Written Commentary
China inflation and US jobs report top data run, Fed and ECB speakers, OPEC monthly Oil Market Report, busy and diverse run of corporate earnings.
- China: Lunar Year Timing effects on food prices drag CPI lower; PPI deflation eases on commodity price rally; underlying trend points to slow road back to still very subdued inflation
- USA: modest pick-up in Payrolls expected, but benchmark revisions make trend analysis difficult, Hassett comments likely skew ‘whisper’ estimate to the downside of consensus
- Recording of yesterday’s GI Daily Energy Markets Podcast YouTube: Watch here
- ADM IS: Watch Mark Soderberg’s recap video on Feb 10 USDA WASDE Supply/Demand crop report here
EVENTS PREVIEW
China’s overnight CPI and PPI and the lunchtime US labour report top the day’s statistical agenda, with the ECB’s Wage Tracker, OPEC monthly Oil Market Report, various Fed and ECB speakers, the January Bank of Canada minutes featuring on the events agenda. A broad mix of corporate earnings from around the world will likely find its highlights in Albemarle, Cisco Systems, Global Foundries, Heineken, McDonald’s, Siemens Energy, TotalEnergies and a slew of financials.
** China – January CPI & PPI **
Today’s inflation data were mixed but overall suggest that China should slowly climb out of a protracted period of deflation. Headline CPI came in at 0.2% y/y vs. a forecast of 0.4%, but this was almost all due to Lunar New Year timing effects on Food prices, which dropped to -0.7% y/y vs. December’s +1.1%, with Core CPI falling to 0.8% y/y from 1.2%, which will likely see an equally sharp reversal in February. PPI was marginally higher than expected at -1.4% y/y (Dec -1.9%), paced by the rise in industrial metals prices, and primarily evident in raw materials and intermediate goods prices (e.g. Non-ferrous Metals prices up 16.1% y/y), with Consumer Goods prices falling at a slightly faster pace, underlining persistent weakness in private consumption. It is demand rather than inflation which will likely prompt the PBoC to deploy further policy easing.
** U.S.A. – Jan Labour Report **
The slightly delayed labour data follow on from the soft December Retail Sales yesterday, which may have been little more than a reactive correction to prior strength, though the breadth of weakness could point to shift down in Private Consumption, but this will be difficult to judge until the February report, given that bad weather will likely result in a contraction in January. Non-farm Payrolls are expected to pick up modestly to 69K, with Private Payrolls at 75K. But with the usual annual adjustments to the BLS’ ‘birth and death’ model, and the publication of revised readings for April through December 2025 (likely lower) and the final annual benchmark revision (seen at -863K), the risk of a surprise looks to be large, though it would be wise not to over-extrapolate signals on trends, especially as underlying immigration assumptions are de facto incorrect given the collapse in immigration during 2025. The Unemployment Rate is seen unchanged at 4.4%, as is the Participation Rate at 62.4%, while Average Hourly Earnings are forecast to be up 0.3% m/m, edging the yr/yr rate down to 3.7%. Hassett’s comments on Monday, in which he suggested markets should expected a weaker trend in Payrolls growth implies some downside risks relative to forecasts, assuming he probably has had sight of today’s data.
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