Next Week

November 28, 2008

Central banks in New Zealand, Australia, Britain and Euroland hold interest-rate policy meetings next week. All of them will implement a cut of at least 50 basis points, and probably probably will slash by as much 100 bps. Conceivably, each will make a move of as much as 75 bps, although the consensus surrounding the ECB decision calls for a drop of just 50 bps because officials said nothing to encourage speculation about a larger action. The ECB press conference will unveil new  price and growth forecasts. The ECB staff in September still looked for 2008 growth of 1.1-1.7% and 2009 expansion of 0.6-1.8%. I cannot recall a 3-month period that saw the outlook for growth change more sharply. The projected 2009 CPI range announced in September of  2.3-2.9% already is entirely above the latest on-year rae of 2.1%.

This is the week that the United States and major European economies release monthly PMI readings for first manufacturing on Monday and later services on Wednesday. For the month of October, the U.S. service sector score of 44.4 was 1.4 points lower than Euroland’s, and the manufacturing score of 38.9 was 2.2 points less than its Euroland counterpart. The sum of the British PMI scores fell to 83.9 in October from 101.2 in April, 106.0 in October 2007 and 113.0 in October 2006.

Other Euroland releases include the Bloc’s producer price index, German retail sales and industrial orders and French unemployment. Japanese third-quarter investment spending is always eagerly awaited because it often indicates the likely direction of any revision to the preliminary estimate of economic growth. Monthly Japanese wage figures also arrive next week.

Canada releases September and third-quarter economic growth at the start of the week and November labor statistics at the end. Canadian building permits also are due in the first week of December.

Besides the U.K. PMI scores, investors will learn the value of the latest Nationwide index of consumer confidence, the Halifax house price index, and the size of British mortgage applications. Swiss consumer price and GDP data are due, too.

U.S. data releases are led by the November labor force survey, with estimates for the drop in jobs starting at 300K. Investors will also get U.S. data on construction spending, factory orders, weekly jobless claims, and consumer credit. The Fed’s Beige Book also gets published in the week ahead. Bernanke testifies on Monday, and Bank of Japan Governor Shrirakawa speaks that day as well. Bernanke has a public speaking engagement also on Thursday, the same day as ECB President Trichet’s monthly press conference.

Some foreign exchange activity may begin to be motivated by yearend accounting considerations. Early reports about holiday shopping and further announced Obama appointments will also attract investor interest.


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