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WEEK AHEAD PREVIEW: Highlights include OPEC, PBOC LPR; US retail sales, IP; China retail sales, IP; RBA mins; UK CPI, retail sales; CBRT, SARB

  • MON: OPEC JTC & Diwali (India); Chinese Retail Sales & Industrial Production (Oct), Norwegian Trade Balance (Oct), US New-York Fed Manufacturing (Nov)
  • TUE: RBA Minutes (Nov) & Hungarian Rate Decision, OPEC JMMC; Norwegian Consumer Confidence (Q4), US Retail Sales, Industrial Production, Import/Export Prices, & Manufacturing Output (Oct); Japanese Trade Balance (Oct)
  • WED: UK CPI (October), EZ CPI (Oct, Final), US Building Permits & Housing Starts (Oct), Canadian CPI (Oct); EU Ambassadors’ meeting
  • THU: CBRT, SARB & Indonesia Rate Decisions; Australian Employment (Oct), Swiss Trade (Q4), Norwegian Oil Investment Forecast (Q4), Swedish Unemployment (Oct), US Initial/Continued Jobless Claims (w/e November 9th & 2nd), Philadelphia Fed (Nov), Japanese CPI (Oct)
  • FRI: PBoC LPR (Nov), Moody's & S&P Reviewing South Africa; UK GfK Consumer Confidence (Nov), Australian Retail Sales (Nov), German Producer Prices (Oct), UK Retail Sales (Oct), Turkish Consumer Confidence (Nov), Italian Industrial Orders (Sep), Canadian Retail Sales (Sep), EZ Consumer Confidence (Flash)
  • (NOTE: Previews are listed in day-order)

CHINESE RETAIL SALES, INDUSTRIAL PRODUCTION (MON): Industrial production growth in October is expected to pare to a rate of 6.5% y/y from 6.9% prior; the September data showed the fastest pace of growth since December 2019, fuelled by a boost in manufacturing output; this momentum is expected to persist as China’s economy continues to recover from the fallout of the virus and with the rebound evident in other strong data releases for October. This includes better than expected PMI figures, where the official manufacturing PMI topped estimates, as did Caixin’s gauge of manufacturing, which rose to the highest since January 2011. China’s October trade data was also mostly encouraging, with both the trade balance and export metrics topping estimates, though imports disappointed, which usually suggests weak consumer demand. Nonetheless, this is unlikely to slow the recovery in retail sales, which are expected to strengthen to a rate of 5.0% y/y from 3.3%, likely boosted by the Golden Week holiday – which was an 8-day holiday this year instead of the usual 7-day intermission, due to the National Day and the Mid-Autumn Festival; a MOFCOM survey found that daily sales during the holiday were higher by 4.9% y/y.

JAPAN GDP (MON): Japanese prelim Q3 GDP is expected to print +4.4% q/q, rebounding from the previous quarter’s -7.9% showing (which was the third straight quarterly contraction); annualised GDP is seen rising to 18.9% from Q2’s -28.1%. The expectation for a recovery has been supported by improved global demand, as well as a pickup in Japan’s exports, industrial production and private consumption, which prompted the BoJ to revise up its assessments on the economy at its September meeting. The central bank has continued to reiterate that the economy remains in a severe state, though it has started to pick up, and the trend is still likely to improve. With that said, the capital expenditure component of the release is expected to remain in negative territory at -3.0% (prior -4.7%), after the continued collapse in machinery orders seen in September.

RBA SPEAKERS/RBA MINUTES (MON-WED): There will be an abundance of RBA communication in the upcoming week, with Governor Lowe to deliver remarks on Covid, the economy, and monetary policy on Monday, followed by RBA’s Kent and Debelle on Tuesday, as well as the release of the central bank’s meeting minutes on the same day; Governor Lowe will then give another set of remarks on Wednesday at a forum. Monday’s speech will be the Governor’s first post-rate decision opportunity to express his thoughts on the central bank’s recent policy action, where it lowered the Cash Rate and 3-year yield target and the rate of its term funding facility by 15bps, each to 0.10%; it also announced AUD 100bln of bond purchases within the 5-10 year bucket for a 6-month period. It is worth keeping in mind the decision came ahead of the Pfizer/BioNTech vaccine update (thus the minutes may prove to be stale in terms of the policy outlook in the medium-term), so it will likely be more interesting to see the Governor’s take on the matter (other key central bank officials from the Fed and the ECB have alluded to a steady course, noting that while the vaccine developments are constructive for the medium-term, the economy will still need a high degree of fiscal and monetary support in the near-term). The audience at both functions that Governor Lowe will partake in are titled more towards the corporate sector, but the Q&A could see more economic and policy-related commentary. Unsurprisingly, desks expect the Governor to signal a strengthening recovery alongside the encouraging vaccine update, but caveat with usual uncertainty ahead.

