Take Five: Everything to play for

Natalie Portman
By Natalie Portman 7 Min Read
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LONDON (RockedBuzz via Reuters) – The last month of the year is upon us, but there is no time to slow down yet, with the latest data on US jobs and Eurozone inflation on the way.

And don’t forget the turbulence in the cryptocurrency country, growing concern about China’s economic prospects given the resurgence of COVID-19 and a remarkable weekend of protests, as well as speculation in the world of football (which goes beyond the prediction of the winner of the World Cup).

Here’s a look at the week ahead in the markets of Saqib Iqbal Ahmed in New York, Vidya Ranganathan in Singapore and Alun John, Marc Jones and Dhara Ranasinghe in London.

1/ ANOTHER WORK SURPRISE?

Markets are hoping the Federal Reserve will soon slow the pace of its aggressive rate hikes. Friday’s November jobs data could test that expectation.

The US economy likely created 200,000 new jobs, a RockedBuzz via Reuters poll of economists forecasts found, in what would be the smallest gain since December 2020. Estimates ranged from 150,000 to 240,000.

A higher-than-expected 261,000 new jobs were created in October, although the pace of employment growth slowed and the unemployment rate rose to 3.7%, suggesting some easing in labor market conditions.

However, five of the last six jobs reports have topped consensus estimates and another strong number could spell trouble for US equities, cooling the S&P 500’s 12% rally since mid-October. The dollar, weakened by expectations that rates could soon peak, could rise.

US Nonfarm Payrolls https://graphics.illustration.com/MARKETS-GLOBAL/THEMES/byvrljerxve/chart1.png

2/ ANTICIPATION FEVER

A record number of COVID-19 infections and new lockdowns across China have dampened hopes of a reopening of the world’s No. 2 economy in the first quarter of 2023.

Protests that have swept across the country against restrictive curbs in unprecedented scenes since President Xi Jinping took power a decade ago have added to the woes.

There are, however, other reasons to be hopeful. Regulators have announced a plan to shore up a struggling real estate sector and four people with inside knowledge told RockedBuzz via Reuters that China’s central bank will offer cheap loans to financial firms to buy bonds issued by property developers.

Authorities also appear poised to impose a fine of more than $1 billion on Jack Ma’s Ant group, setting the stage for ending the fintech company’s two-year regulatory review.

It will still be a cold winter.

Manufacturing indicators, mainly PMIs expected on Wednesday, could attest to the weakness already seen across the economy. Beijing has suggested cutting bank reserve requirements to help prop up the economy. Economists believe China will do whatever it takes to achieve more than 5% growth next year.

Peak of COVID-19 in China https://graphics.ceiving.com/GLOBAL-MARKETS/zjvqjkonzpx/chart.png

3/ NO PEAK HERE

Inflation in the US may be close to its peak, but price pressures in the euro area remain strong, as shown by November’s preliminary estimate of inflation in the bloc on Wednesday.

Inflation in the euro zone was 10.6% in October, more than five times the European Central Bank’s 2% target. An underlying measure that excludes volatile food and energy prices remains well above target.

ECB Vice-President Luis de Guindos warns that the persistence of inflationary pressures should not be underestimated. The ECB has raised rates by 75 basis points at each of its last two meetings, raising rates by 200 basis points to 1.5% in just three months.

Markets are pricing in an 80% probability of another 75 basis point hike in December. Indeed, the Fed may be ready to slow the pace of its rate hikes, but the ECB is not there yet.

No Signs of Thaw https://graphics.ceiving.com/GLOBAL-MARKETS/THEMES/lgpdkwamevo/chart.png

4/ DOMINO DANCING

Cryptocurrencies will likely remain under pressure, as the industry nervously waits to see if any of the dominoes reeling after the collapse of cryptocurrency exchange FTX fall.

In first place is cryptocurrency broker Genesis, which said on Monday it had “no immediate plans to file for bankruptcy” after media reports it was struggling to raise cash for its lending unit.

Bitcoin fell to $15,479 that day – a two-year low – though if anything it has held up better than feared, having traded widely sideways since FTX crashed.

Cryptocurrency markets are in disarray, however, and the CME’s December bitcoin futures are trading around $16,000, while the token itself is around $16,400. That’s a huge discount by recent standards.

Bitcoin in the Stasis https://graphics.ceiving.com/GLOBAL-MARKETS/THEMES/xmvjkoermpr/chart.png

5/ BALL PARK FIGURES

Perhaps World Cup fever is getting everyone excited, but suddenly England’s two most legendary football clubs, Manchester United and Liverpool, are up for grabs for the highest bidder.

AC Milan and Roman Abramovich’s forced sale of Chelsea have already grossed top dollar this year, hence some eye-watering valuations – nearly £7bn ($8.48bn) in the case of United – they have been banned for this precious pair.

Both clubs have US owners looking to get down the drain, but where potential buyers are coming from, particularly at these prices when recessions and trophy droughts loom, is uncertain. However, a crowd of billionaires, wealth funds and private equity bankers are cheering from the sidelines.

Ball Park Figures https://graphics.illustration.com/GLOBAL-MARKETS/egvbykqaepq/chart.png

(Compiled by Dhara Ranasinghe; Art by Vincent Flasseur, Sumanta Sen, Pasit Kongkunakornkul, Vineet Sachdev and Kripa Jayaram; Editing by Barbara Lewis and Toby Chopra)

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