Written Commentary
- Busy looking schedule of data and events a little short on major market moving news, as markets focus on hawkish Fed message: digesting much weaker than expected China inflation and Japan Q4 GDP; Swedish GDP and Egypt CPI jump, as expected downbeat UK RICS survey
- Awaiting South Africa Current Account, US weekly Jobless Claims and Challenger Layoffs, Mexico CPI; BoC’s Rogers headlines smattering of central bank speakers; BoJ bids farewell to Kuroda tonight
- China: CPI dragged lower by sharp fall in Food price inflation, but non-food prices also week; PPI fall on weaker commodity prices; both underline post Zero Covid recovery likely to be bumpy
EVENTS PREVIEW
Today’s schedule of data and events looks busy, but with markets still labouring under the burden of a still very foggy outlook for the global economy (growth, inflation and demand), and major central banks sticking to a hawkish rate narrative, there may be rather little which has a material impact outside of the two US labour market reports: weekly jobless claims and Challenger Job Cuts. There are Japan’s final Q4 GDP, UK RICS House Price survey, Swedish monthly GDP and Egyptian CPI (the latter two both much higher than expected) to digest, while ahead lie South Africa’s Q4 Current Account, and Mexican CPI. Rate decisions in Malaysia, Serbia and Peru are all expected to see rates on hold, while there is a smattering of ECB and Riksbank speakers. But the main point of interest will be BoC’s Rogers speech, which will flesh out yesterday’s expected pause and the statement that retained a clear tightening bias, while offering some optimism on inflation, underlining downward pressure on growth, though also noting that the local labour remains very tight. Tonight also sees Kuroda’s valedictory meeting as BoJ governor, with no policy changes expected, and nothing new in terms of the policy outlook, particularly given the sharp down revision to Q4 GDP overnight, and the baton of BoJ leadership now passes to Ueda. Govt bond sales see Ireland offering 9 & 14-yr, while the US rounds off this week’s funding exercise with $18 Bln of 30-yr.
** China – February CPI and PPI **
If there had been any hope that the re-opening following the end of the Zero Covid policy might serve to boost Chinese inflation as demand picks up, then today’s data clearly puts an end to that. But that said, the fall in CPI was largely down to large base effects in Food prices: 2.6% y/y vs. Jan 6.2%, though there was also a drag from Non-food CPI (0.6% y/y vs. prior 1.2%), though base effects due to LNY timing effects probably account for much of this. By contrast, the dip in PPI to -1.4% y/y from -1.3% and an expected -0.8% was down to weaker commodity prices, which more than offset a very modest upward pull from base effects. There is an element of needing to be patient, given that the rebound in activity following the reversal of the Zero Covid policy was never going to be anything other than bumpy. Overall the inflation readings do give the PBOC scope to ease rates a little further, but the key recovery driver will still have to be fiscal policy measures, above all in restoring some stability and impetus to the woe stricken property sector.
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