Macroeconomics: The Day Ahead for 8 February

The day’s data run is very short on obvious market movers, with UK BRC Retail Sales, Japan’s Economy Watchers (services) survey, Household Spending & Wages (all missing forecasts) and French Trade to ponder ahead of the US NFIB Survey, along with US and Canadian Trade. The events schedule has rather more to offer with Poland’s NBP policy meeting and speeches by ECB’s de Cos and Villeroy, who follow comments from French Finance Minister Le Maire talking about a ‘normalisation of monetary policy’, an unusual verbal intervention, which Mme Lagarde will not welcome given the divisions on the ECB board on the inflation and policy outlook. In the commodity space the US EIA publishes its Short-Term Energy Outlook (with the focus on supply prospects, above all for US shale and oil products, with Crude inventories close 2008 lows – see chart) and Statscan releases monthly grains and beans stockpiles. A busier day for earnings has results from BNP Paribas, BP, Peloton, Pfizer, Softbank and Warner Music amongst others. Germany auctions Inflation Linked Bunds and the US kicks off its quarterly refunding with %50 Bln of 3-yr Treasuries. As noted in the week ahead, Poland’s NBP is expected to hike rates 50 bps to 2.75%, while Romania’s BNR is seen hiking a modest 25 bps to 2.25%, and in both cases this would still leave policy well behind the curve.  Polish NBP governor Glapinski, who said a stronger PLN would be helpful last week, is clearly failing to understand (probably wilfully and at the behest of the vile PIS government) that a weak PLN is a function of poor NBP policy, as well as government economic policies, and serial confrontations with the EU. But the $64 million question remains just how G10 central banks manage a colossal simultaneous liquidity withdrawal without having a very profound impact on markets, and all the more so given that they are effectively shutting the stable door after the horse has bolted. In that regard, it is the credit space that requires most attention, thus far the spread widening has been modest, though the pace may have caught a few investors “offside” – see charts.

** U.S.A. – Jan NFIB Small Business Optimism **

– The consensus looks for a drop back to 97.5, after eking out marginal gains in the prior months to 98.9 from October’s 98.2, and leaving the index at its weakest level since February 2021, with Omicron related disruption expected to take its tool. The already published Employment sub-indices saw a record high  (past 48 years) 50% of companies reporting increased Compensation. and a near record 47% reporting Jobs Hard to Fill. But as has been the case for a protracted period, it is the ‘Expect Better Economy’ sub-index which remains the key drag, with December’s pick-up to -35 from November’s matching all-time low of -38 hardly signalling a turnaround. The other focal point will inevitably be “Higher Selling Prices (last 57 vs. November peak of 59) as markets wait on Thursday’s CPI.