Written Commentary
- Lightweight schedule to end the week has Japan National CPI, UK Retail Sales and German PPI to digest, ahead lie US Existing Home Sales and Michigan Sentiment; smattering of central bank speakers; financials and Schlumberger headline corporate earnings run
- UK Retail Sales: December slump to revive rate cut and recession chatter, trend very weak, but caution required given inherent seasonal volatility
- US Existing Home Sales seen posting further marginal gain; Michigan Sentiment seen little changed at depressed levels, focus on Inflation Expectations
EVENTS PREVIEW
Markets remain in thrall to central banks and geopolitics, and today’s light schedule of data is unlikely to cause much of a disturbance. There are Japan’s National CPI, German PPI and UK Retail Sales to digest, with only US Existing Home Sales and preliminary Michigan Sentiment, along with the less than timely November Retail Sales reports from Canada and Mexico ahead. Davos WEF finishes with Lagarde featuring on a panel about creating jobs and growth, and there are also a few other Fed speakers just ahead of the ‘purdah’ period before the January 30-31 FOMC meeting. Second tier financials dominate the day’s US corporate earnings, which also sees oilfield services giant Schlumberger (SLB) reporting.
Next week brings BoJ, ECB and Bank of Canada policy meetings, while none are expected to make any policy changes, they will all be closely monitored for hints on the timing and prerequisites for any policy easing. The US dominates the statistical schedule via way of advance Q4 GDP, Personal Income/PCE, Durable Goods Orders, Goods Trade Balance and New & Pending Home Sales, which are accompanied by G7 flash PMIs, Germany’s Ifo & GfK and a raft of other surveys. Elsewhere Japan has Trade and Tokyo CPI, the UK PSNB budget, and there are preliminary January inflation readings from Brazil and Mexico. China has its monthly 1 & 5-yr Loan Prime Rate fixings, and the ECB publishes its quarterly Lending survey, while the EM space sees rate decisions in Turkey (+250 bps to 45.0%) and South Africa (no change 8.25%). The US corporate earnings season picks up pace, with Tesla, Intel, Netflix, Texas Instruments, IBM and Seagate amongst the tech sector highlights, while elsewhere American Express, ADM, Blackstone, Colgate-Palmolive, Freeport-McMoRan, Kimberly-Clark, Procter & Gamble, Union Pacific and Visa are likely to make the headlines.
** U.K. – December Retail Sales **
The much worse than expected -3.2% m/m -2.4% y/y will revive hopes for an early BoE rate, and will doubtless be grist to the mill for the numerous critics of the current government. But this series is notoriously volatile around the turn of the year, with seasonal adjustment very difficult due to calendar timing effects, as such a true picture of spending trends will probably not emerge until the February data are published. Be that as it may, if this is unrevised, the ONS estimates that Retail Sales will deduct around 0.04 ppt from Q4 GDP. Given the long-term effects of the cost of living crisis, and the solid 1.4% m/m gain in November, Christmas spending may have been front loaded, as cost conscious consumers picked up bargains in Black Friday promotions.
** U.S.A. – Dec Existing Home Sales, Jan Michigan Sentiment **
Existing Home Sales are seen eking out a small gain of 0.3% m/m to a 3.83 Mln SAAR pace, with low levels of inventories and still high mortgage rates (despite the recent fall) remaining the biggest headwind. Michigan Sentiment is also seen little changed at 70.0 vs. Dec 69.7, still depressed when seen from nay long-term perspective, but the focus will likely be on whether the sharp fall in Inflation Expectations in December as is expected (1-yr seen at 3.1%, 5-10-yr at 3.0%).
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