MARKET ANALYSIS – by Junaid Wilson

Following the terror attacks in Paris over the weekend, I will expect the markets to become risk off in the short term (1-3 weeks) on the Tokyo open. We should expect to see the JPY, USD, CHF and Gold slightly strengthen over this period but don’t expect wild swings in the market. The attack was over the weekend and market participants have had time to digest the information flow so far. I will expect participants to have a rounded view of what has happened going into Monday, so we shouldn’t expect to see any panic selling.

Global equities should continue their decline from last week especially stocks and indexes across Europe and the United states. This will be on the back of a risk of environment and an anticipated rate hike

Traders and Fund managers with exposer to the travel and tourism industry should expect to see large declines following the terror attacks. France has the largest number of tourists in the world and the sector accounts for almost 7.5 percent of GDP. This may also lead to a fall in visitors to France or tourism across Europe taking into consideration the Russian plane crash.

 

Monetary Policy

The Federal Reserve is not the only central bank where virtually every word from policy makers is viewed for policy direction by investors and traders. The ECB, Bank of Japan and PBoC fall into this category as well.

Investors have carefully dissected speeches from U.S. Federal Reserve officials including Chair Janet Yellen, Vice Chair Stanley Fischer and regional Fed presidents William Dudley, Charles Evans and Jeffrey Lacker during the week. But so far, traders have been complaining that Fed speakers has provided little clarity as to when the Fed funds rate hikes will start. On the other hand, Investors are also looking at comments from the European Central Bank for signs of additional easing at its December meeting. Also in Japan where expectations are for the second consecutive quarter of negative growth in the third quarter and yet another technical recession.

With the latest NFP reading a 271,000 headline payroll surge, upped the odds for the Fed’s big move. But the strength of the employment report didn’t point to strength for retail sales nor to strength for the PPI report continue to showed no growth whatsoever.

 

Looking ahead

Manufacturing and housing will be the features of the week including a key update on inflation. Empire State, a key report that back in August decisively signaled a break lower for the factory sector, starts off the week with the first indication on November’s activity followed on Thursday by the Philadelphia Fed report which has also been weak.

Industrial production on Tuesday will offer the first indications on October’s factory activity and a needed bounce for the manufacturing component is expected.

Consumer prices will also be posted on Tuesday and some pressure is expected. But whatever the results, the CPI is capable of affecting December FOMC expectations.

 

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