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Week Ahead: posturing in Brussels and Black Friday in America

Our preview of the main financial events of the coming week, one that is likely to be marked by deadlocks on both sides of the Atlantic.

 
Week Ahead: posturing in Brussels and Black Friday in America

Tick. China’s new set of leaders has been named, removing another source of uncertainty for global investors.

However, the resultant perceived shift towards more conservatism, coupled with the predictability of Chinese leadership changes, means markets have taken little succour.

Rather, concern over the lack of a compromise to prevent a ‘fiscal cliff’ in the US – when taxes rise and automatic spending cuts kick in, potentially pushing the economy into recession – has seen global markets lurch lower since Barack Obama was re-elected as president 10 days ago.

This issue will likely continue to sap investor sentiment over the coming week as Democrat and Republican leaders meet to thrash out a deal. Bank of America Merrill Lynch provides the following advice to investors: ‘fasten your seatbelts and remain seated until co-pilots Obama and Boehner turn off the fasten seatbelt sign’.

Americans might choose to temporarily loosen their buckles for the Thanksgiving holiday on Thursday and ‘Black Friday’, traditionally the busiest shopping day of the year.

A US consumer sentiment reading due on Wednesday may reflect worsening morale amid this political bickering. The fallout from hurricane Sandy will continue to be reflected in economic data, subduing numbers on housing starts and building permits due over the coming week.  

Europe has a budgetary impasse of its own, with discussions to continue between Greece and eurozone finances ministers as they attempt to restore debt sustainability for the country, and work out a deal to release the country’s next aid bung. A final resolution is not expected.

They will meet against a backdrop of a worsening eurozone economy, with the recent confirmation that the troubled currency union slipped back into recession in the third quarter of the year to be followed by more weak survey results on Thursday, when the November PMIs are published.

More Brussels-based posturing will follow on Thursday, when EU leaders negotiate over the bloc’s long-term spending plans. British prime minister David Cameron – himself under pressure from eurosceptic MPs – has called for the budget to be frozen in real terms.

‘The EU has got to start living within its means,’ Cameron told reporters at a recent meeting with Italian prime minister Mario Monti, where the two failed to find agreement.

Meanwhile Cameron’s neighbour, chancellor George Osborne, will next week be focusing on public finance figures due to be published on Wednesday, which are expected by economists to show a slight improvement in the shortfall. Osborne is due to deliver his Autumn Statement exactly two weeks later.

As well as a fiscal update, investors can also look forward to monetary enlightenment on Wednesday as the Bank of England publishes the minutes from its Monetary Policy Committee (MPC)’s latest meeting.

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2 comments so far. Why not have your say?

William Bishop

Nov 17, 2012 at 10:03

While the issue of the "fiscal cliff" has certainly had a depressing effect on US business sentiment, I have not seen any evidence of consumers being sensitive to this.

I am a bit surprised that the Middle East was not mentioned as a potential negative, even though the likelihood of a major spillover affecting oil supplies still seems to be low. It might have been different if Romney had got elected, and was showing much more overt support for Netanahyu - we may be lucky that the latter and Obama seems to be as chalk and cheese?!

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Graham D-C

Nov 17, 2012 at 17:29

Horse trading between U.S. Republicans and Democrats over the national debt and the $1trillion hole in the 2013 budget has begun, whether agreement is reached or not, there wil be cuts in government spending and money in middle class Americans pockets.

The conflict between Israel and terrorist organisations in Gaza, is evidence that the former will defend itself against all comers, irrespective of what U.S. president is in office. The timing of visit by the PM of Egypt with its Islamic President, to Gaza, is a clear pointer of where that country's political loyalties lay.Fortunately, they cut no ice with Israel's political and military leaders. The spat could of course be no more that a diversrion created by Iran backed militants in order to mask's Iran's significant increase in centrifuges at one of its deep underground uranium enrichment plants.

The French government has take a courageous and prompt step in recognising the politcal coalition of the FSA, Britain must not drag its feet to do the same and together(irrespective of others) agree to supply suitable much need weapons to assist in the bringing down of the Assad regime..

The demand for oil has fallen, whilst production from Iraq is increasing, so unless Iran blocks the straits of Hormuz, I do not expect any notable change to barrel of oil prices.

Given the widespread monetary crisis in European economies, where most are experiencing severe cuts in jobs, pay and pensions ; PM Cameron's call for the E.U. (whose financial books have never been audited) to live within its means is spot on. The sheer madness of pouring more money into EU coffers without any idea of where the money is going, has to stop, If Cameron does not act, his position as PM will be called into serious question by party MP's and supporters.

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