Positives and negatives Amid Black Friday Records and China’s Civil Unrest

• The S&P / ASX 200 opened 0.4% lower on Monday, unsettled over civil disturbances in China.
• Preliminary data out of the US suggests that the Black Friday sales were the biggest on record despite record inflation.
• With little data to go on this week, the market will battle these two divergent forces.

The positives

Preliminary results of the biggest shopping day of the year are in, and the US has hit a new online sales record for Black Friday. Despite high inflation, online bargain hunters were out in force, spending over $9bn.

Monday is expected to draw even higher sales, with Cyber Monday bargains expected to attract over $11bn of spend.

The foot traffic of in-store purchases was down slightly year-over-year, which was partly blamed on the weather.

The biggest beneficiary of the bumper sales number will be eCommerce behemoth Amazon Inc NASDAQ:AMZN (AMZN).

AMZN is down over 40% this year because rising interest rates and an anticipated slowing of demand due to runaway inflation have weighed down technology and growth stocks.

Friday’s sales results will go some way to opening the door to a quick AMZN recovery and will likely be well-received by the markets.

The negatives

The moderate results on in-store sales will likely heap more pressure on the big department store retailers like Macy’s NYSE:M (M). M had fallen 40% this year before recovering, trading 10% lower than at the start of 2022.

Further afield, civil unrest over China’s zero-COVID policy is starting to influence the markets. Over one billion people have endured some stringent restrictions on movement for almost three years, and tensions are reaching breaking point.

Asian markets have retreated marginally, predominately on the prospect of contagion rather than any immediate impact. So far, the pockets of civil disobedience are isolated and uncoordinated, having little effect on businesses and productivity.

Oil markets anticipating a pullback in Chinese buying due to the possibility of a government clampdown are selling off on Monday morning. Brent crude is down by 1.5%, continuing the pattern of last week as oil retreated by almost 7%.

The week ahead

It is improbable China will change tack immediately due to a few isolated pockets of resistance to the continuation of the zero-COVID policy. Given that we’re in the peak-flu season of winter, the restrictions will last at least for the next few months.

Possibly over the next few days, the leadership will attempt to quell dissent with an understanding of moderation. A mediation and carefully worded communique from the leadership committee being the order of the day. They will try to complete what many see as the last COVID winter before some inevitable rolling back of the lockdowns.

The exit will be difficult, but it is near the end of the road for the COVID-fatigued population, and one can only hope that better times lie ahead in the year of the Rabbit.

Summary

The economic data prints will be coming thick and fast this week from Europe and the US. Against the backdrop of Chinese unrest and the upcoming Christmas holiday slowdown, we can expect a particularly volatile week in the markets.