Macroeconomics: The Day Ahead for 22 February

A busier day for statistics has the G7, India & Australia ‘flash’ PMIs as its centrepiece, with French Business Confidence to digest, ahead of final Eurozone CPI (with details on key ‘super core’ CPI), Canadian Retail Sales, and US weekly jobless claims and Existing Home Sales. As expected the Bank of Korea held rates at 3.50% overnight, with Turkey’s TCMB expected to hold rates at 45.0% for the first time after a brutal rate hiking cycle from June 2023 to January, which saw rates rise 3,650 bps, as Karahan presides over his first policy meeting since taking over as TCMB governor at the start of the month. This would signal policy continuity, given that former governor had signalled that January’s 250 bps likely marked the end of the rate hike cycle, though retaining a hawkish bias, which will probably retained today. Following on from yesterday’s FOMC minutes, which echoed recent Fed speakers’ caution on cutting rates too quickly, there is a further barrage of Fed speakers, preceded by the release of the ECB ‘account’ of its January policy meeting. A busy day for corporate earnings will likely see some or all of the following making the headlines: Fortescue and Lenovo, with Anglo American, Lloyds Bank, Repsol, Telefonica, WPP and Zurich Insurance in Europe, the Americas look to Cheniere Energy, Keurig Dr Pepper, Moderna, Newmont, Pioneer Natural Resources and Vale. The US will also sell $9.0 Bln of 30-yr TIPS.

** G7, India – February ‘flash’ PMIs **

– Asia’s flash PMIs were distinctly mixed, with Indian indices posting some modest gains, and pointing to a further robust expansion, while Japan’s readings echoed the drop seen in yesterday’s monthly Tankan readings and the govt’s downgrades to the growth outlook, and continuing to suggest that domestic demand remains week. Other 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 seeing a slight upturn in Manufacturing (100 vs. expected 99), but Services weakening to its worst level (99.3) since Q2 2021. UK PMIs are also expected to see Manufacturing improving to 47.5 from 47.0, but with yesterday’s CBI Industrial Trends Orders index jumping to -20 from -30, and Selling Prices to 17 from 9, a stronger than expected outturn seems likely. By contrast the Services PMI is seen holding at a 9-mth high of 54.3, though the survey does not include Retail or indeed public sector healthcare or transport, which have been the key elements in the choppy outturns for the official Index of Services. In the US dips are expected in both Manufacturing and Services PMIs, but still signalling a modest expansion, with Existing Home Sales, which are forecast to bounce 5.0% m/m after dropping 1.0% in December, weather effects (as seen in last week’s Housing Starts) and a slight uptick in mortgage rates impart some downside risks.