though data is considered as second tier in terms of market impact any surprise in the data would have some market impact.
03 Jul 18 (Tue)
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