Holiday rush on data

• RBNZ raises interest rates by 0.75%, the most in a single setting on record.
• Key UK & Euro business conditions published on Wednesday, with markets anticipating a slowdown.
• US business and consumer sentiment is expected along with the Federal Open Market Committee (FOMC) minutes.

NZ tightening the screws

Across the Tasman Sea, The Reserve Bank of New Zealand has, as expected, raised key benchmark interest rates by 0.75%. Faced with stubborn inflation of 7.2%, well above the target of 1-3%, policymakers are slamming hard down on the brakes.

The Kiwi dollar reacted favourably to the policy direction and narrowed on the 0.62 USD mark for the NZD, up 13% on the month.

European woes

Later in the day on Wednesday, several critical business surveys are published that are expected to reflect a marked slowdown in the continent and the UK. The continued unrest in Ukraine is draining coffers across the trading bloc.

Russia and Gazprom are threatening to shut off the remaining piped Russian gas supply to Europe that enters via Ukraine as soon as next week.

The news sent US LNG supplier Cheniere Energy, Inc NYSE:LNG (LNG) higher by 5% on Tuesday’s trading day. The expectation is that this new powerhouse of international LNG trade will provide the balance of the marginal supply.

Liquefying and shipping LNG from US shores versus pipelines from the relatively proximal Russian fields is hugely energy inefficient. European businesses and consumers continue to suffer under the weight of sanctions against Russia, and the additional cost of supply relative to competitors near and far will weigh heavily on the European business outlook.

FOMC

FOMC language is expected to point to the gains in stemming the tide of inflation while, at the same time, highlighting the work yet to be done in bringing inflation back down to the target area of 2%.

Markets are starting to come around to the idea of interest rates staying higher for longer. Any indication that the door needs to be opened to sharp interest rate rises to dampen inflation further will cause the global stock markets to react negatively.

Thanksgiving Holiday

Thursday is a US holiday which will result in thin trading volumes on Thursday and Friday. We can expect the Australian and other international markets to follow suit with, barring some major calamity, volumes down.

Week ahead

Monday and Tuesday will get us off to a slow start before some big inflation numbers out of the Australian Bureau of Statistics (ABS) on Wednesday. They will be followed by China manufacturing sentiment, European inflation, US GDP, and employment, all capped off by the Fed’s Chairman Jerome Power’s speech to close out the month. It will be a busy day that will set the tone for the final month of trading for the year.

Outlook

Following a relatively slow week, things will be heating up next week ahead of the build-up to the Christmas holiday period. Depending on the economic data this week and next, the potential is there for a positive tone to close out 2022.