Watch China data and oil reports

Genevieve Signoret

Macro Views

• The U.S. jobs report surprised on the upside. Yet we hold to our view that the Fed will not raise rates before the second half of 2015. Note that the unemployment rate did not come down: workers who had been idle are responding to jobs growth by rejoining the work force. Also, we’ve seen research suggesting that falling global crude oil prices will cause energy investment activity to slump long before consumption jumps on falling gasoline prices. If true, jobs growth can slow down before speeding back up.
• Speaking of oil, spot Brent crude closed today at US$68.64/barrel today. Markets could react next week to the monthly energy report trio: the International Energy Agency Oil Market Report, the Organization of the Petroleum Exporting Countries Monthly Oil Market Report and the U.S. Department of Energy Information Agency (EIA) Short-Term Energy Outlook. All three will hold supply and demand forecasts; the EIA report, additionally, will hold a price forecast.
• The ECB failed again to expand its quantitative easing program to include public debt or to do anything else, really. It did continue to talk tough. But, by focusing on keeping zombie banks alive rather than stimulating demand, and by failing to follow through on its tough language, the central bank is gambling dangerously with its credibility.  Markets concerned about the deflation risk will watch next week to see whether German and euro area industrial production numbers improve and how many banks take up ECB loans auctioned under its liquidity program, TLTRO.
• Polls in Japan suggest that Prime Minister Shinzo Abe will win the December 7 election by a landslide. This bodes well for his reform package. Markets await the release of revised Q3 GDP numbers.
• We’re questioning our scenario assumption that investment demand in Mexico will shoot up in the next two years, given falling support for President Peña Nieto and rising political uncertainty generally. Daily, we’re watching for mass turnouts and violence at protest marches, and for evidence of any protest coordination (leadership) emerging. This weekend, we’ll follow Senate discussions of Peña Nieto’s security and justice reforms.

Events in red are those most likely to shake markets.

All week

• Mexico: Possible protests; anecdotal evidence regarding investment plans. Will effective opposition leadership emerge? Will domestic and international investment projects go on hold?

During the week

• India: Foreign trade (Nov)
• Mexico: Auto production and sales (Nov)

Monday 8

• China: Foreign trade (Nov).
• Japan: GDP (Q3, final). On 18 November, we learned from the first estimate that Japan was in a recession. That very same day Shinzo Abe, Japan’s Prime Minister, announced his decision to postpone the second tax hike to 2017 and called a snap election. Consensus: –0.1% q/q (from -0.4% in the first estimate).
• Turkey: Industrial production (Oct).
• Germany: Industrial production (Oct). Germany’s IP serves as a preview for the Euro area number later next week. Consensus: 0.4% m/m (from 1.4% in Sep).

Tuesday 9

• Germany: Foreign trade (Oct).
• UK: Industrial production (Oct).
• USA: Job openings and labor turnover (Oct), EIA Short-Term Energy Outlook (Dec). We’re just starting to figure out how a 60-dollar-per-barrel world looks like. Next week’s oil reports will help us in such a challenge.   
• Mexico: Consumer prices (Nov).

Wednesday 10

• Global: OPEC Monthly oil market report (Nov).
• China: Consumer prices (Nov). China’s inflation has been steadily low in the last months. We expect no change in this trend. Consensus: no change at 1.6% y/y.
• Korea: Unemployment rate (Nov).
• Turkey: GDP (Q3).
• UK: Foreign trade (Oct).
• USA: Federal government income and spending (Nov), world agricultural supply and demand estimates (Nov).
• Mexico: Wage settlements (Nov), fixed investment (Sep).

Thursday 11

• Korea: Monetary policy meeting.
• Euro Area: ECB TLTRO auction. First TLTRO (targeted longer-term refinancing operations) was a bit disappointing: banks only borrowed €83Bn (forecast was €100Bn+). Banks are expected to borrow €120Bn+ in the second auction. The ECB is trying to expand its balance sheet in €400Bn with this program.
• USA: Retail sales (Nov), unemployment claims (Dec 6), business inventories (Oct), U.S. spending bill deadline. U.S. government will face a partial shutdown if Congress fails to pass a spending bill by this date. Consensus: retail sales, no change at 0.3% m/m; business inventories, 0.2% m/m (from 0.3% in Sep).
• Brazil: Monetary policy meeting minutes (Dec 3).

Friday 12

• Global: IEA monthly oil market report (Nov).
• China: Retail sales (Nov), industrial production (Nov), fixed investment (Nov). China is slowing down. PBoC further easing depends on how fast it is doing so. Consensus: retail sales, no change at 11.5% y/y; industrial production, 7.5% y/y (from 7.7% in Oct); fixed investment, 15.8% y/y (from 15.9% in Oct).
• Euro Area: Industrial production (Oct). This week the ECB staff revised down their 2014 growth forecast. Euro Area’s industrial production has been trending down all year, and October’s PMIs weren’t encouraging. Consensus: 0.2% m/m (from 0.6% in Sep).
• USA: U. Michigan consumer confidence and inflation expectations (Dec, preliminary).
• Mexico: Industrial production (Oct). So far, the Mexican recovery has been slower than expected. We expect a Q4 acceleration. Consensus: 2.6% (from 3.0% in Sep).