Dubai: Investors are bracing themselves ahead of a rush of events this week, with analysts hoping the upcoming US Federal Reserve meeting and a flurry of US economic data will help drive a boost in riskier investments.
Global markets ended last week on a sweet note, led by Wall Street gains, after the release of a set of strong US economic data. Also, upbeat remarks from US President Donald Trump on Thursday that trade talks with China were “moving right along” eased concerns among investors who are hoping that a protracted trade tiff between the world’s top two economies will soon end.
The last Federal Reserve meeting for the year tops the agenda for the week. The Federal Open Market Committee (FOMC) meets on December 11 to decide on interest rates at the US economy, followed by a press conference by Chair Jerome Powell. Also, New York Fed’s John Williams’ talk on monetary policy on December 13 will peak investor attention as well.
“It is widely expected that when the FOMC wraps up its meeting this week it will leave interest rates unchanged — a break from a run of interest-rate cuts at three straight Fed meetings this year,” said Richard Barrington, Senior Financial Analyst at MoneyRates.com. “That doesn’t mean the Fed won’t make a significant announcement at the meeting’s conclusion,” Barrington said. “Sometimes there’s more to a Fed meeting than meets the eye.”
Analysts widely expect the meeting to hint at what lies ahead for the top economy next year. How the economy performs is an industry-wide gauge that influences macroeconomic sentiment. “With this being the last FOMC meeting of the year, it may go a long way toward setting the tone for 2020,” Barrington said. “That includes providing insights into both the Fed’s expectations for the economy next year and its monetary policy plans in response.”
Other news to watch
Any progress on trade talks between the world’s top two economies will dominate the limelight, as a December 15 US tariff deadline approaches. On the day, tariffs on another $156 billion in Chinese goods will go into effect, which economists view as potentially the most damaging, since they directly target consumer goods.
Elsewhere, GCC markets will closely watch state-owned oil giant Saudi Aramco’s first day of trading on the local stock exchange, Tadawul, on December 11. The firm priced its share sale at the top end of its expected range late on Thursday, making it the world’s biggest initial public offering at $25.6 billion after Alibaba raised $25 billion in 2014.
With the stock increasingly reliant on oil prices, investors will keep an eye on potential oil price gains after the Organization of the Petroleum Exporting Countries (Opec) and ally Russia agreed on Friday to cut crude production by an extra 500,000 barrels a day for the first quarter of 2020.
“For the regional markets, the announcement of extending oil cuts is likely to act as a catalyst for equities in the coming weeks,” said Iyad Abu Hweij, Managing Director at Allied Investment Partners PJSC. “Furthermore, this should also be positive for the upcoming Aramco IPO, as it should be supportive of current valuations on the back of expected improvement in oil prices.”
“Markets will take the news positively but as ever with Opec production cuts, what is agreed and what gets delivered can be very different,“ said Edward Bell, commodity analyst at Emirates NBD. Before clearing out for the holidays, the next week could be one of the last opportunities to evaluate where investors stand on riskier assets ahead of the year end.