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Take Five: World markets themes for the week ahead

Reuters  |  LONDON 

(Reuters) - Following are five big themes likely to dominate the thinking of investors and traders in the coming week, and the stories related to them.

1/AT $80

Brent hit $80 a barrel this week - good for exporters like and but less so for importers such as and especially those with big current account deficits, like The loss of Iranian supply into an already tight market should keep prices elevated for now.

But $80 has proved a formidable psychological and technical barrier, so staying above that is going to be tricky. Brent briefly popped above $80 in May, marking its highest in over three years, but it could not maintain altitude. There's likely to be a lot of options positions around this big number, and for all you chartists out there, technicals are at play too. The 61.8 percent Fibonacci retracement of Brent's $90 plunge between June 2014 and January 2016, comes in just above $81.

There's another barrier to consider: The has complained repeatedly about prices, demanding OPEC action to bring them down. And he was doing that when oil was lower than it is today, so another tweetstorm from the would be a surprise to pretty much nobody.

2/BIT OF A STRETCH

When the of Japan meets next week, it will scrutinize market moves since its July decision to allow bond yields more flexibility around its zero percent target. There won't be much to look at, though.

Despite Haruhiko Kuroda's assurance the BOJ will allow 10-year yields to stretch to around 0.2 percent, they have been caught in a tight range around 0.1 percent. It's proving difficult to revive a market that has seen liquidity dry up as a result of the central bank's huge purchases. This in turn means strains on the sector will remain in focus. For now, the BOJ may blame sticky yields on a summer lull and prefer to wait for longer before drawing any conclusions. But policymakers will also have to debate the risks that global trade frictions pose to the export-reliant economy. They'll notice there was no holiday lull in the rest of the world.

3/HOLD ON TIGHT

may have delivered a chunky 625 basis-point interest rate rise but similar fireworks are unlikely at next week's crop of central meetings in emerging markets. Nevertheless, with inflation and growth worries rising across the developing world and policymakers engaged in a delicate balancing act to calm investors, markets will watch for the sort of signals central bankers send.

Hungary, for instance, is expected to keep interest rates unchanged but its inflation report, also due on Sept 18, could show price pressures picking up. So it could spell out details of future policy tightening, though the first rate rise is unlikely before end-2019.

South Africa's rand, which is down 16 pct this year, looks like it needs the support of higher rates. But with the economy recently dipping into recession, authorities are unlikely to make the move, choosing to hold fire in case the emerging market turmoil worsens.

too should hold rates at 6.5 pct. The real has not been spared by sellers, though, and is down 21 pct this year. But inflation is running below-target and growth is sluggish. Political risks ahead of next month's elections remain high too. All of which suggest the central will keep its powder dry.

4/SHOP TIL YOU DROP

The mood music on UK is pretty dire. Sector bellwether just told investors that its first-half profit was all but wiped out - down 99 pct as the store chain was forced to match discounting by peers.

Its struggling rival plumbed new record lows after telling to examine radical restructuring options for the group.

Overall, earnings growth for retailers on the has slowly crept up since the Brexit vote, but is still a way from recovering to pre-June 2016 levels.

sales data on Thursday will update us on the health of the UK consumer, but signs are not encouraging. BAML economists say the summer bounce won't last and figures from the British Consortium last week showed shoppers had shunned the stores during the hot weather, apparently in favour of pubs.

Fears of Britain crashing out of the without an exit deal have kept investors favouring exporter stocks over domestically-focused stocks like retailers, which suffer directly from the squeeze on consumer wallets.

But retailers aren't just worried about a no-deal Brexit: as shows, they face an intensifying struggle against discounters and - where the "infinite shelf" of products lures in consumers while keeping costs low.

5/HOME SWEET HOME

U.S. existing home sales have hit a wall, falling for four straight months, and next week could bring that they slipped again last month.

A decade after the financial crisis - which had its beginnings in the U.S. housing market collapse - sales of preowned U.S. homes remains more than 25 pct below its pre-crisis peak. The sales pace has dropped nearly 7 pct from its post-recession high last November. What's keeping a lid on sales? In a word: supply. The number of homes for sale is stuck near a record low and inventory growth has been negative on a year-over-year basis every month for more than three years. That is driving prices to a record with annual sales price increases of nearly 5 pct. Many economists believe the steep prices are cutting into affordability, and the limited number of homes for sale is dissuading current owners from putting their homes on the market to trade up.

(Reporting by in Hong Kong; Dan Burns in New York; Jamie McGeever, Helen Reid and Claire Milhench in London; compiled by Sujata Rao)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Fri, September 14 2018. 17:29 IST
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