Week Ahead: OPEC meets, Caixin PMI to reveal coronavirus impact

Week Ahead
XRay

OPEC to the rescue, Democrats approach Super Tuesday, US Nonfarm Payrolls and more on Covid-19

Welcome to your guide to the week ahead in the markets. Watch the latest week ahead video in XRay on the platform now.

OPEC to the rescue?

Oil has been hammered as the coronavirus forced factories across China to cease production and grounded flights across the globe. China is coming back online now, but crude inventories have been building amid the demand drop-off and we could be facing shutdowns in other parts of the world if the virus continues to spread.

Crude and Brent fell to their lowest levels in over 12 months last week, but hope remains that OPEC will ride to the rescue when it meets on Thursday and Friday. The current pact to cut production by 1.7 million barrels per day expires at the end of this month. There is talk of extending the deal and cutting production by another 600,000 barrels per day, but it is uncertain whether cartel ally Russia will agree to such a move.

Caixin PMI

Chinese manufacturing came back online towards the end of February, with travel data showing a larger-than-expected number of workers were able to leave their hometowns and return to work after the extended Lunar New Year holiday. The number of people travelling at the end of the month was still well below usual post-holiday levels, however. Even businesses that have reopened are facing labour shortages, supply chain disruptions, and weak demand. This week’s Caixin Manufacturing PMI will be a key measure as economists slash growth expectations and markets look for clues over how severe the economic impact of a large-scale outbreak in the US or Europe could be.

Democrats approach Super Tuesday

This week will give markets a clearer indication of which Democratic candidate is likely to challenge President Trump in this year’s election. 14 states are due to hold primaries on ‘Super Tuesday’. Only 100 delegates were assigned during three primaries last week, with Bernie Sanders securing almost half of those. A strong performance on Super Tuesday would cement his position as the frontrunner – the number of delegates up for grabs on Tuesday alone is around a third of the nearly 4,000 needed to secure the nomination. Bernie is the worst outcome as far as the markets are concerned due to his socialist policies, so any shift in voting towards more moderate candidates like Joe Biden could see markets breath a small sigh of relief.

US nonfarm payrolls

Usually the highlight of the economic calendar, this month’s nonfarm payrolls may not be so impactful. The monetary policy outlook is currently ruled by coronavirus headlines – markets are betting on a rate cut in April, if not this month, and a solid set of jobs numbers would be unlikely to materially shift those expectations. Markets are thinking about the potential economic impact of a large-scale Covid-19 outbreak in the US, so backwards-looking data may not settle many nerves

Heads-Up On Earnings

2nd March – 01.45 GMTChina Caixin Manufacturing PMI
2nd March – 08.15-09.30 GMTEurozone / UK Finalised Manufacturing PMIs
2nd March – 15.00 GMTUS ISM Manufacturing Index
3rd March – 03.30 GMTRBA Official Cash Rate Decision & Statement
3rd March BeiersdorfQ4 2019
3rd March – 10.00 GMTEurozone Flash CPI Estimate
3rd March – After MarketHewlett Packard EnterpriseQ1 20202
4th March – 00.30 GMTAustralia Quarterly GDP
4th March – 07.00 GMTDS Smith Q3 Trading Update
4th March – 08.15-09.30 GMT Eurozone / UK finalised Services PMIs
4th MarchLegal & GeneralQ4 2019
4th March – Pre-MarcketDollar TreeQ4 2019
4th March – Pre-MarketCampbell SoupQ2 2020
4th March – 15.00 GMTBank of Canada Interest Rate Decision and Statement
4th March – 15.00 GMTUS ISM Non-Manufacturing Index
4th March – 15.30 GMTUS EIA Crude Oil Inventories Report
4th March – After MarketZoom Video CommunicationsQ4 2020
5th March – 00.30 GMTAustralia Trade Balance
5th March – All DayOPEC Meeting, Vienna
5th March – Pre-MarketKrogerQ4 2019
5th MarchAvivaQ4 2019
5th March – 15.00 GMTUS EIA Natural Gas Storage Report
5th March – After MarketCostco Wholesale CorpQ2 2020
6th March – 00.30 GMTAustralia Retail Sales
6th March – All DayOPEC+ Meeting, Vienna
6th March – 13.00 GMTUS Nonfarm Payrolls Report

Watch The Week Ahead on XRay

Highlights on XRay this week:
Daily –  08:15 GMT
European Morning Call
  Free Register       

March 2nd – 15.00 GMT
The Trendsignal Podcast
  Free Register    

March 3rd – 10.00 GMT
FXTrademark Course: Trading Strategies
  Free Register       

March 4th – 10:00 GMT
FXTrademark Course: 10 Laws of Trading
  Free Register       

March 6th – 13:00 GMT
Live Trade Setups with Mark Leigh
Free Register

Markets fall quiet ahead of US jobs data, UK seeks longer Brexit extension

Morning Note

Market activity has cooled today as traders across the globe await the latest non-farm payrolls report from the US. Last month’s data showed a severe undershooting of forecasts, with jobs creation clocking in at just 20,000 compared to the 175,000 consensus. But wage growth was solid and unemployment dropped back below 4%, making the headline jobs number easy to dismiss as a blip.


But private American payrolls data from ADP – which traders have often believed serves as an indicator for the NFP result – delivered a big miss this week. Markets are now bracing for another soft jobs number. The Federal Reserve has already paused its plans to continue hiking rates, with the dot plot shifting lower and markets already pricing in odds of a rate cut this year. Another set of dire jobs numbers, combined with pressure from the White House to begin cutting rates straight away, could make it hard for the Fed to avoid committing to a much more dovish policy trajectory.


Just keep an eye on wage growth – a tight labour market should be delivering strong pay increases. A solid performance here could soften the blow of any downside surprise in the jobs numbers, especially as a late-stage economy will naturally struggle to keep adding jobs. A 49-year low for US jobless claims in the previous week also suggested that the labour market remains on good form.

UK prepared to participate in European Parliament elections in exchange for longer Brexit delay

GBP/USD is holding firm just below $1.3100, with traders reluctant to bid sterling higher despite the news that Theresa May has requested another Brexit extension. This time the UK is seeking to push back the official exit date until June 30th. The past week has been a good one for those betting against a no deal exit – cross-party talks and a further delay have both cut the odds of a hard Brexit.


However, there are two reasons not to get too optimistic on sterling.
Firstly, sterling so far has been largely unperturbed by the significant risk of a no deal before this week’s developments, so optimism is largely priced into cable already.


Secondly, May and Corbyn might be able to reach a consensus, but given the leaders’ strenuous relationship with their respective parties, there is still no guarantee that even a joint deal can make it through Parliament.

This delay is unlikely to go down well with Brexiters, especially as it means fielding candidates in the European Parliamentary elections – expect there to be little goodwill in Parliament towards May and her new deal.

Equities hold near highs – NFP overshadows talk of incoming trade deal

Equities are similarly shielded from the latest tailwinds by the proximity of NFP figures. President Donald Trump yesterday stated that a trade deal with China could be concluded within four weeks, with President Xi Jinping calling for talks to conclude earlier.


Global equities are soft for now, but are still on track to close on a solid footing. The STOXX 600 index is on track for its best performance in almost three weeks, while the DAX hasn’t fared this well since December 2016. Gains for the S&P yesterday saw the index notching the first six-day winning streak since February 2018.

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