The coming week again focuses on international events to the detriment of U.S. fixed income fundamentals, although there are Fed buys, official appearances and inflation and industrial data during the period.
Key economic data include October retail sales (expected to rise, showing a good start to Q4), PPI and CPI price data (expected to moderate), while manufacturing data that should show growth.
Focus remains on Europe, as in addition to events in Greece, market participants are watching if Italy's 10-year yield can remain below 7% and when Italy's elections will be called, and are looking to see how far France can be dragged into the turmoil as its bond yields rise.
There are a number of regional Fed speakers, but key Board members are absent from the calendar.
Focus early in the euro zone week will once again be on wider political developments in the periphery. The new Greek government formed under Loukas Papademos looked like being given a short honeymoon period by the markets - if Friday's relative stabilisation in the markets is anything to go by. The same applies to the government which is expected to be formed around former European Commissioner Mario Monti.
Worry for euro zone leaders is that attention now starts to shift to France. This had already been in the air Thursday, with a move by Moody's or Standard & Poor's expected any day now to move the country off stable outlook and into Review or Ratings Watch mode.
That said, it is also an important data week next week for the zone, with flash Q3 GDP due for EMU as well as France and Germany on Tuesday. Analysts seem to be expecting a kind of technical bounce back for the core from the impact of the Japan tsunami on supply chains at the start of the year. But recent PMIs have pointed to underlying weakness in the EZ economies and ECB President Mario Draghi's comment at his first press conference that the zone is already maybe in a mild recession is echoing in markets' minds. A flat Q4 is expected and hence a further easing of policy further out by the ECB is also expected.
ECB officials have full speaking agendas next week, with Bundesbank President Jens Weidmann due to speak during the week and ECB President Mario Draghi slated for a keynote address on Friday next week. Chief Economist Juergen Stark is also due to speak on Tuesday. Now that Italian Board Member Lorenzo Bini Smaghi has announced his departure, we should start to hear some names of likely contenders emerge from France, given that this major euro zone country does not have a member of the ECB board at present.
In the past week, ...Read more
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