The Week Ahead: G20 Summit To Take Centre Stage

Market Analysis /
26 Nov 2018
  • Markets await meeting at the end of the week between Trump and Xi on trade at the G20 summit
  • US data and speeches from FOMC officials expected to be pivotal drivers of sentiment this week

Volatility has been on the rise throughout October and November, but what are the root causes? Well, there are three big issues that have been affecting markets over the last two months. Namely, The US-China trade war, global growth concerns and rising US interest rates have all taken a toll on risk-assets in recent times, and this week they will all be at the forefront of investment decisions again, with several key events on the calendar that could have significant market repercussions.

The G20 summit in Argentina kicks off on November 30th, with the focal point being the anticipated meeting between US President Trump and Chinese President Xi. The imposition of tariffs and counter-tariffs between the world’s two largest economies has spooked global markets for several months now and its quite clear that investors would prefer a trade agreement to be reached between the two rather than have the tariff war continue indefinitely.

Whether such an agreement can be reached or at least agreed in principle at the G20 summit remains to be seen, but at the very least, markets would like to see positive dialogue on the subject and a ratcheting down of trade tensions. Such an outcome would soothe concerns, but conversely, if the meeting is not so cordial and trade tensions remain in place then this will continue to act as a constraint on global markets. Needless to say, the G20 is not only a key event but also an event-risk if trade tensions remain unresolved.

US interest rate expectations will be guided by what is a heavy week of economic data releases including readings on Consumer Confidence and Preliminary GDP, whilst several Fed officials will also have speeches including the Chairman Jerome Powell. Traders will be looking at the data for any signs that the US growth story may be approaching the end of the cycle, whilst also listening to see if the Fed speakers further emphasise the risks of a slowing global economy.

This is where we could see a bit of a ‘catch-22’ situation – if the Fed officials do make increasing references to slowing global growth, this on its face would be risk-averse as it would be seen as justifying the slump seen on Wall Street in October and November. But equally, such a global-growth risk could reduce the pace of rate hikes by the Fed, which would be a positive scenario for sentiment. We’ll see just how it all plays out, but the key US data and the Fed speeches this week will be pivotal drivers of market sentiment ahead of the G20 summit.

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