Australia: Retails surprised stronger, now awaiting for RBA tone post-MPC. Previously Gov. Lowe was sanguine on current trajectory - noting that next move will be a hike and that the RBA are not too concerned about low CPI/wages:
21 Nov: Rates will rise eventually as unemployment falls enough to spur wages, CPI. Not too far from 2%, just not getting there as quickly as we'd like. RBA are not 'inflation nutters', will accept low CPI for stability - RBA Gov. Lowe
We are strategically bearish AUD and would add on spikes, potentially after tomorrow's GDP print where up/downside risks are balanced.
South Africa GDP (530pm SG time, cons 1.7% qoq ann, prior 2.5%) could show whether the economy is coming from a position of fundamental strength ahead of ANC party conference (17 Dec). Our 'believability-weighted' check on consensus estimates suggests upside risk - with GDP potentially coming in closer to 2.3% due to a punchy call from HSBC (3%). With Ramaphosa gaining momentum from ANC party members, we are biased tactically bullish ZAR and SAGBs and strategically bullish South African stocks.
Poland NBP (time tbd) is expected to keep rates on hold at 1.50% but the recent upturn in CPI could shift the tone of the policy statement slightly more hawkish - despite resistance from the majority of policy committee members, including the Governor. Strategically long PLN-EUR.
Sweden's Riksbank governor speaks this evening, which would set the tone for its upcoming decision whether to extend QE. Markets do not expect an extension, in line with ECB, but QE end could be offset by communication that a rate hike is not imminent. Brewing concerns over the property market could intensify if home price data (Thu, 7 Dec) confirms a sharp slowdown. If this materialises, we would register Riksbank highly among central banks at risk of incurring a 'policy mistake' . Neutral SEK but watching house prices.
Qatar at the GCC Summit: Qatar stocks rebounded in recent days in anticipation of a thaw in relations with the Saudi-led bloc that has implemented an economic embargo. Though a breakthrough should not be expected, we think a no-worsening of relations would provide a boost to Qatar stocks, which are down ~25% ytd. MSCI clarification on FX valuation is expected as soon as today; clarity on the issue would be a technical positive. Strategically positive Qatar (potentially RV long vs Egypt/Saudi).
Today's risk events & opportunities:
Tue/5: New Zealand ANZ Commodity Px (8am), Australia BOP CAB (Q3, 830am), Australia retails (830am, prior 0%), RBA MPC (1130am, cons unch. 1.50% cash rate), Sweden industrial orders (430pm), EZ svces/comp PMI-fin (5pm), UK svces/comp PMI (530pm), EZ retails (6pm), EZ GDP-fin (6pm), US trade (930pm), US svces/comp PMI-fin (1045pm)
Speakers: Riksbank Ingves (10pm)
Events: Sweden Financial Stability Council meets, EU finmins meet (4pm, re tax haven blacklist), GCC summit (5-6 Dec, Kuwait), NATO foreign mins meet (5-6 Dec), IOC meets (230am Wed, re Russia participation in 2018 Pyeongchang Olympics)
EM: Korea BOP CAB (7am), Philippines CPI (9am, prior 3.5% yoy), China Caixin svces/comp PMI (945am), Romania GDP (3pm), Hungary retails (4pm), Hungary GDP-fin (4pm), Taiwan CPI (4pm), South Africa GDP (530pm, prior 1.1%/2.5% yoy/ann qoq), Brazil IP (7pm), Chile activity (730pm), Mexico gross investment (10pm), Poland NBP MPC (cons unch. 1.50%), Colombia CPI (8am Wed)