Next week (November 23), the first flash estimate of Eurozone PMI data for November will be published. In October, manufacturing sentiment in particular deteriorated significantly, suggesting a decline in manufacturing activity in the current fourth quarter. By contrast, sentiment among service companies cooled only slightly. However, the index also suggests a slight decline in activity among service providers in 4Q. For November, we expect a further slight weakening of business sentiment in the Eurozone. A stabilization of European gas prices, at a low level compared to the summer months, is currently a welcome signal, especially for industry. Overall, however, the economic environment remains highly uncertain. The EU’s monthly indicator for economic uncertainty rose slightly again in October and is gradually approaching the highs recorded at the outbreak of the Covid-pandemic in March 2020. Companies are therefore currently acting with corresponding caution and restraint in their personnel planning and investments. At least the capital market gave positive signals from an economic perspective last week. For the first time in a long time, inflation data in the US was significantly lower than expected by the market, which supported risky asset classes, especially equities. In addition, a meeting between China’s President Xi and US President Biden was unexpectedly amicable, given previous geopolitical tensions. This, combined with the announcement of measures to support the real estate market in China (focus on improving the liquidity situation of real estate developers), boosted Chinese equities in particular. As China and the US are the Eurozone’s most important trading partners, sustained improvement in the economic situation in China would have a positive impact on the Eurozone economy through rising export growth. We currently forecast a slight decline in GDP in 4Q by 0.2% q/q, after the Eurozone was able to grow surprisingly strongly by 0.2% q/q in 3Q. The economy should stabilize in the first half of 2023. Assuming that inflation should steadily lose momentum in the coming months, we expect Eurozone GDP to grow slightly from 2H23 onwards. Consumers in particular should benefit from the declining inflation momentum. For 2023 as a whole, we therefore expect slight growth of 0.3%, followed by a slight acceleration in growth to 0.7% in 2024. Download The Full Week Ahead

Europe It looks set to be another positive week for markets in Europe, however most of this week’s price action has been confined to a fairly modest range in what looks increasingly like a period of consolidation. The FTSE100 had yet another look above the 7,400 level and once again was unable to sustain the momentum. Amongst the gainers today, retail has done well, with Frasers Group higher after being rated as a buy by Numis, while JD Sports has got a lift after US counterpart Foot Locker upgraded its outlook for the year after beating on Q3 results. Legal & General is higher after reiterating its full year guidance while welcoming the announcement from the Chancellor of the Exchequer to overhaul Solvency II with a view to making it easier for domestic insurers to invest in home grown infrastructure projects. The insurer also stated it has taken a limited hit due to the recent LDI volatility on the UK gilt market, estimating an impact of about £10m. Royal Mail owner International Distribution Services was on the receiving end of more bad news today as the CWU union announced further strike days in the lead-up to Christmas, although the shares still managed to edge higher. Earlier this week the company announced it had slipped to a H1 loss of £127m. For the full year management said that full year operating losses are expected to remain between £350m and £450m, which includes the recent and current strike day losses, but not the new ones. The union said it would not allow bosses to destroy the livelihoods of postal workers, however the reality is that the strike action is making matters worse, and potentially hastening the loss of further jobs given the current scale of losses. BP and Shell are acting as the biggest drag on the back of today’s sharp declines in oil prices.    US After a slightly negative finish yesterday US markets shrugged off yesterday’s comments from St. Louis Fed President James Bullard about a 5% to 7% terminal rate and opened higher today. Yields have continued to edge higher, and while the prospect of a 5-7% terminal rate is not an unrealistic prospect, it's somewhat of an outlier at this point, and markets appear to be treating it as such. When US retailer Williams-Sonoma reported its Q2 numbers there was little sign of a slowdown in consumer spending with the owner of Pottery Barn reporting record revenues of $2.14bn, a rise of 11.3%, on the previous year. Yesterday’s Q3 numbers saw revenues come in at $2.19bn, also beating forecasts, however profits fell slightly short, although they were still up from a year ago at $3.72c a share. All so far so good however the retailer declined to reiterate its previous full year guidance of mid to high single digital annual net revenue growth, due to high levels of “macro uncertainty” and elevated inventories, sending the shares sharply lower. Inventory levels are expected to come down in Q4, however they are still 33% above the levels they were a year ago. Alibaba shares are in focus after missing on revenues in its recent Q2 numbers, and sinking to a surprise loss of $2.9bn, after marking down the value of some of its assets. Despite this the company announced an increase to its buyback program, as well as extending it into 2025. Alibaba said its Single’s Day sales were in line with last year's numbers, lagging behind its peer JD.Com. Gap shares are higher after Q3 sales came in better than expected. The company managed to report a 1% gain against an expectation of a 3.4% decline. Inventories were also manageable. The Old Navy brand underperformed while Gap and Banana Republic came in better than expected.  FX The US dollar has undergone a week of consolidation after the losses of last week, as markets look to determine the next move. Bullard’s comments yesterday briefly gave the greenback a lift along with yields, but the jury remains out as to whether we are set for further declines. The euro has spent most of the week trying to punch through the 200-day SMA with little success, making it susceptible to a pullback. The pound has looked slightly more resilient today after the modest weakness from yesterday’s budget. A modest rebound in consumer confidence in November, and retail sales in October appears to have given it a lift in the short term, as it looks to close higher for the second week in a row. Commodities Crude oil prices are continuing to drift lower on concerns about winter demand in China as covid cases continue to rise. This would also be the second successive weekly decline in prices with some suggestions that China may well look to slow oil imports, due to rising inventories, while concerns about a 2023 European recession...

