Some thoughts going into next week

A very heavy data calendar for next week in the US:

• Monday: ISM expected (37)


• Tuesday: Domestic Vehicle Sales (7.8m)


• Wednesday: ADP(198K), ISM Non-Manf. (42), Beige Book (Exp: Very Soft)


• Thursday: Initial Jobless Claims (540K),


• Friday: Nonfarm Payroll (-320K, 6.8%)

As can be seen from the expected data (according to Bloomberg) above very week numbers are indeed expected for the week, so weaker than expected numbers could be difficult to achieve. On the other hand should that happen it would indicate extreme weakness.

In Europe we get PMI manufacturing on Monday (36.7) and PMI services (46.2) on Wednesday, before we on Thursday will be blessed with ECB and BOE announcements.

The economist expectations for ECB are a move from 3.25% to 2.50-2.75% and for BOE a move from 3% to 2% is expected on Thursday. The ECB decision and discussion will be extremely interesting considering the aggressive market expectation for less than 1.75% during the Spring of 2009 and actually the market is discounting a high probability of a full percentage cut on Thursday or an inter-meeting cut later in December, see below (click to enlarge)

Market questions for the coming week:

Will the positive sentiment in equities carry over from last week in equity markets of will the 1929 pattern play out?

As long as 940 (almost equal to 38% retracement of early September to late mid November) holds on the up-side and 840 on the down side (10 dma) a 1929 pattern is playing out.

Will more quantitative easing focus in fixed income markets help bunds to the target of 124 more or less equal to 3%. Strong support in 120 level. Let us see if the usual pattern of early selling Monday will be followed by buying Tuesday into the all important ECB/BOE meetings and payroll on Friday. Or will mr. Trichet spoil the bund market party?

What direction will eur/usd take after some undecided trading in the 1.23 to 1.30 range settling November in the middle of the range

Will gold prices pick-up momentum again after the lack of follow-through after the break of 800 in the latter part of last week?

Key levels on upside 843 and 880. On the downside focus will be 784 and 755.

On market views are still tilted towards a negative equity and eur/usd view, but more positive on bunds and gold, but no positions on as I will be following this from the sideline during my trip to New York this week. Being back for the final - and probably - most important nonfarm payroll numbers on Friday.

Finally I like this description of the difference between the Germans view of the world and the US, UK and French. I almost find myself on the German side, click below for the comment in FT.

And I have to agree to Willem Buiter's "Even central bankers should be held accountable: they play with public money after all"