Macroeconomics: The Day Ahead for 17 February

As the Ukraine crisis continues to rumble, the day’s schedule is light on statistics, with Japan Trade and Orders (the former worse than expected, the latter better), Singapore Exports and Australia’s labour report to digest, with US Philly Fed Manufacturing, Housing Starts and Weekly Claims ahead, while the events schedule is replete with central bank speakers, and expected no change rate decisions in Philippines and Turkey. Elsewhere the International Grains Council publishes its monthly report, there are govt bond auctions in Japan, France, Spain, Canada and the US, and a busy run of corporate earnings, with the following likely to be among the headline makers: Baidu, Newcrest, Woodside Petroleum, Gazprom, Eni, Nestle, Orange, Standard Chartered, Palantir and the highlight of the day: Walmart. In terms of the central bank speakers, we have heard from most of the speakers in the past fortnight, so they are unlikely to veer much from the scripts that they have already set out. Developments around the Ukraine, and NATO vs. Russian narratives about what is or is not actually happening remain very fluid, while in the background the noises coming out of Vienna on the prospects for a nuclear deal with Iran appear more optimistic. As can be seen on the attached charts, both Europe Natural Gas and Brent are toying with key support levels, and remain choppy given the very disaparate supply and geopolitical newsflows.

There are the January FOMC minutes to digest, with the tone overall less hawkish than man had expected, above all the lack of any material further detail on its balance sheet reduction (QT) plans, or any active discussion of a 50 bps rate hike. That said, the minutes did not rule out any more aggressive moves, but rather underlined the Fed’s desire to have a great deal of operational flexibility as it goes forward, primarily predicated on high levels of uncertainty about the outlook. It is worth taking particular note of SF Fed’s Daly’s comments overnight that she would like to see a ‘continued tightening of financial conditions’, which as can be seen on the attached chart remain very loose, but equally her comments imply that the Fed is actually quite happy for markets to do some of the ‘heavy lifting’ on tightening policy, though this does not necessarily mean that the FOMC will endorse the market’s current rate trajectory.

** U.S.A. – Jobless Claims, Philly Fed  Manufacturing & Housing Starts **

– Today’s US data is very much second division, and rather immaterial to the Fed’s policy trajectory, above all given the ‘unfortunate’ trifecta of higher than expected CPI, PPI and Import Prices, which highlighted both increasing passthrough pressures and corporate pricing power, which owe much to supply chain disruptions, but lean heavily against the narrative that has emanated from the deflationista school of thinking. Be that as it mat the Philly Fed Manufacturing Index is expected to dip to 20.0 after a unexpectedly robust 23.2 in January, with particular focus on Prices Received after the surge in the NY Fed survey, as well as Orders and Employment. Initial Claims will get some extra attention as they cover the week of the Payrolls survey (even if this was a very poor steer for the January payrolls), and are expected to dip to 218K from 223K, while Housing Starts (consensus -0.4% m/m) and Building Permits (-7.2% m/m) are seen correcting after very robust readings throughout Q4.