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Fed or China: Who Could Bring the Cheer This Week?

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China

This week, two key events will unfold that could have broad macroeconomic consequences. On December 18, Chinese President Xi Jinping will give a speech as China marks the 40th anniversary of China’s opening up its economy. The speech will likely receive a significant amount of attention amid the US-China trade spat and a softening Chinese economy.

Recently, China’s economic data have spooked the markets. In November, China’s retail sales grew at their slowest pace since 2003. Its export and import growth rates also fell to multimonth lows. Car sales (F) (GM) also continue to tumble in China (FXI), and they fell in the double digits last month. The real estate sector hasn’t been in the best of health either.

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Meanwhile, we’ve seen some positive developments in US-China trade relations as China has started buying US soybeans and has announced that it will lower tariffs on US automobiles. Nonetheless, China’s slowdown has been quite apparent over the last few months. Jinping’s speech will likely be scrutinized for any hints of a possible economic stimulus.

Federal Reserve meeting

Looking at the US market (FCX), we have the Federal Reserve’s meeting this week. The Fed has raised rates three times this year to President Donald Trump’s dismay. The Fed’s meeting and Jinping’s speech could influence the market’s direction this week. In this series, we’ll see whether these events could help propel a Santa Claus rally in the markets (SPY).

Let’s look at the expectations from the Fed’s meeting in the next article.

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