By Gülbin Yıldırım
U.S. letter, week beginning Nov. 29

- FOMC considers rate raise appropriate in December to preserve credibility

Last week, the economic agenda in the U.S. was lighter than normal due to "Thanksgiving Day". All major U.S. markets were closed on Thursday and opened for half a day on Friday. Despite the low trading volume, Wall Street finished the week at a record high with positive sentiments floating in the market. 

One of the most important developments of the short week was the minutes of Federal Open Market Committee’s (FOMC) November meeting released on Wednesday.  The minutes showed that FOMC members are increasingly concerned over the bank’s credibility if they keep failing to raise the benchmark interest rate.

"Most participants expressed a view that it could well become appropriate to raise the target range for the federal funds rate relatively soon. Some participants noted that the recent Committee communications were consistent with an increase in the target range for the federal funds rate in the near term or argued that to preserve credibility, such an increase should occur at the next meeting,” the minutes read.

The minutes also reflected that the divergence among FOMC members regarding the timing of the next interest rate narrowed compared to previous meetings.


- Trump to withdraw U.S. from TPP on his first day in office

Another highlight of the week was President-elect Donald Trump’s announcement on the Trans-Pacific Partnership (TPP).

On Monday, Trump said he plans to submit an “intent to withdraw” from the TPP on his first day in the Oval Office. "Instead, we will negotiate fair, bilateral trade deals that brings jobs and industry back on to American shores," he said in an official video his transition team posted on YouTube.

Many economists, financial institutions and international companies have been warning that the new president's proposed trade policies may lead to recession in the country.  There is also a growing fear that his policies may cause retaliation by other countries which could trigger a global trade war.


- Last week’s data

According to data released last week, existing home sales in the U.S. rose 2 percent in October, reaching the highest level of about 10 years. On the other hand, October’s new home sales fell by 1.9 percent to a weaker-than-expected rate of 563 thousand.

Durable consumption goods orders jumped by 4.8 percent in the same period, beating expectations of a 1.7 percent increase. The University of Michigan consumer sentiment reading climbed to 93.8 in late November from the preliminary reading of 91.6 and October's 87.2.

Moreover, total sales on Black Friday were expected to reach a record level at $12.3 billion this year, compared to 2015’s $10 billion.


- New week: GDP, employment report, OPEC meeting

In the United States, the new weekly economic agenda will be released on Tuesday, Nov. 29 and Friday, Dec. 2.

The third quarter Gross Domestic Product growth, which was announced as 2.9 percent last month, is expected to be revised to 3.1 percent on Tuesday.

The market expectation for the November non-farm employment increase to be announced on Friday will be around 170 thousand, but every figure above 150 thousand is thought to be enough to support an interest rate increase. In addition, continued wages will calm officials who want to see clear evidence that the Fed is moving towards a 2 percent target for inflation.

A surprising weakening in data is expected to shed some light on how the presidential elections affect the labor market and could lead to a revaluation of interest rate expectations and fluctuations.

As well as data, the speeches of Fed officials are among the developments that the markets will follow closely this week.  Among the names who will speak are Stanley Fischer, William Dudley, Loretta Mester, Daniel Tarullo and Robert Kaplan.

Furthermore, the decisions to be made at the OPEC meeting in Vienna on Nov. 30 are of great significant to oil prices and all markets.

28 Nov,2016