With a plethora of high impact data due this week there should be no shortage of market volatility. However, the ECB’s  Minimum Bid Rate Announcement, US Retail Sales, CPI and UoM Consumer Sentiment look certain to dominate events.

This week
This week, high volatility events begin on Monday at 15:30 with the Bank of Canada Business Outlook Survey. The quarterly survey will be watched very closely due to the significance of the firms that are surveyed. A change in sentiment within these firms can be a precursor to future economic activity and economists will be looking for signs of job losses or a reduction in investment.

Also on Monday the NZIER Business Opinions Survey is due to be released. This is New Zealand’s equivalent to the BOC Outlook Survey so traders will be keen to see how businesses are likely to react to current economic conditions. This indicator came in at -19 in the third quarter of 2008.

On Tuesday our first major event will be Ben Bernanke’s participation in the Stamp Memorial Lecture Series organised by the London School Of Economics (LSE). He is due to speak about “Policy Responses to the Financial Crisis” at 13:00 in London.

At 13:30 US and Canadian Trade Balance data will be released. The US is currently running a trade deficit of $57.2B but this is expected to have improved slightly to $53.5B in November.

Canadian trade surplus for the month of November is expected to come in at CAD 3.3B after October’s 3.8B. Canadian trade surplus has been slowly eroded over recent months, falling from a revised $5.6B in September.

Building Consents from New Zealand will complete Tuesday’s events. The monthly reading for December will be closely watched following November’s 21.9% fall in approvals issued.

Australian Home Loans are due to be released at 00:30 on Wednesday morning. Data for November is expected to show a 1.0% increase in the number of new loans granted following on from a 1.3% increase in October.

Later in the day focus will shift to the US with Retail Sales and Core Retail Sales for the month of December due at 13:30. This data will be closely watched because it is an indication of consumer spending during the holiday season; largely regarded as the busiest in the retail sector’s calendar. A decline of 1.3% is expected in the Core number, following on from a 1.6% fall in November. The headline figure is expected to show a drop of 1.2% MoM after the 1.8% decline seen one month previous.

Thursday promises to be a very busy day, beginning at 00:30 with Australian employment data. Employment Change for December is expected to show that the Australian economy shed 20K jobs, following on from a reduction of 15.6K in November. The Unemployment Rate over the same time period is expected to have increased from 4.4% to 4.5%.

The most important piece of news of the day from Europe will be the combination of the ECB Interest Rate Announcement and the ECB Press Conference. Although the Minimum Bid Rate announcement itself is only regarded as a medium volatility event it cannot be denied that traders and economists will be watching it very closely. The ECB is expected to cut rates from 2.50% to 2.00%. Once this has been confirmed, attention will switch to the press conference for an insight into the decision. Traders will also be looking for clues to future interest rate moves. The ECB press conference is due at 13:30 GMT.

Also due at 13:30 is US PPI and Initial Jobless Claims. Wholesale inflation is expected to have declined by 2.0% in December, following on from a 2.2% decline in November. US Initial Jobless Claims came in slightly better than expected last week at 476K. However, this is still an indication that the US economy is in recession and a figure of 520K is expected this week.

Friday will be dominated by high ranking US data. We begin at 13:30 with the Core CPI. Economists are expecting an increase of 0.1% in consumer inflation for the month of December after a flat November.

The next piece of news to cross the wire will be TIC Net Long-Term Transactions. After a huge fall to $1.5B in October vs the $66.2B seen in September, net investments in US securities is only expected to recover to $2.0B for November.

To close the week we will see the University of Michigan Consumer Sentiment (preliminary reading). Economists are expecting the index to drop slightly to 59.5 from the revised 60.1 seen one month ago.

Without a shadow of a doubt next week’s major news story will be the election of the 44th President of the United States. Who will it be, McCain, Obama? We will have to wait until late Tuesday or the early hours of Wednesday to find out but the US Presidential Election is bound to dominate news wires this week.

So how will financial markets react? Generally speaking, domestic markets attempt an optimistic rally when new leaders are elected. Of course this relies on the premise that policies and conditions facilitating economic growth were bad/ worse under the previous management.

Taking this into account, are we seeing some “buy on rumour” type trading in the US stock market? Last week the S&P 500 and the DOW both had their largest rallies since 1974, up by more than 10%. There seems little doubt that the financial rescue plan is playing a huge part in this relief rally but the market also seems to be responding favourably to Obama’s 7-point lead in the polls.