OPEC JMMC (TUE): The monthly meeting of the Joint Ministerial Monitoring Committee (JMMC) will take place on the 17th. The committee (comprising of Saudi Arabia, Russia, Iraq, UAE, Kuwait, Nigeria, Algeria, Venezuela and Kazakhstan) will track compliance among members and review secondary source data alongside current market fundamentals before proposing policy recommendations – thus no policy decision will be taken at this meeting. The JMMC will be key in laying the groundwork for the upcoming OPEC/OPEC+ meetings on November 30th and December 1st. We are on alert for another drip feed of ‘sourced’ reports during the day, which is likely to signal OPEC’s thinking heading into the decision-making confab at the end of the month. Consensus prior the Pfizer/BioNTech Covid vaccine update was tilted towards OPEC+ extending current production levels through Q1 2021 versus an output cut rollback to 5.7mln BPD (from the current 7.7mln BPD) in January under the pact. However, there has also been chatter of deeper output curbs, with recent reports stating that talks between OPEC and allies are closing in on a delay of between three- and six-months, while deeper cuts have not garnered support so far from other members (NOTE: unanimous consent is required for any revisions to the pact).

US RETAIL SALES (TUE): The Street looks for headline retail sales growth of 0.5% m/m in October, cooling from the 1.9% pace in September. Similar is expected from the ex-autos (exp. 0.6% m/m against the previous +1.5%), and retail control group measures (exp. 0.5% m/m against the prior +1.4%). Retail sales surpassed pre-COVID levels in June, and since then, have been putting in steady gains. But Moody's notes that the retail sales for October will be particularly telling: "Sales have seen a stunning recovery from the severe, if brief, recession that decimated the economy in the Spring, but support from fiscal programs and the shift in spending from services to goods has seemed set to fade."

US INDUSTRIAL PRODUCTION, MANUFACTURING OUTPUT (TUE): Industrial production is seen rebounding in October, with the Street expecting +0.8% m/m from the prior -0.6%; manufacturing output is seen rebounding +0.8% m/m from -0.3% prior. Credit Suisse says industrial production has lost momentum after a strong rebound this Summer. The bank expects a sub-consensus +0.4% m/m rebound for industrial production, which would still leave the level of output around 7% beneath pre-pandemic levels. The bank thinks that manufacturing will likely outperform, noting that employment in the sector continued to rise in October, while business surveys have been solid (the new orders component within the ISM manufacturing survey rose to a new cycle high in October, auguring well for future activity in the sector). Elsewhere, mining output has stabilised after collapsing earlier this year, but CS says it should show a modest contraction in this report. That being said, the bank argues that ahead, risks are skewed to the downside: "The election has increased the probability of divided government, limiting the prospects for renewed fiscal stimulus," while Covid infections are surging nationwide, adding that "restrictions should be more limited than in the Spring, but consumers and businesses are likely to be increasingly cautious, limiting activity."

UK CPI (WED): September’s inflation reading was bolstered by tailwinds from domestic stimulus measures, particularly the ‘Eat Out to Help Out’ programme. Given the scheme ended before October, the effect of that scheme will not be seen in the data. Even so, the consensus looks for headline CPI to rise 0.1ppt to 0.6% y/y, underpinned by auto prices continuing to rise, particularly second-hand vehicles. In the November MPR, the BoE noted that CPI remains well below its 2.0% target, and expects it to remain in proximity to current levels throughout Winter before ‘rising quite sharply towards the target as the effects of lower energy prices and VAT dissipate’. In terms of future readings, and as the UK comes out of the current mini-lockdown in early-December, activity is likely to pick-up once again; given some recent commentary from the Chancellor that he is already looking at further support measures, while not ruling out a return of ‘Eat Out to Help Out’, which could result in a resumption of the aforementioned inflation boost.

CANADIAN CPI (WED): Canadian bank RBC forecasts headline CPI will rise +0.3% m/m in October after a -0.1% prior. Price pressures are likely to be driven by autos prices and property taxes, since the yearly incorporation period falls in the month; food prices may weigh, while gas prices saw declines in the month. RBC will also be keeping an eye on the airfares category to gauge how trends are improving. The bank notes that the BoC's three core inflation measures have held up very well during the pandemic, averaging 1.7% y/y in September, alongside sizable federal fiscal supports that have been extended into 2021; and while RBC sees the BoC core measures falling over time, it sees little change in October.

