Weekly Market Outlook: FOMC and global PMI figures in focus
As US markets are closed on Thursday for the Thanksgiving holiday, there are quite a few different economic announcements coming out beforehand. This includes Manufacturing PMI numbers, Consumer Confidence levels, Unemployment Claim numbers, GDP and the latest release of FOMC Meeting Minutes.
It is also a big week for European markets as Eurozone, German and French Manufacturing and Services PMI numbers are also released this week. Of course, it is also meant to be the final week of negotiations between the EU and UK with many believing a deal could be announced soon.
While earnings season has winded down, investors will most likely be looking for the next big theme. Comments over the weekend from Russian President Vladimir Putin stating he is not ready to recognise Joe Biden as US President may cause investors to be cautious.
However, the market is focused on some big themes right now and they include emerging markets and sector investing. Learn more in these articles:
- Emerging Markets Index Investing
- Best Retail Stocks to Invest in Right Now
- How to Get Started with Socially Responsible Investing
- Best Stay at Home Stock to Buy
- Russian President Vladimir Putin says he is not ready to recognise Joe Biden as US president
- France plans lockdown easing in three steps as governments look towards the holiday period
- UK set to announce the biggest public borrowing since World War II
- Apple halves app fees for small developer sonly
- Airbnb prepares for IPO
Source: Forex Calendar provided by Admiral Markets UK Ltd.
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Trader's Radar - UK & European PMI figures
This week sees the release of a range of different PMI (Purchasing Managers' Index) figures. It is essentially an index based on a survey of the purchasing managers in different industries. Figures above 50 indicate an economy that is in expansion and figures below indicate it is contracting.
As businesses have to react the quickest to changing market conditions the managers within certain industries provide key information regarding the health of an economy. Even more so now with the impact of the coronavirus pandemic and subsequent lockdown restrictions.
The releases on Monday include 8.15am GMT French Services and Manufacturing PMI, 8.30am GMT German Services and Manufacturing PMI, 9.00am GMT Eurozone Services and Manufacturing PMI and 9.30am GMT UK Services and Manufacturing PMI. The market is expecting a fall in all of these figures which cover the lockdown period in most European countries. It is the extent of the fall that traders will be focused on.
Source: Admiral Markets MetaTrader 5, EURUSD, Monthly - Data range: from May 1, 2013, to Nov 22, 2020, performed on Nov 22, 2020, at 10:00 pm GMT. Please note: Past performance is not a reliable indicator of future results.
In the long-term monthly price chart of EURUSD above, it shows that the surge higher from the lows of the pandemic period have held quite well. If price can stabilise above this major level of support at 1.1646 - which was once a resistance line during 2015, 2016 and 2018 - then there is potential for buyers to try and test the multi-year highs of 2018 at 1.2424.
However, much will also depend on the US dollar which has been a downtrend in recent months. US Consumer Confidence figures released at 3pm GMT on Tuesday and the FOMC Meeting Minutes release on Wednesday at 7pm GMT could be important data points for traders to take into consideration.
Most analysts are forecasting significant stimulus plans and actions from new US president Joe Biden. This could pressure the US dollar further to the downside, helping to support other risk-assets like commodity currencies and even the euro. However, an announcement of Brexit deal could lead to a collapse in EURGBP so risk management will be key to navigating volatility in the market right now.
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Corporate trading updates and stock indices
As US and European earnings season winds down, investors will be looking for a new theme. In the past week, it has been news of a potential coronavirus vaccine from Pfizer and Moderna - two companies whose share prices have performed well. While stock markets advanced on the news, stock market indices have since traded sideways and lost some momentum.
Of course, this is partly due to the construction of stock market indices which hold a basket of stocks from all sectors. Institutional investors have been much more selective about which stocks to hold and have been rotating between stay at home and work from home stocks during lockdown restrictions. On the news of a potential coronavirus vaccine, value stocks and those which were unloved during the pandemic suddenly became more favoured.
In this type of environment, veteran investors are trying to pick out key themes to focus on such as specific sectors that are likely to perform well under US president Joe Biden such as infrastructure and renewable stocks. There have also been strong flows into bigger macro plays such as emerging markets and China which have largely been unaffected by a second wave of the coronavirus.
Source: Admiral Markets MetaTrader 5, SP500, Daily - Data range: from March 12, 2020, to November 22, 2020, performed on November 22, 2020, at 10:30 pm GMT. Please note: Past performance is not a reliable indicator of future results.
Last five-year performance of the S&P 500 circa: 2019 = +29.09%, 2018 = -5.96%, 2017 = +19.08%, 2016 = +8.80%, 2015 = -0.82%, 2014 = +12.32%
The above daily chart of the S&P 500 stock market index shows that price has continued to range traded and lose momentum at the previous all-time high price level at 3577. As volatility levels are quite low - after a significant increase over the past few months - the key skill that is likely to pay off now is patience.
Currently, price is struggling to break through which could make a retest of the lower trend line around 3400 possible. This would then complete the ascending triangle formation chart pattern in which traders will focus on mean reversion trading inside of the chart pattern until price breaks out and starts to trend.
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