Written Commentary
Written by Marc Ostwald, ADMISI’s Global Strategist & Chief Economist
- Modest schedule has Australia Trade to digest ahead of UK Construction PMI, US jobless claims, Non-farm Productivity & Factory Orders; BoE and CNB rate decisions; France & Spain bond auctions; more corporate earnings
- BoE: no change on rates/QE; Q2 taper? S-t forecasts to be revised lower, medium-term higher? Results of negative rates consultation eyed
- US jobless claims: further dip expected, surveys and ADP hint at larger drop
EVENTS PREVIEW
A busy looking schedule has on closer inspection rather less in the way of likely market moving data and events to distract from pandemic related news, politics and the strictures of central bank financial repression. There are Australia’s trade data to digest, while ahead lie the UK Construction PMI and Auto Sales ahead of US weekly jobless claims, Q1 Non-farm Productivity & Factory Orders. In event terms, the Bank of England’s MPC is expected to keep Base Rate and QE volumes unchanged, as is the Czech Republic’s CNB; the ECB’s Economic Bulletin is accompanied by more Fed and ECB speakers, while France and Spain hold multi-tranche bond auctions. A busy day for corporate earnings will likely see the following amongst headline grabbers: Infineon, Roche, Royal Dutch Shell & Unilever in Europe, along with Cigna, Ford, Snap, Solwarwinds and Tapestry in the US. Markets’ reaction to Draghi being given the mandate to try and form a new Italian govt really gives the lie to the ‘Saviour Machine’ thinking that is so much ZeitGeist (see lyrics to one of the late great David Bowie’s lesser known, but most brilliant songs here).
U.K. – BoE policy meeting
The BoE’s MPC is expected to keep Base Rate and its QE programme unchanged, but the focus will be on its ongoing review of the feasibility of deploying negative interest rates, with the responses to its consultation process on negative rates due to be published. The message on negative rates will likely remain the same, they remain a policy option, but there is no immediate prospect of actual deployment, with many technical issues, and given the most recent BoE comments on the topic, there is also little MPC enthusiasm, nor are markets discounting any move to negative rates. There will be a forecast update, which will inevitably see near-term growth forecasts revised down (above all Q1), but still looking for a sharp rebound in Q2; labour market forecasts will be of interest, particularly the BoE’s estimate of actual unemployment relative to official data. Last but not least, there will be an update on the pace of QE purchases over coming months, with the current £4.4 Bln / week seen maintained until the end of Q1, and some speculation that Q2 may see some tapering to a £3.4 bln / week pace, which may be seen as ‘less accommodative’, though it could borrow from the RBA and extend / strengthen forward guidance on rates as a balancing measure.
U.S.A. – Jobless Claims
– Following on from the upside surprises on ADP Employment and Services PMI & ISM, there will be some hope that Initial and Continued Claims beat expectations of a modest dip to 830K on the former, and a more substantial drop to 4.70 Mln on the latter. The ADP Employment strength was above all paced by Services (+156K) and medium-sized (50-499 staff) enterprises, which is encouraging in terms of an anticipated pick-up in Q1 growth, even if the read across to tomorrow’s Payrolls is always open to question.
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