CBRT PREVIEW (THU): Market expectations are entirely skewed towards policy tightening by the CBRT following the ousting of Governor Uysal, on account of the record lows hit by the Lira, whilst former finance minister Agbal was appointed with the central bank’s top job. Additionally, desks note more constructive commentary from Turkish President Erdogan, who recently seemed to suggest a more orthodox policy view than he has expressed previously. The Turkish currency has been strengthening on expectations of more stringent measures to stem the TRY decline, which has so far resulted in USDTRY extending losses below 8.000 vs. record highs of ~8.5790. Current analyst forecasts look for the CBRT to lift its key rate by between 400-575bps (currently 10.25%), with the median looking for a 475bps hike. The newly-appointed governor remarked that the “the current situation and expectations will be reviewed, developments will be closely monitored; and necessary policy decisions will be made with the available data and final evaluations”, while adding that the central bank will use all policy told in pursuit of price stability. Analysts at Barclays expect the central bank to over-deliver as a quick reversal of recent Lira action is warranted should the bank underwhelm. “The blended funding rate is likely to be around/close to the late liquidity window rate of 14.75%,” Barclays says, “with that in mind, we think the CBRT is likely to increase the weekly and overnight rates by 475bps to 15.0% and 16.5%, respectively.” The bank adds that the CBRT could also reverse the tweaks it made at the last meeting to widen the rate corridor by lifting the late liquidity window by only 325bps to 18.0%, narrowing the spread between the weekly rate and the late liquidity window back to 300bps.

SARB PREVIEW (THU): After a cumulative 300bps of rate cuts this year, 17 out of 22 analysts surveyed by Reuters think the SARB will next week leave rates at the record low of 3.5% (the other five look for a 25bps cut), and see the central bank keeping rates at current levels over the next year, as inflation is likely to accelerate in the months ahead, with base effects likely to lift annualised inflation above 4.0% in the first half of next year; Continuum Economics argues that the SARB will want to keep some ammunition available in case a second wave of Covid unleashes further havoc on the economy.

AUSTRALIAN LABOUR FORCE (THU): Headline employment change is expected to show a shedding of 30k jobs in October (versus the prior -29.5k), whilst the unemployment rate is seen ticking higher to 7.2% from September’s 6.9%, and the participation rate is expected to dip to 64.7% from 64.8%. Desks note that the Victoria lockdown throughout October is likely to pressure employment further, with analysts at Westpac also suggesting that payroll recovery in other states was running out of steam. The bank’s forecast for the metric is in line with consensus. Moving to the unemployment rate, last month’s modest tick higher was due to a 0.1ppt fall in the participation rate. If the participation rate eases again in-line with forecasts, then Westpac expects the unemployment rate to tick higher to 7.2% assuming -30k employment change.

JAPANESE CPI (THU): Japanese national CPI data for October is expected to remain subdued following the negative print in September, which marked the second consecutive monthly fall in prices. The recent declines were partly due to weaker demand amid the ongoing pandemic, although the main cause of the deflationary pressure was the government’s ‘Go to Travel’ campaign which provides residents subsidies for domestic travel including transport, hotels, restaurants and tourist attractions. This campaign was launched in late July with the initial discount set at 35% and was then boosted in October with an extra 15% in vouchers for a total 50% subsidy, while Tokyo and its residents were also added to the scheme from October after having initially been excluded due to the previous spikes in the city’s coronavirus cases. This subsequently pressured Tokyo CPI in October, with the headline -0.3% (exp. -0.1%, prev. 0.2%) and ex. fresh food at -0.5% (exp. -0.5%, prev. -0.2%), which is likely to filter through to the upcoming national figures. Further, the BoJ anticipates that consumer prices will decline for the time being but turn positive as the economy improves, and is then expected to gradually accelerate, which is reflected in its recent outlook report, where it cut the fiscal 2020 median core CPI forecast to -0.6% from -0.5%, although raised its FY21 median forecast to 0.4% from 0.3%.

PBOC LPR (FRI): The PBoC is expected to maintain its benchmark lending rates for the sixth consecutive meeting, with the 1-year Loan Prime Rate (LPR) expected to be held at 3.85% and 5-year at 4.65%. An unchanged outcome will likely be underpinned by the continued improvement in economic data, which supports the notion of China being the first-in-first-out of the Covid fallout. The central bank has also refrained from any adjustments to its LPR and its closely tied 1-year Medium-term Lending Facility (MLF) rate since April, which points to the unlikelihood of any changes to its benchmark rate given that the central bank had previously lowered the MLF rate first in the last three occasions prior to reducing its LPR. Instead, the PBoC has opted to conduct policy through liquidity operations.

UK RETAIL SALES (FRI): Both the headline and ex-fuel readings are expected to see the pace of growth moderate to 0.3% y/y from 1.5%, and 0.4% m/m from 1.6%. Given the data is for October, it will not be hindered by the lockdown implemented from November, and the tiering system before this is unlikely to have much impact; indeed, Oxford Economics believes this could have benefited retail performance. However, it is plausible the measure will have been hindered by the tiering system affecting consumer appetite at the time – evidenced via the month’s Springboard shopper numbers falling for every week of October; and may explain the moderation in the growth of retail volumes. Looking ahead, the implementation of a month-long lockdown may impact November’s data, but the end-of-year holiday period and vaccine developments should spur volumes in the months ahead, some desks have suggested.