Morning Roundup

Protests Spread Across China

This weekend saw protests spread across China’s major metropolitan areas, as individuals demonstrated against the continuation of the CCP’s Covid lockdown measures. Despite the prospect of harsh repercussions, protestors gathered in cities such as Chengdu, Xi'an, Wuhan, Shanghai, and Beijing with reports of clashes with authorities.

These latest protests follow the civil unrest seen in Urumqi which started after the local population took to the streets in anger against local authorities’ lockdown measures which they argue hindered rescue efforts for a house-fire which saw ten people die. The localised protests subsequently gained considerable social media traction that sparked protests elsewhere.

Many are seeing these protests as a direct challenge to the CCP’s zero-covid measures specifically, and their authority more generally. Indeed, some protesters were demanding for Xi’s resignation, which comes just weeks after the CCP’s 20th Party Congress which saw the Premiere further consolidate his grip on power after gaining a third consecutive five-year tenure.

The protests come just weeks after some cities looked to be relaxing their covid measures. For example, last month Guangzhou, China’s southern manufacturing capital, announced that it would suspend a city-wide lockdown and opt instead for areas to be closed off on a district-by-district basis. This sent a risk-on sentiment throughout global markets, which was later subdued by further reports of rising covid cases and subsequent lockdowns in major industrial hubs.

The weekend’s unrest has seen WTI crude futures drop some 3% to around $74dpb and Asian equities dip sharply. The risk-off sentiment has also fed into pressure on US stock futures and European equities which has seen the DAX and Stoxx 600 futures slipping 0.5% and 0.3%, respectively.

The Week Ahead

This week’s primary market attention will be focused on US labour market data - chiefly Nonfarms on Friday and ADP data on Wednesday. Nonfarms are expected to come in at 208,000, representing a slowdown from last month’s print of 261,000 which surpassed market expectations. Similarly, ADP employment change (often seen as a precursor to nonfarms) are predicted to come in below last month’s figure as the US labour market begins to show signs of easing.

On Wednesday, markets will also be paying attention to the second estimate of US Q3 GDP data which is expected to come in at 2.6% (in line with the previous estimate). This data comes just hours before Chairman Powell’s speech, with markets hoping to get some further indication of how the Fed may act in their December meeting.

Elsewhere, Tuesday will see Q3 GDP data out from Switzerland and Canada in addition to CPI data from Germany. Wednesday will see Eurozone inflation data, where the markets will be chiefly focused on whether inflation has come off the record high of 10.6% seen in October. This of course comes ahead of the ECB’s rate decision on 15th December where money markets have priced in some 61bpts.

Thursday will also see the release of Eurozone retail sales which are predicted to come in at -1.5% (a significant depreciation from last month’s print of -0.9%). This will be followed by the Bank of Japan’s Governor Haruhiko Kuroda speaking as well as US PMI manufacturing data. ??

This week’s market data will act as an important prelude for next month’s key central bank’s rate decisions including the Fed’s on 14th December as well as the ECB and BoE’s which both fall on 15th December.