Weekly Market Outlook

This week’s highlights are concentrated on Monday, Wednesday and Thursday. We open the week with China’s trade balance on Monday. A key thing to watch on Wednesday is the Bank of Canada rate meeting. Thursday comes with a few events which warrant investors’ attention: the European Central Bank rate meeting, the UK industrial and manufacturing production data, and Adobe’s results for the fourth quarter.

China’s November Trade Balance (Monday)

After the improvement in China’s trade balance starting in September, there are grounds to anticipate a strong year end, even on the background of the second coronavirus imposed restriction period. The comprehensive demand for medical PPE contributed to strong exports. Domestic demand in China has also been going strong in the past months, as the November figures are likely to confirm. Import figures are especially in the limelight, particularly after the Golden Week’s contribution in early November. Recent data have confirmed strong services PMI levels.

Bank of Canada Rate Meeting (Wednesday)

The problems that the Bank of Canada is facing are common for North America, with the hiring rate declining and restrictions getting stricter in the winter. October showed an especially sharp plummeting in hiring. As the November payrolls report showed on Friday, the decline is still in progress. Interest rates have reached a record low of 0.25%. The Canadian dollar has soared to its highest levels against the US dollar this year. The currency’s appreciation is a serious reason for concern for the central bank’s officials, as it is expected that the US Fed will resort to further easing measures at their late December meeting.

European Central Bank Rate Meeting (Thursday)

The ECB expanded its pandemic emergency asset purchase programme to €1.35trn from €750bn, extending it to mid 2021. These measures gave rise to the expectations of further recovery. Indeed, there was evidence of economic recovery since the pandemic started in March. However, the lockdowns recently imposed in Germany and France in November have exerted pressure on the ECB to fill the gap, especially with the delays in the EU fiscal package.

Manufacturing has been performing well, whereas services PMIs still definitely show contraction, with little likelihood of rebounding, as the restrictions are continuing in Germany and France. Another negative factor is the appreciation of the euro. The lack of a forthcoming fiscal response from the EU is an obstruction. There could be further easing measures, but they are likely to be constrained if the governing council is not unanimous. Most of its members have opposed further large-scale stimulus.

UK October Industrial & Manufacturing Production (Thursday)

The manufacturing sector’s performance has been positive recently, with gains attained every month since May. The third quarter was positive, with a sharp rebound  seen after the lockdown, reversing some of Q2’s worst losses. The recent PMIs figures have indicated a resilience in both manufacturing and construction, while the services sector has not fared that well, owing to the tighter restrictions imposed. The positive developments in manufacturing and industrial production are expected to continue. The gain, however, is likely to be the modest 0.3%.

Adobe Q4 Results (Thursday)

Adobe has been among the tech companies seeing their shares skyrocket to record highs, and their revenue soaring accordingly this year. The reason is the massive number of home working people. The company’s annual revenue is forecasted to exceed last year’s $11.17bn. The diverse product mix palette has been among the main reasons for that. The same can be said about Adobe’s cloud business, with the offering of tools for designing, publishing, photography, which  are essential in advertising and marketing, and also in analytics. The profits for Q4 are seen coming out at $2.65, the total annual revenue figure is expected to reach $12.8bn, a 15% increase compared to last year.