History tends to repeat itself, and mining stocks appear to be repeating their 2008 performance, which has very interesting implications. Why do I think that gold miners are repeating their 2008 price patterns? Please take a look at the below chart. The only times when gold stocks declined similarly sharply as they did this year were in 2013 and in 2008. Given that the situation in stocks appears to be similar to what we saw in 2008 (due to rising interest rates, for example), it seems that focusing on this analogy is particularly important right now. All right, let’s zoom in and see how mining stocks declined in 2008. Back then, the GDXJ ETF was not yet trading, so I’m using the GDX ETF as a short-term proxy here. The decline took about 3 months, and it erased about 70% of the miners’ value. The biggest part of the decline happened in the final month, though. However, the most intriguing aspect of that decline – which may also be very useful this time – is that there were five very short-term declines that took the GDX down by about 30%. I marked those declines with red rectangles. After that, a corrective upswing started. During those corrective upswings, the GDX rallied by 14.8-41.6%. The biggest corrective upswing (where GDX rallied by 41.6%) was triggered by a huge rally in gold, and since I don’t expect to see anything similar this year, it could be the case that this correction size is an outlier. Not paying attention to the outlier, we get corrections of between 14.8% and 25.1%. Fast forward to the current situation. Let’s take a look at the GDXJ ETF. The junior mining stocks moved sharply higher recently, and this move took place on huge volume (I spoke about it on Nov. 7). The only similarly big volume that we saw recently was at the early-March top and the January top. As history has shown, the massive attention that junior miners have received is a bearish indicator (not only for miners but also for related parts of the precious metals market, including gold and silver prices too). Back in 2008, the biggest corrective upswing (the 41.6% rally) was the thing that preceded the biggest part of the medium-term decline. This time, the volatility is not as big, but the size of the corrective upswing (assuming that it started in September) that we just saw is also greater than what we’ve seen before. Consequently, it could be the case that what happened recently is what “had to” happen given the way history decided to rhyme. Please note that we can estimate what is likely to happen based on historical analogies, but we can never be 100% certain that a given analogy will work and some others won’t. In this case, it seems that the correction happened, even though it didn’t “have to” happen based on many other techniques. Either way, the medium-term trend remains down, so the current corrective upswing is likely to be a “thing of the past of little meaning” sooner rather than later. Speaking of analogies, I previously wrote that the current rally is a mirror image (it’s not a crystal-clear mirror, though) of the corrective decline that we saw in late March 2020. As it turned out, due to the most recent part of the upswing, the size of both moves became even more aligned. And yes, this means that another decline could take the GDXJ all the way down to its 2020 low, or very close to it. On the below chart, I marked just how perfectly the recent price moves played out according to the Elliott Wave Theory. Of course, EWT is not the only tool that one could use, and I find other technical tools more useful, but still, this kind of pattern-following is uncanny. The classic EWT pattern is three waves down (I marked those with orange rectangles) and then a correction consisting of two smaller waves.  That’s exactly what we have seen in recent months. The September–now pattern appears to be the above-mentioned correction. It didn’t only consist of two smaller waves higher – they were actually almost identical in terms of size and sharpness. This created a classic ABC correction (flag) pattern. Now, since this pattern is complete, another huge 3-stage move lower can – and is likely – to unfold. This is very bearish for junior mining stocks (as well as for gold, silver, and probably other commodities), and the fact that juniors are already showing weakness relative to gold (on Wednesday, the latter was almost flat while miners declined) serves as a bearish confirmation. As always, I can’t guarantee anything, but in my view, the profits that can be reaped on this upcoming slide in mining stocks can be enormous. Want free follow-ups...

