Key events to watch in the week ahead: 4 – 10 December 2023

This week’s overview

Following a move in the Nasdaq to a new year-to-date high last week, this week has seen the DJIA following suit, as Wall Street closed off November with their best monthly performance for the year. The US dollar attempts to bounce towards the end of the week but failure to reclaim its key 200-day moving average (MA) may still keep the broader downward trend intact. Gold prices continue to hang just 1.3% below its multi-year high, while silver prices have also regained some traction lately, surging as much as 16% to a new six-month high over the past three weeks.

December has historically been another month of positive seasonality for stocks, with eyes on the December Federal Rsereve (Fed) meeting to provide any go-ahead, alongside the usual labour and inflation reports.

Heading into the new week, here are four things to note.

5 December 2023 (Tuesday, 11.30am SGT): Reserve Bank of Australia (RBA) interest rate decision

At its meeting in November, the RBA raised its cash rate by 25 basis point (bp) to 4.35%. The RBA’s first rate rise since June was widely expected, and the statement accompanying the decision retained a watered-down tightening bias.

While the RBA’s communique since the November board meeting has sounded more hawkish, a string of data this week has brought some relief. Retail sales for October surprised to the downside at -0.2% MoM vs 0.1% expected. The monthly consumer price index (CPI) indicator, which hit a high of 8.4% last December, eased to 4.9% YoY in October, less than the 5.2% expected.

The cooler-than-expected monthly indicator sees downside risks to the RBA’s December 2023 inflation forecast of 4.5%, which should be enough to see the RBA keep rates on hold in December. Sticky “homegrown” services inflation driven by consumer demand means a hike in February is still possible and will hinge on the outcome of the December quarter (Q4) inflation data due for release in late January.

6 December 2023 (Wednesday, 8.30am SGT): Australia’s 3Q gross domestic product (GDP) growth rate

Australian GDP rose 0.4% in the June quarter of 2023 and 2.1% YoY. It was the seventh straight rise in quarterly GDP, and annual growth remained above trend, reflecting the absence of significant COVID-19 disruptions, such as lockdowns, in 2022-23.

Within the details,
- Capital investment and exports of services were the main drivers of GDP growth during the quarter.
- The household saving-to-income ratio fell for the seventh consecutive quarter to 3.2&, its lowest level since the June quarter of 2008.
- GDP per capita fell 0.3%, which means that although the economy grew, largely due to population growth, Australians experienced a fall in living standards. Households facing cost of living pressures have dug into savings.

This quarter, GDP is expected to increase by 0.4%, and the annual growth rate is expected to increase by 1.8%. This would be the slowest pace of annual growth since the December quarter of 2020.

8 December 2023 (Friday, 9.30pm SGT): US November non-farm payrolls

In the November Fed minutes, policymakers acknowledged that US labour supply and demand were coming into “better balance”, but assessed that labour market conditions remained tight. They continued to view “some further softening in labour market conditions as likely to be needed” to return inflation to its 2% target.

With firm expectations that the Fed is done hiking, along with 125 bp worth of rate cuts being priced by the end of 2024, a softer job report will be needed to provide validation for such dovish views. Current consensus is for US to add 175,000 jobs in November versus the previous 150,000, while unemployment rate is expected to hold steady at 3.9%. A more restrained wage growth will be on watch as well (previous 0.2% month-on-month) to provide more confidence of a softening inflation trend ahead.

9 December 2023 (Saturday, 9.30am SGT): China’s November inflation rate

China’s purchasing managers index (PMI) numbers for November failed to impress, with manufacturing activities dipping further into contractionary territory at 49.4, while services activities softened to a new 11-month low at 50.2. The data continues to reinforce the views that the recovery momentum for the world’s second largest economy has been uneven, with the series of downside economic surprises likely to see authorities lay more options of policy support on the table.

The upcoming inflation read is expected to point to a more subdued recovery front for China as well, with November consumer prices expected to stay in deflationary territory once more with a potential tick lower to -0.3% from the previous -0.2%.