LONDON (Reuters) – The UK’s long-awaited fiscal plan is (almost) here and after the turmoil sparked by September’s mini-budget, markets are paying close attention.
Chaos reigns in cryptoland as problems at cryptocurrency exchange FTX resonate, while the latest US and Chinese data comes just as hopes of an interest rate spike grow.
Here’s a look at the week ahead in the markets of Elizabeth Howcroft, Tom Wilson, Amanda Cooper and Mike Dolan in London, Vidya Ranganathan in Singapore and Ira Iosebashvili in New York.
1/ BUDGET DAY, AT LAST
The moment that sterling traders have been waiting for is almost here. On November 17, Finance Minister Jeremy Hunt unveils the government’s budget plan.
Predecessor Kwasi Kwarteng’s September mini-budget brought the pound to its knees and forced the Bank of England to intervene to stem a rout in the bond market.
Hunt has since scrapped most of that plan and signaled some £60bn ($68.70bn) in tax hikes and spending cuts that plug a gaping hole in public finances.
UK markets have recovered most of the mini-budget maxi-losses, but the outlook is bleak. The economy faces its longest recession in a century as a cost of living crisis rages.
The latest inflation and employment figures are also on the calendar. Inflation soared to 10.1% in September and there is little reason to expect any respite.
Chart: UK gilts recover after September fiscal rout – https://graphics.Reuters.com/GLOBAL-MARKETS/mypmomzznpr/chart.png
The crypto world has been thrown into further chaos by a meltdown at FTX. On Thursday, the main exchange was on the verge of collapse and users were unable to withdraw their funds.
A bailout deal offered by rival exchange Binance fell through on Wednesday, sending the top cryptocurrency bitcoin below $16,000 for the first time since late 2020.
Crypto investors are in shock – FTX founder Sam Bankman-Fried was considered by many to be the industry’s “poster kid”. Investors are now waiting to see if FTX can be saved and the extent of contagion within crypto markets, which have already taken a beating this year as central banks reverse pandemic-era monetary policy.
Chart: Pain in crypto land – https://graphics.reuters.com/GLOBAL-MARKETS/THEMES/lbvggrkadvq/chart.png
3/ THE COMPUTER CROWD
This year’s fall in Big Tech stocks shows few signs of ending – due to the compression of real consumer incomes, fears of recession and a valuation overhaul due to soaring interest rates. interest that discount their future earnings at today’s prices.
After warnings about online advertising and streaming services plagued the third-quarter earnings season, massive layoffs are emerging. Meta Platforms has just announced that it will cut more than 11,000 jobs, or 13% of its workforce.
It’s one of the biggest this year and follows job cuts at other tech companies, including Twitter, Microsoft and Elon Musk-owned Snap. The big banks are also starting to downsize.
Markets are watching closely to see if others follow – and are trying to determine whether this is simply a pullback from overly exuberant and pandemic-distorted staffing levels or from the thin end of the wedge. which deepens any impending recession. Central banks will also be watching like hawks.
Chart: Tech in red Tech in red – https://graphics.Reuters.com/GLOBAL-MARKETS/THEMES/klpygearxpg/chart.png
4/ BIG SPEND
Wednesday’s U.S. October retail sales should give markets an idea of how consumers are faring ahead of the key holiday shopping season.
And remember that the Federal Reserve intends to raise interest rates to contain inflation, even if it means squeezing consumption in the process.
Data from September showed a measure of underlying retail sales rising on the back of strong wage increases and savings, although the broader number remained flat. Analysts polled by Reuters expect an increase of 0.8% for October.
The good news is bad news crowd would likely see a high number as evidence that the Fed still has work to do to cool the economy. This outlook is unlikely to bring cheer to markets battered by expectations of further monetary policy tightening this year.
Chart: U.S. Retail Sales Flat in September – https://graphics.Reuters.com/GLOBAL-MARKETS/THEMES/lgvdkmdgypo/chart.png
5/ BUY THE RUMOR
Chinese stocks celebrate that Beijing has relaxed some of its draconian COVID rules, including shortening two-day quarantines for close contacts of infected people and for incoming travelers. This comes despite cases on the mainland at 6-month highs and some major cities under new lockdowns.
The data ahead will be a stark reminder of the consequences of strict COVID policy: retail sales are plummeting, industrial production was hit by strict shutdowns during the 20th Party Congress last month and property sales are in a prolonged decline. .
The glass half full sees green shoots in promises authorities have made on growth and hopes for increased political support. One test is whether China’s central bank rolls over a huge trillion yuan in medium-term loans to banks, maturing on Tuesday.
Chart: The Reality of China The Reality of China – https://graphics.Reuters.com/GLOBAL-MARKET/THEMES/zdvxdymznvx/chart.png
(Graphics by Vincent Flasseur, Kripa Jayaram, Vineet Sachdev, Riddhima Talwani and Sumanta Sen; Compiled by Dhara Ranasinghe; Editing by Alison Williams)