Macroeconomics: The Day Ahead for 6 February
- Light data and events schedule likely to be overrun by Friday US labour data fall out, China/US tensions; digesting robust Indonesia GDP, German Orders rebound and Australia Inflation jump; Eurozone Sentix survey & Retail Sales, Canada Ivey PMI ahead; smattering of earnings
- Markets wrong footed once again, underpinning volatility and underlining continued uncertainty, goldilocks scenarios not on the menu
- Week ahead: light data schedule features UK Q4 GDP, China CPI and PPI, plenty more earnings, US Short Term Energy Outlook and USDA WASDE
Today’s run of data and events is likely to be subordinated to the fall-out from markets once again being wrong footed on the outlook for Fed rates, and the tensions between the US and China over the suspected ‘spy balloon’, along with the devastation that has been wrought by the earthquake in Turkey and Syria. There are Indonesia’s robust Q4 GDP and a better than expected rebound in German Factory Orders to digest, while ahead lie the UK Construction PMI, Eurozone Sentix Investor Confidence (unlikely to have to captured last week’s whipsaw) and Retail Sales, and Canada’s Ivey PMI – none of which are really likely to capture the hearts of markets and investors that are now very confused as to how to position themselves, after last week’s reality check. As noted on Friday, and worth repeating: Markets are for the most part wilfully blind, with a strong penchant for ‘wishful seeing’, and the sharp moves that have been seen are a) testament to woeful levels of underlying market liquidity, and b) underline that central banks with their balance sheet reduction programmes have barely made a dent in the colossal volume of liquidity that was injected during the pandemic, let alone the QE of the last decade. Even if they are in most cases close to a peak, rates are much less likely to fall by the end of the year than markets are discounting, though the nascent earnings recession (cf. the Alphabet, Amazon & Apple results yesterday) could well be key to this. An earnings recession is de facto not a recipe for a risk asset rally, and once again markets are getting a lesson in not assuming that initial flows at the start of the year are necessarily a guide as to how it will evolve over the longer run; goldilocks scenarios are very simply out of place.
RECAP: Week Ahead Preview
The new week’s calendar is quite light on economic data with the exception of the UK, but will see peak volume in terms of the Q4 earnings season, with 93 S&P 500 companies. Statistically the US has Trade, Consumer Credit, preliminary Michigan Sentiment and annual CPI revisions; Q4 GDP tops the UK run, accompanied by the usual array of monthly business and trade activity indicators, BRC Retail Sales and RICS House Price survey; German publishes its delayed CPI data along with Factory Orders and Industrial Production, while PPI, CPI and credit aggregates are on tap in China. Japan looks to Wages, Household Spending and the Economy Watchers survey, and Canada has labour data. Both Australia’s RBA and India’s RBI are seen hiking rates a further 25 bps to 3.35% and 6.50% respectively, and there are plenty of Fed, ECB and BoE speakers, which will be of particular interest after last week’s strong US labour data totally wrong footed markets wishful seeing ‘dovish’ spin on the Fed, BoE and ECB meetings. Monday night brings the US State of the Union address, while Thursday and Friday see a special EU Summit to discuss the European Commission’s Green Deal Industrial Plan that is intended to act as a counter to the US Inflation Reduction Act, though divisions within the EU over the proposals run very deep.
In the commodity space, the EIA publishes its Short Term Energy Outlook, while a busy run of S&D reports will be the focus for agricultural markets, headlined by the USDA’s WASDE, accompanied by China’s CASDE and Brazil’s CONAB Agri and UNICA Sugar data, and StatsCan grains and oilseeds inventories. The EU’s ban on seaborne imports of Russian refined oil products comes into effect, and as has been noticed by some observers, it may be the middlemen and services providers (insurance, logistics) that feel the biggest challenges and squeezes as a consequence.
Corporate earnings highlights for the week as per Bloomberg News: AbbVie, Activision Blizzard, Adyen, AP Moller-Maersk, Apollo Global Management, Astellas Pharma, AstraZeneca, Banco Bradesco, Bharti Airtel, BNP Paribas, BP, British American Tobacco, Brookfield, Brookfield Asset Management, Carrier Global, CDW, Centene, Chipotle Mexican Grill, CME Group, Credit Agricole, Cummins, CVS Health, Daikin Industries, Deutsche Boerse, Dexcom, DNB Bank, Dominion Energy, Duke Energy, DuPont de Nemours, Eaton, Emerson Electric, Enbridge, Enphase Energy, Equifax, Equinor, Fiserv, Fortinet, Fujifilm, Gartner, Hilton Worldwide, Idexx Laboratories, Illumina, Intact Financial, International Flavors & Fragrances, Iqvia, Itau Unibanco, KBC Group, KKR, L’Oreal, Linde, Mettler-Toledo International, Motorola Solutions, Neste, Nintendo, NT&T, O’Reilly Automotive, On Semiconductor, PayPal Holdings, PepsiCo, Philip Morris International, Prudential Financial, S&P Global, Sampo, Semiconductor Manufacturing International, Siemens, Simon Property Group, SoftBank Group, Sun Life Financial, Swisscom, Thomson Reuters, Tokyo Electron, TotalEnergies, Toyota Motor, TransDigm Group, Transurban Group, Uber Technologies, Unilever, Vertex Pharmaceuticals, Vestas Wind Systems, Vinci, Walt Disney, Willis Towers Watson, Yum China, Yum! Brands, Zurich Insurance.
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