Normally the Christmas-New Year period is a time for relaxation, eating, drinking, and not worrying too much about events in the wider world – unless its terrible bushfires here like last year or now the coronavirus which is back with a vengeance in the US, UK, much of the EU, parts of Asia and now parts of Sydney.
Markets will be mixed – the impact of the new waves of the virus in the US, Sydney, and the UK has seen old worries about travel, tourism, and related stocks resurface, despite the appearance of three vaccines and the early start of vaccinations in some countries.
The US sees the two Senate elections in Georgia on January 5 – control of the Senate and the direction of the Biden Presidency is up for grabs. The US Congress votes to ratify the Electoral College vote ratifying the result of the November 3 presidential poll.
In the UK and Europe, the end of year deadline for a trade deal with Britain looms – that deadline may be extended for a short time if the groups are close to a deal.
Wall Street will trade confused – local markets will follow, but watch the continuing commodity price boom – especially in iron ore, copper, lead, oil, and LNG.
Data will be viewed in light of the virus and interpreted the same way.
In Australia the data flow will slow until early January – tomorrow sees the release of preliminary retail sales figures for November and Wednesday sees the preliminary trade data for November issued. The credit data for November from the Reserve Bank will be issued on December 31.
CoreLogic home price data for December (and 2020) will be released on January 4 (The AMP’s chief economist Dr. Shane Oliver expects them to show another 0.6% gain).
Early January also sees the release of the final surveys of manufacturing and services in Australia and globally with the from China again important for assessing the health of the current economic engine for the global economy and the most worrying country at the same time.
November building approvals and trade data will be released on January 7. Dr. Oliver expects approvals to rise another 1% (they were up solidly in September and October). The trade figures will be again boosted by high prices for iron ore (offset by a fall in shipments from Port Hedland especially).
Orica holds its AGM this week which just about wraps up the 2020 meeting and reporting seasons – though there might be the odd pre-December 31 trading update.
In the US there’s consumer confidence tomorrow, durable goods orders the month personal spending, and private final consumption deflator inflation data (both on Wednesday).
The third and final estimate of US third-quarter GDP is out tomorrow and is expected to show an unchanged growth rate of an annual 33.1.%.
The US jobs data for December will be out on January 8 and Dr. Oliver forecasts a 150,000 rise in new jobs and an unchanged unemployment rate of 6.7%.
Eurozone economic confidence data (on January) may show a slight recovery, but core inflation (the same day) will likely remain weak and unemployment (January 8) will likely rise slightly, according to Dr. Oliver.
The outcome of Brexit talks will also be watched closely. Dr. Oliver says some progress looks to have been made on the sticking point around fair competition rules, with issues around fishing and governance still remaining.
“If a deal is not reached then the UK will have the much talked about hard Brexit at year-end resulting in the imposition of tariffs, quotas and additional costs to trade between the two which would be far more negative for the UK as 43% of its exports go to the EU whereas less than 10% of EU exports go the UK,“ Dr. Oliver pointed out in his last weekend note for 2020.
“While much of the damage would be lost in the hit from coronavirus a hard Brexit could mean that UK growth in 2021 would be 2-3% lower than otherwise. The hit to Eurozone GDP would likely be much less at around -0.5%. A hard Brexit would also hit the British pound,” Dr. Oliver added.
Japan releases November industrial production data will be released December 28 after jobs data on December 24.
In China, before the end of the year/start of year business activity surveys, the People’s Bank of China holds an interest rate policy rate meeting today. Economists wonder if this meeting will see some of the emergency pandemic support will be unwound.
China’s trade data for December and 2020 will be released on January 7. The surplus is expected to be at or near record levels.
Merry Christmas, Happy Holidays, and a safe 2021.