Last Week
If traders were paying strict attention to last week’s economic releases they may have been forgiven for thinking a stock market rally lacked fundamental justification. This is because 4 out of the 5 high volatility economic indicators released last week pointed to economic slowdown. Consumer Confidence, Core Durable Goods Orders and GDP data all pointed towards contraction while the Federal Funds Rate was slashed by a further 0.50% to 1.00%. Only New Home Sales managed to post MoM growth. Worryingly however, median prices fell to a new four-year low.

This Week
This week’s first high volatility event will arrive on Sunday at 21:45 with New Zealand’s Labour Cost Index. On a quarterly basis the index is expect to increase by 0.8%, in line with that of the previous quarter.

In the early hours of Monday morning we will see Australian Retail Sales Trend. Monthly growth of 0.2% is expected after September’s 0.3% rise.

The rest of the day will be dominated by manufacturing data. The UK’s Manufacturing PMI is due at 09:30 with economists expecting a reading of 40.0. Anything below 50 represents industry contraction so Sterling traders will welcome surprises to the upside.

At 15:00 the US ISM Manufacturing PMI is due to be released. September’s reading was 43.5 and the contraction is expected to deepen in October with a 41.6 consensus estimate.

At 16:00 in the UK we will hear testimony from BOE Governor King, Chancellor of the Exchequer Darling and FSA Chairman Turner on the recent banking crisis. The trio are due to testify before Parliament’s Treasury Committee, in London.

Aside from the US Presidential Election, Tuesday will be fairly quiet on the economic front. In the early hours of the morning we are due to see further tightening of global interest rates as the RBA’s Interest Rate Statement is expected to reveal a further half point cut to 5.50%. This represents a fall of 1.75% since August this year.

Wednesday will be a much busier day beginning early with Australian Building Approvals and Trade Balance. Following on from a 3.7% MoM contraction in the number of permit approvals in September, October’s rate is also expected to fall, by 1.1%. Trade Balance will likely fall to 0.50B AUD from 1.36B previously.

At 09:30 the UK’s manufacturing Industry will come under further scrutiny courtesy of Manufacturing Production which is expected to fall by 0.4% MoM. At the same time Services PMI is expected to reflect further contraction, dropping from 46.0 to 44.5.

As a precursor to official data from the Bureau of Labor Statistics later in the week, ADP’s Non-Farm Employment Change will be closely watched at 13:15. Economists are expecting a reading of -100K in the number of employed people in October.

At 15:00 the ISM Non-Manufacturing PMI is expected to worsen from minor expansion in September to 47.3, a reading that would indicate contraction in October.

New Zealand employment data comes to the fore on Wednesday evening at 21:45. Employment Change and Unemployment Rate are both due to be released. Employment Change is expected to show 0.8% fewer people were in employment over the previous quarter. This data contributes to the expected sharp increase in the Unemployment Rate to 4.3% from 3.9%.

Hot on the heels of similar data from New Zealand, Australia will report Employment Change and Unemployment Rate at 00:30 on Thursday morning. It is expected that the Aussie economy shed 10K jobs in October with Unemployment duly up to 4.4% from 4.3% in September.

The BOE Interest Rate Statement is due at 12:00 with the MPC expected to cut the Official Bank Rate to 4.00% from 4.50%. The Global interest rate focus will remain intact at 12:45 with the ECB Minimum Bid Rate Announcement. The ECB is also expected to cut by half a point, down to 3.25% from 3.75%. Traders will be very interested in the ECB Press Conference at 13:30 for an insight into ECB sentiment and the possibilities of further rate cuts.

Also due at 13:30 is Canadian Building Permits data. September saw a huge 13.5% fall in the number of permits issued with another 1.3% fall expected in October. Also from Canada at 15:00 is they Ivey PMI. This indicator attempts to reflect the health of the economy as a whole and expansion is expected to slow to 56.0 from 61.0 previous.

Friday’s focus will be on data from North America with Canadian Employment Change and Unemployment Rate getting things started at 12:00. The Canadian economy impressively added 106.9K jobs in September with 10K less jobs expected for October. Unemployment Rate is expected to worsen slightly, up to 4.2% from 4.1%.

At 13:30 we will see one of the most highly anticipated releases in the economic calendar. Non-Farm Employment Change from the US is expected to show 200K fewer employed people in October after 159K less in September. Unemployment rate, due at the same time, is expected to worsen from 6.1% to 6.3%.

There will barely be time for the dust from Non-Farm Payrolls to settle before Pending Home Sales are released at 15:00. With September’s MoM increase of 7.4%, sales in October likely fell by 3.4%.

This week will be rounded off by the New Zealand Parliamentary Election on Saturday. Although the impact on global markets will be limited there should be some effect on the New Zealand Dollar early next week.