WEEKLY MARKET SNAPSHOT 12/2 – 16/2| Various GDPs and CPIs reporting will be in focus in the next weeks’ economic calendar
The latest Japanese QoQ (Q4) GDP figure is published on Tuesday and the prediction is for a significant fall to be revealed, from 2.5% to 0.9%. If this forecast is met then investors may conclude that the celebrations regarding the apparent success of Abenomics, were premature. Yen may come under pressure if investors then quickly reach the conclusion that monetary and fiscal stimulus can’t be tapered as quickly as the BOJ previously suggested.
Two Eurozone countries, Italy and Germany, as well as the wider Eurozone, report their latest GDP figures on Wednesday, the single currency bloc experienced a significant improvement in GDP growth during 2017, and analysts will be looking for the maintenance of this trend.
Inflation has been a key discussion subject over recent days, as a consequence of the short, sharp selloff, which global equity markets experienced. One of the factors blamed for the sudden loss of market sentiment, involved the rise of wage inflation in the USA. This rise is inextricably linked to CPI inflation, which is currently at 2.1%. The USA inflation figure will therefore come under intense scrutiny, when it’s released on Wednesday.
The U.K. statistics agency also publishes its latest CPI figure. Currently at 3% the U.K. pound may experience movement if the figure rises above this level. Germany’s current CPI level is less of a concern, however, if it falls further below the current 1.6% reading, analysts may assume that the ECB will hold back on any aggressive tapering to the current monetary policy stimulus.
The U.K. dependence on its retail and services sectors is well documented, after experiencing a significant and surprising fall in the month of December (-1.6%), analysts will be looking for the January retail figure to bounce back. If another negative reading is provided, this could tip the U.K. into a YoY negative reading, which would represent the first negative reading in several years and would have many financial mainstream media commentators, suggesting that the U.K. may be flirting with an impending recession. They may also conclude that Brexit fears are finally beginning to stalk the U.K. high streets.
Sunday starts the week with the latest house sales data for New Zealand. Sales slumped to -10.1% YoY in December, analysts will monitor the metric carefully, given N.Z.’s rise in consumer debt, relative to rising house prices over recent years. Retail spending and credit card debt will help to complete part of the jigsaw, regarding consumer sentiment.
Monday continues the theme of Australasian data, as the latest credit card balances and purchase figures are published. As Europe opens, the latest CPI figures for Switzerland are revealed, currently at 0.8% YoY, the forecast is for no change. The weekly sight deposits in the Swiss banking system are also released. Late into the New York session the latest U.S. budget statement is reported, where December’s figure came in at $53.1. The day closes with Australia’s RBA official Mr. Ellis delivering a speech in Sydney, thereafter Japan’s latest corporate prices are published.
Tuesday begins with the latest Australian NAB consumer confidence figures, the latest bond purchase results and machine tool orders for Japan will be carefully monitored. Attention then turns to the U.K. (once European markets are open), as a cluster of inflation metrics are published. The key reading is CPI, currently at 3% the latest figure will be closely scrutinized, coming shortly after the BoE base rate decision (held at 0.5%) and the quarterly inflation report. RPI, excluding mortgage payments, is currently at 4.1%, a figure that shouldn’t be ignored during the noise and focus regarding CPI. In addition, the latest govt. house price inflation figures for the U.K. will be reported, currently at 5.1% growth YoY. This figure looks under threat, based on alternative house price metrics. Japan’s latest GDP figure closes the day’s significant economic calendar news, the forecast is for a QoQ GDP fall to 0.9% in Q4 2017, versus the previous reading of 2.5%.
Wednesday’s focus for investors should be fixed on the latest GDP figures for: Germany, Italy and the wider Eurozone. Whilst Germany’s economy is constantly under the microscope, Italy’s economy made significant improvements during 2017, rising to 1.7% YoY for Q3 2017, a continuation of this trend would possibly reveal a pattern of improved growth in countries that previous languished. The last Q3 Euro Zone GDP figure came in at 2.7% and the maintenance of this level of growth is forecast. Sandwiched in between the GDP data Germany’s latest CPI metric will be delivered; currently at 1.6% the YoY figure was negatively affected by the -0.7% MoM reading in December, therefore this figure may rise YoY if the MoM figure moves back into positive territory. Industrial production figures for the Euro Zone will be revealed, currently at 3.2% growth YoY, the expectation is for little change.
As attention shifts to the USA, the latest annualized CPI figure will be published. Currently at 2.1%, investors and analysts will carefully monitor this figure. A raft of figures concerning USA advanced retail prices and pricing will be released. The latest wage growth figures for the USA will also be revealed, as will be business inventories; which are forecast to have fallen to 0.2%, from the 0.4% reading recorded for November. Various gasoline and oil inventory detail for the USA will be reported, whilst the day ends with Japanese data on machine orders.
Thursday’s significant calendar data begins with Australia’s latest unemployment reading, forecast to remain at 5.5%. Bond purchase results for Japan will be carefully monitored for hints that the BOJ may be shifting its accommodative monetary policy. Japan’s latest industrial production data will also be published, forecast to remain close to the 4.2% YoY growth figure recorded up to November. Europe’s only significant data delivered on the day concerns the Eurozone trade balance for December, expected to reveal a healthy surplus.
As U.S. markets open, the latest Empire manufacturing report is forecast to deliver an unchanged figure for February of 17.7. Continuous and existing jobless claim data will also be published. Industrial production figures for the USA will be revealed, forecasted to come in at 0.3% for January, a fall from 0.9% reported for December. Manufacturing and capacity utilization data will also be announced, whilst the NAHB issue their latest index metric, forecast to come in at 73 for February.
On Friday analysts will turn their attention to the latest U.K. retail figures. For December retail sales fell by -1.6%. If another poor monthly figure is reported for January, then YoY sales may also deliver a negative reading, in a country highly dependent on the retail sector for employment and economic stimulus this may have repercussions on GBP pricing. Canada’s December manufacturing sales are forecast to remain close to the 3.4% growth level reported in November, whilst January import prices in the USA are forecast to rise by 0.6% MoM, from 0.1% in December- a significant rise that will have a knock on effect on future inflation data. YoY import prices may also rise above their current 3% level.
House building permits and housing starts are predicted to make a slight seasonal improvement in January. The university of Michigan sentiment report for February will be closely watched for any signs that USA consumers’ economic faith is waning. The week ends with the traditional Baker Hughes rig count for the USA, due to the recent WTI price fall, as a consequence of overproduction fears, this rig count will be closely watched.
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