Key events over the next two weeks

As we head into the new year – we can reflect on an impressive turnaround in market sentiment through 2H19.

Back in August markets were worried about recession with the US Treasury yield curve having inverted and equities selling off. Today, after three Federal Reserve interest rate cuts and the announcement of a 'phase one trade-deal that eases US-China tensions, equities are at all-time highs and the yield curve has steepened. We have also had some better-than-predicted data, which makes it look increasingly likely that we are in for a period of stable interest rates in the US.

That theme should continue with the final set of releases in 2019. Home sales figures are likely to be supported by the plunge in mortgage rates experienced over the past 12 months while consumer confidence should get a lift from the strong jobs report and rising asset prices. Nonetheless, it isn’t all positive with the manufacturing ISM likely to remain consistent with ongoing contraction in that sector despite the better trade newsflow.

China will release its industrial profits on 27 December, we expect a smaller profit squeeze in November from the better industrial production data. On the last day of the year, we will have China’s official PMI, we expect manufacturing PMI to be above 50 due to growth in domestic orders although export orders will continue to be contracting from the trade war.

The Philippines will be reporting the budget balance for November which should show another deficit (forecast PHP -70.22bn) given the government’s efforts to perform “catch up” spending to close out the year. Philippines will also be reporting December’s inflation rate with market consensus at 2.0% (ING’s forecast at 2.1%) as base effects continue to fade.

We expect annual inflation to further increase in December to 11.5% (0.4% month-on-month) mainly on the back of an unsupportive base, while the recent rise in energy prices should also be a contributor, likely pushing transportation inflation into double digits again.