In this weekly market outlook, the host reviews recent developments and looks ahead to key economic events for the week of December 5‑9, 2022. He starts with OPEC’s decision to keep oil production unchanged, noting it follows a prior 2 million‑barrel‑per‑day cut and reflects ongoing volatility, Russian sanctions, and Chinese demand concerns. He then explains the EU’s new sanctions on Russian crude, which will ban most seaborne imports and impose a $60‑per‑barrel price cap. The discussion shifts to China, where Shanghai, Beijing, Shenzhen and Guangzhou have eased COVID restrictions after recent protests, and manufacturing hubs like Zhengzhou (Apple’s biggest plant) are also reopening. Central‑bank commentary follows: a dovish Bank of England member suggests rates should peak below 4.5 % to avoid a deep recession, while the French central‑bank governor calls for a 50‑basis‑point ECB hike, indicating a slowdown in tightening. The host outlines the data calendar for the week, including final PMI releases, Chinese trade and inflation numbers, US producer‑price index (PPI) expectations, the University of Michigan consumer‑confidence survey, and rate decisions from the Fed, ECB, BoE, RBA and Bank of Canada. He notes market pricing of a smaller Fed hike in December and the probability of rate moves by other central banks. The segment ends with a reminder to subscribe to a free daily newsletter and a casual sports comment.
Chapters
Okay, happy Sunday, hope you're doing well, and welcome to this outlook for the week ahead where I'm going to talk to you a little bit about what happened with the OPEC meeting this weekend. We've got an update on the COVID rules in China. We've also got interesting commentary coming out of Bank of England and ECB officials which I can update you on. And then for the week ahead, we've got Chinese trade data, we've also got rate decisions coming out of the likes of the RBA and the Bank of Canada, and then we have US CPI, of course, always a focus for inflationary conditions for US policy, and that comes out on Friday. But let's dive straight in and let's talk a little bit about OPEC, who have responded to surging volatility and really growing uncertainty in the global crude market, just given a number of different things at the moment, from a growth perspective, from a Russian sanction perspective, from a Chinese demand perspective. And they've basically decided to keep production unchanged. Doesn't come as a great deal of a surprise. This was pretty much in line with what we were expecting. And this does follow that hefty 2 million a barrel a day reduction that we saw in the prior meeting. The other thing, of course, that's happening at the moment is to do with Russia. So European sanctions on crude exports from Russia, they're going to come into effect on Monday. This is where the EU will ban most seaborne imports of Russian crude and block anyone else from using the region's shipping or insurance services for the purchases of Russian oil unless it is done so below the price level of $60 price cap. The other thing that's really quite key at the moment in regards to, to oil and trying to work out the future direction is, and the decisions from OPEC, is what's happening in China. And we have had some largely positive news happen over the weekend where Shanghai has eased some of its COVID restrictions, joining other top-tier cities like Beijing, Shenzhen, Guangzhou. Authorities have moved to accelerate the shift toward reopening the their economies. And of course, this comes this time last week where there was quite an outbreak of a number of protests across the country. Just to give it a bit of context, pretty mind-blowing figure I saw here. Of those four Chinese cities— Shanghai, Beijing, Shenzhen, Guangzhou— if you were to put their population together as one total figure, just those four cities are the same size as the entire United Kingdom. So quite a big deal. Of course, a lot of these places are key manufacturing hubs, technology for Shenzhen. And the other thing we've seen here, of course, protesters for Apple, which we saw some of their production being impacted by these protests. And actually what's happening here is restrictions are also being rolled back in Zhengzhou City, which is Apple's largest manufacturing site in China. Otherwise, some other things to update you on, and this is some central bank commentary. First of all, coming out of the Bank of England, where according to Smriti Dhingra, Bank of England's benchmark interest rate benchmark interest rate should peak below 4.5% if the central bank wants to avoid a deepened and prolonged recession. For context, the Bank of England have been raising rates for 8 consecutive meetings now. The benchmark rate is currently at 3%, obviously the main focal point being to tackle inflation. Their next meeting coming on the 15th of this month. But these comments here, of course, a little bit more on the dovish side, but coming from a dovish member. If we just look at the MPC board here, the top being the most dovish members, Tenreyro, Dingra, and Cunliffe, Mann and Haskell being the most hawkish. So this type of commentary doesn't come as a great deal of surprise. Flip over to the ECB, pretty similar really. The head of the Central Bank of France, François Villeroy de Galles, has come out and said the central bank should raise interest rates by 50 basis points. So again, reinforcing expectations that the ECB are going to slow the pace of monetary tightening, much like in a similar vein of what the markets are pricing for the Fed at this present point in time. And then just taking a quick look at the week ahead, what have we got in store? Well, these actual PMI numbers on Monday are all going to be final prints, so shouldn't really move the needle a great deal. However, if we skip on into Wednesday, we're going to get Chinese trade data. November was a month, of course, that was plagued by Chinese COVID lockdowns as case rates have, have soared. That in turn sparking some of that social unrest in several large Chinese cities. And with China being the second largest global economy, its data is going to offer us a bit of a glimpse into not only the domestic scene, but demand as well coming from the likes of the Western world in mainland Europe and North America. So that will be particularly interesting data. There's also inflation data coming from China as well. The other major thing happening this week is on Friday. Here you've got US producer prices, which are expected to ease in November, providing fresh evidence then for the Fed that their drive to bring down inflation is paying fruition or coming to fruition. Headline producer prices are expected to have risen 7.1% in November from the prior year, and that actually would mark its slowest increase since May of 2021, excluding volatile food and energy. So the core reading for PPI is expected to have risen just 5.8%, a step down significantly from 6.7% in October, and that would be the slowest pace since June of 2021. Um, again, as far as markets are priced, despite the jobs data that we saw at the end of last week, which saw that quite extreme negative reaction, but then recovered into the close on Wall Street, markets are still taking the lead from the comments from Fed Chair midweek last week from Jerome Powell, who talked about then come December the increment change of policy tightening is going to be slightly smaller, i.e., 50 basis points. And that's still priced at around an 80% probability at this present point in time when that meeting's on the 14th. So remember, this month you've got the Fed on the 14th, the ECB and the Bank of England on the 15th, so quite a lot to come in the week or so ahead. And then on Friday, just back to the calendar, you also get the December University of Michigan number. Could be quite interesting. US consumer confidence again expected to soften, and these are the preliminary numbers, so markets will be keeping a half an eye on those. The other central banks, of course, I briefly mentioned are the RBA. They're likely to hike rates again on Tuesday when they meet. Money markets are pricing in around a 70% chance of around a 25 basis point rate increase. And then for the Bank of Canada, they come out on Wednesday Markets and economists, though, this one could be a little bit more interesting. They're pretty split on what we're looking out for and whether or not the central bank will opt for 25 or 50 basis point rate change. So yeah, that's it. That's everything to look out for this week. I hope that was useful. Don't forget to sign up for our free daily newsletter. I'll drop the link on the video for this if that's going to be useful for you. Otherwise, have a good week ahead. And come on, England, playing tonight against Senegal.
