Macroeconomics: The Week Ahead: 19-23 February

The new week kicks off with the US closed for President’s Day on Monday, and is overall very light on major data and long on monthly surveys, with Thursday’s G7 & India ‘flash PMIs’ likely to be the main focal point. The US looks to Existing Home Sales, UK to PSNB and GfK Consumer Confidence, continental Europe awaits Germany’s Ifo survey, final Q4 GDP and final Eurozone CPI, French Business Confidence and other surveys including the ECB report on negotiated Wages, along with Swedish CPI. Japan has Trade, Australia Q4 Wages, and Canada has CPI and Retail Sales. The corporate earnings season will remain busy, with the focus in the US on AI darling Nvidia and major retailers, such as Home Depot and Walmart. A busy run of central bank speakers accompanies policy meeting minutes from Fed, ECB and RBA, while rates are seen hold in Indonesia, South Korea and Turkey, but China’s monthly Loan Prime Rate fixings are expected to see a 10 bps cut to the 5-yr rate to 4.10% (which guides local mortgage rates). In the commodity space, mining behemoths BHP, Rio Tinto and Vale all report earnings, as do a number of energy sector companies, there are the Egypt Energy and London Global Base Oils conferences, while the IEA, IEF and OPEC hold their annual symposium. Conferences (UK NFU, Dubai Gulfood & Paris Agriculture Show) and US livestock monthly reports dominate the agricultural agenda. Geopolitics will continue to cast a very long shadow, be that the Ukraine/Russia or Israel/Hamas conflicts or the attacks in the Red Sea.

G7 flash PMIs are expected to see only marginal changes, with small improvements seen in Eurozone Manufacturing & Services PMIs, but still signalling contraction, with French Business Confidence seen unchanged at sluggish 99, and Germany’s Ifo Business Climate to edge up to a still desultory 85.5. UK PMIs are also expected to see Manufacturing improving, but as with the also due CBI Industrial Trends still pointing to contraction, but by contrast Services are seen holding at a 9-mth high of 54.3, while India should could continue to see all round strength. In the US dips are expected in both Manufacturing and Services, but still signalling a modest expansion, with the only notable US data item being Existing Home Sales, forecast to bounce 5.0% /m/ after dropping 1.0% in December, weather effects and a slight uptick in mortgage rates impart some downside risk. Details on final Eurozone CPI and German Q4 GDP will also be closely watched, with the former expected to see further easing in ‘super core’ inflation, while the latter highlights that CapEx (seen at -1.5% q/q) paced the -0.3% q/q, more than offsetting small 0.2% q/q increased in Private Consumption & Government Spending.

In Japan, Monday’s Private Machinery Orders are expected to rebound 2.7% m/m after sliding -4.9% in November, while Trade data should show Export growth holding up near December levels at 9.4% y/y, while Imports contract a faster -8.7% y/y, primarily due to lower coal and oil volumes. In Australia, the Q4 Wage Prices Index should slow to 0.9% q/q from Q3’s 1.3%, as the boost to Q3 from a rise in the minimum wage unwinds, but edge up 0.1 ppt in y/y terms to 4.1%, with the RBA seeing a further modest deceleration to 3.5% by 2024 year end.

The data and survey schedule is per see likely to have limited impact on markets, barring outliers. Central bank speakers are likely to be more closely watched, given that the Fed, ECB and RBA minutes are likely to have been overtaken by more recent data, with the focus above all on how Fed speakers parse last week’s CPI and PPI jumps, and the drops in Retail Sales, Industrial Production and Housing Starts. In all likelihood they will probably suggest that these did not change their views on the economy, highlight weather effects, and reiterate that path lower on inflation was always going to be bumpy, and underscore that they have been cautious on the timing of an initial rate cut with good reason. The ECB’s report on negotiated wage rates and the monthly Inflation Expectations survey will be of far greater importance than the minutes, with the latter underlining that wage trends will be critical in terms of the rate and policy outlook.

While S&P500 corporate earnings in the US have beaten expectations in 80% of those companies that have reported, and offer support for the rise in the S&P 500 along with the resilience of the US economy. The fact that Germany’s Dax has been powering to all-time highs, and Japan’s Nikkei is knocking on the door of it’s all time high 34 years ago, when both economies are performing poorly should certainly raise more than a few eyebrows. Be that as it may, corporate earnings highlights for the week as compiled by Bloomberg News are like likely to include: Air Liquide, Allianz, Analog Devices, Anglo American, Ansys, AXA, BAE Systems, Barclays, BASF, BHP Group, Block, Booking, Cheniere Energy, Coca-Cola Europacific Partners, CoStar Group, Danone, Deutsche Telekom, Diamondback Energy, Dominion Energy, Emirates Telecommunications Group, Engie, EOG Resources, Exelon, Fomento Economico Mexicano, Fortescue, Glencore, Home Depot, HSBC Holdings, Iberdrola, Intuit, Keurig Dr Pepper, Keysight Technologies, Lloyds Banking, Loblaw, Medtronic, MercadoLibre, Mercedes-Benz, Moderna, Nestle, Newmont, Nu Holdings Cayman Islands, Nvidia, Palo Alto Networks, PG&E, Pioneer Natural Resources, Public Storage, Quanta Services, Realty Income, Rio Tinto,Rolls-Royce, Saudi Telecom, Suncor Energy, Synopsys, Trip Group, United Overseas Bank, Vale, Verisk Analytics, Vici Properties, Walmart, WEG, Wolters Kluwer, Woolworths Group, Zurich Insurance.