Macroeconomics: The Week Ahead: 5 – 9 February

The Week Ahead – Brief Preview:

The new week has a relatively modest run of statistics, kicking off with Services PMIs around the world. The US only has Trade, annual US CPI revisions and the Fed’s Senior Loan Officer survey, China looks to CPI, PPI and Credit aggregates, Germany to Factory Orders, Industrial Production and Trade, while the UK awaits the update on the LFS labour market data which has been suspended since October, Japan looks to Labour Cash Earnings and Household Spending, and Canada has labour data.

The RBA is seen leaving its policy rate unchanged, as are India’s RBI, Poland’s NBP and Banco de Mexico, with Czechia’s CNB expected to cut rates a further 25 bps, and there will be a fair volume of central bank speakers. The China / Asia Lunar New Year holidays start on Thursday or Friday (ending on February 16), while it will be another busy week for corporate earnings in the US and elsewhere, and the OECD publishes its World Economic Outlook update. To reiterate the key points on the Fed rate outlook: incoming data do not make the case for the Fed to take immediate action, there is no major threat to financial stability (though there are points of concern, as highlighted by NY Community Bank’s earnings last week), thus they will err on the idea of caution, as the very hawkish Bowman summed up on Friday: “it will eventually become appropriate to gradually lower our policy rate to prevent monetary policy from becoming overly restrictive.”

Agricultural commodity markets look to USDA’s WASDE, and monthly grains and oilseeds S&D reports from China’s Agricultural Ministry (CASDE), Brazil’s CONAB and Canada’s StatCan. Energy markets look to the EIA’s monthly Short Term Energy Outlook Outlook (STEO), India Energy Week and more major oil & gas earnings (e.g. BP, ConocoPhillips, Equinor and TotalEnergies). The Metals & Mining sector looks to the Mining Indaba conference in South Africa, earnings from the likes of ArcelorMittal, Nippon Steel and Sumitomo Corp, and Q4 production reports from Anglo American, Anglo American Platinum & Kumba Iron Ore. Soft commodities are likely to focus on Amsterdam Cocoa and Chocolate Week, and Unica’s monthly Cane Crush and Sugar production.

Statistically markets continue to be wrong-footed by the strength of the US economy (Friday’s labour report being most notable not only for the Payrolls and Wages strength but also the weakness in the labour force Participation Rate), disappointed by China’s economic performance, and only finding some reinforcement of their views in incoming UK and Eurozone data. Services PMIs on Monday are expected to confirm the flash estimates for the G7 (solid in USA and UK, weakness across the Eurozone), with the US Services ISM seen rebounding to 52.0 from December’s 12-month low of 50.5. US CPI revisions will be watched closely, with many hoping for some downward revisions, and annual weighting revisions that might impart some further downward pressure in outlook terms, but in truth the scale of the revisions are likely to be modest in big picture terms. Germany’s Orders and Production data are seen falling -0.2% m/m and -0.5% m/m, and as can be seen from the attached charts of their respective indices, would thus underline just how dire underlying trends are; Trade data are expected to reverse much of the better than expected Export and Import gains in November. China’s inflation data are forecast to show that downward pressure on prices ease very slightly for PPI -2.6% y/y vs. Dec -2.7%, but increased for CPI to -0.5% y/y from -0.3%, while the expected jump in credit aggregates will owe much to a typical seasonal surge, as well as the fact that PBOC liquidity injections since November sum to around CNY 3.0 Trln, but the fact remains that corporate and household credit demand remains weak. Japan’s Labour Cash Earnings and Household Spending are forecast to improve on November, but remain weak in absolute terms, with wages boosted by generous winter bonuses. Canada’s labour data on Friday are likely to show that labour demand continues to ease with the Unemployment Rate forecast to rise to a 2-yr high of 5.9%, but underline that wage pressures (last 5.7% y/y) remain a substantial roadblock to the BoC being the first G7 central bank to cut rates, as some are anticipating.

Govt bond supply is quite plentiful, headlined by the US conducting its $121 Bln 3, 10 & 30-yr quarterly refunding, including a record $42 Bln 10-yr auction, with a fat yield concession already factored in after the sharp upward move post Payrolls. There are also auctions in UK, EU, Germany, Austria, Netherlands, Canada and Japan.

Another busy week for Corporate Earnings worldwide, with highlights for the week as compiled by Bloomberg News including: Adyen, Air Products & Chemicals, Alibaba Group Holding, Allstate, Ametek, Amgen, AP Moller-Maersk, Apollo Global Management, Ares Management, ARM Holdings, Assa Abloy, AstraZeneca, Banco Bradesco, Banco BTG Pactual, Banco do Brasil, BCE, Bharti Airtel, British American Tobacco, Carrier Global, Caterpillar, CDW, Centene, Chipotle Mexican Grill, Cloudflare, Cognizant Technology Solutions, Coloplast, ConocoPhillips, Credit Agricole, Cummins, CVS Health, Daikin Industries, DBS Group, Deutsche Boerse, Dexcom, Dubai Electricity & Water Authority, Duke Energy, DuPont de Nemours, Edwards Lifesciences, Eli Lilly, Emerson Electric, Enbridge, Equifax, Equinor, Estee Lauder, Fiserv, Ford Motor, Fortinet, Fujifilm, Gartner, GE HealthCare Technologies, Gilead Sciences, Hermes International, Hershey, Hilton Worldwide, Honda Motor, Idexx Laboratories, Infineon Technologies, ICE Intercontinental Exchange, Intesa Sanpaolo, Itau Unibanco Holding, Itochu, KBC Group, Kenvue, Kering, KKR, L’Oreal, Linde, McDonald’s, McKesson, Mettler-Toledo International, Mitsubishi, Mitsubishi Electric, Mitsubishi UFJ Financial Group, Monolithic Power Systems, Motorola Solutions, Neste, Nestle India, Nintendo, Nippon Telegraph & Telephone, Nordea Bank, NXP Semiconductors, O’Reilly Automotive, On Semiconductor, Palantir Technologies, PayPal Holdings, PepsiCo, Philip Morris International, Pinterest, Prudential Financial, Publicis Groupe, Recruit, Renesas Electronics, Roblox, S&P Global, Siemens, Simon Property Group, Snap, SoftBank, SoftBank Group, Spotify Technology, State Bank of India, Sumitomo, Sun Life Financial, Swisscom, Take-Two Interactive Software, Thomson Reuters, Tokyo Electron, TotalEnergies, Toyota Motor, Transurban Group, Uber Technologies, UBS Group, UniCredit, Unilever, Vertex Pharmaceuticals, Vestas Wind Systems, Vinci, Walt Disney, Willis Towers Watson, Xylem, Yum! Brands, Zimmer Biomet.