Stocks have continued to make headway this afternoon, oblivious of the recession fears dogging oil, which is down sharply again today. Stocks finish up the week with more gains “Stocks are once again shrugging off warnings about high interest rates in the US, and it appears the normal seasonal tendency of equities to rally in Q4 has asserted itself once again. Indeed, the fact that Fed speakers continue to bang the hawkish drum, but to little apparent effect, might suggest that traders still have their hearts set on a risk-rally into the end of the year, even if that sets everyone up for a fall in January.” Oil prices touch six-week low “Oil has seen several sharp drops this week, followed up by tepid rallies that suggest recession fears are really making themselves felt in the commodity. The latest drop today has seen around 4% wiped off Brent and WTI; this in itself might be giving fresh impetus to the equity rally. While FOMC members go on about rising rates, the market is watching oil and other things like shipping rates and expecting further weakness in US CPI prints in coming months.”

Consumer inflation in Japan accelerated to 3.7% in October, repeating 2014 highs and approaching the peak of 4.2% in late 1990. Excluding fresh food, prices rose by 3.6% y/y, the highest since 1982. At the same time, price growth was expected to slow from 3.0% to 2.7%, so the difference between expectations and facts looks shocking. The highest price growth since the early 1980s unites the developed nations, going well beyond the price of energy, as was the case in previous years of recent decades. However, in North America, inflation is already on its way down; in Europe, it is likely to peak in November. This divergence in inflation trends is mainly due to exchange rate movements, where the yen has been the hardest hit. In October, the country's monetary authorities stood up for the yen (in Japan, currency interventions are the prerogative of the Ministry of Finance and not the Bank of Japan). Nevertheless, an important fundamental factor weakening the yen was still the policy of the Bank of Japan, which remains the only central bank in the world that keeps negative interest rates. Although consumer inflation in Japan has been above the central bank target for the last seven months and continues to accelerate, Chairman Kuroda continues to find excuses not to raise rates. In his speech following the release of inflation statistics today, he ruled out a rate hike without accelerating wage growth. This is like the assurances of the ‘temporary inflation’ we heard from the Fed and ECB last year. The BoJ stuck in the denial phase leaves the fundamental reason for the pressure on the yen, which would probably continue to fall without the support of currency interventions.

With the UK's Autumn Statement out of the way, attention turns back to the economic data which are deteriorating – UK PMIs are likely to re-emphasise the worsening condition and that a recession is coming. In Sweden, the Riksbank is expected to hike by 75bp next week, raising the policy rate to 2.5%. US: Ongoing weakness in housing data Thanksgiving means a holiday-shortened week in the US with the focus set to remain on the outlook for Federal Reserve policy. Market pricing has switched markedly since the surprisingly soft October CPI print but Federal Reserve officials continue to suggest there is more work to be done to ensure the inflation front is defeated. Indeed, we continue to hear comments suggesting the risk of doing too little outweighs the consequences of doing too much in terms of interest rate increases. Expect more next week. Data-wise we are looking at ongoing weakness in housing data, but durable goods orders should rise given firm Boeing aircraft orders. Nonetheless, it is doubtful this will be market moving in any meaningful way. The November jobs report on 2 December and the November CPI print on 13 December are the big releases to watch. UK: Focus switches back to the data and Bank of England The key takeaway from the UK’s Autumn Statement was that much of the anticipated fiscal pain has been pushed back until after the next election. Chancellor Jeremy Hunt has calculated that calmer financial markets and the announcement of certain tax rises mean he can push back some of the tougher spending decisions, without sparking a fresh crisis of confidence in UK assets. No doubt the Treasury is banking on less aggressive Bank of England rate hikes to lower future debt interest projections, giving scope to water down some of the cuts further down the line. Read more about the Budget announcements here.  With the fiscal event out of the way, attention turns back to the economic data which is clearly deteriorating. Next week’s PMIs are likely to re-emphasise that more companies are seeing conditions worsen than improve right now, the latest sign that a recession is coming. There’s also the question of whether the Bank of England will pivot back to a 50bp rate hike in December, and we think it will, despite some mildly hawkish inflation data in recent days. We’ll hear from a couple of rate-setters next week to help shape expectations ahead of that meeting in a few weeks' time. Sweden: Riksbank expected to hike by 75bp Back in September, the Riksbank hiked the policy rate by a full percentage point but signalled that it expected to pivot back to a 50bp rate hike in November. Since then, core inflation has exceeded the central bank’s forecasts by half a percentage point, while the jobs market has remained relatively tight. Given that the ECB has continued with its 75bp rate hikes – and the Riksbank has been vocal about staying out in front of the eurozone’s interest rate policy – we expect further aggressive tightening by Swedish policymakers next week. Remember this is the Riksbank’s last meeting before February, and we therefore expect a 75bp hike on Thursday. We’d expect the new interest rate projection published alongside the decision to pencil in at least another 25bp worth of tightening early next year, but ultimately there are limits to how far it can go given the fragile housing market. Key events in developed markets next week Source: Refinitiv, ING Read the original analysis: Key events in developed markets next week