- Fed speakers and array of China, Japan, UK and German data along with FOMC minutes top agenda; further rash of govt bond sales
- China: stimulus measures showing little sign of dislodging deflationary forces
- Japan: Labour Cash Earnings and BoJ survey of wage settlement intentions continue to make case for further BoJ rate hikes
- UK: BRC Shop Prices point to continued weakness in consumer spending, as KPMG/REC survey highlights both softer labour demand and skills shortages
- Germany: Production pick-up mostly down to weather related boost to energy output, rebound in Construction after protracted weakness
EVENTS PREVIEW
While a relatively busy run of Fed speakers (Barkin, Bowman, Harker & Schmid) and the ever-present outbursts from Trump will sustain the focus on the US, despite the memorial for President Carter, there is a busy run of data and events elsewhere. There are China’s CPI and PPI, UK BRC Shop Prices and KPMG/REC Employment report, Japan’s Labor Cash Earnings, German Industrial Production and Trade and Australian Retail Sales, along with last night’s December FOMC minutes to digest. Ahead lie Eurozone and Brazilian Retail Sales and Mexican CPI, and a likely highly market sensitive speech from BoE’s Breeden. Govt (and indeed corporate) bond supply remains very plentiful with France and Spain holding multi-tranche auction.
From the overnight run, China’s inflation data were essentially in line with forecasts, reinforcing the simple point that all the rather piecemeal stimulus measures are not dislodging the underlying deflationary forces at work in its economy. Japan’s Labor Cash Earnings beat forecasts at 3.0% y/y (vs. expected 2.7%), though remained negative in real terms at -0.3%, though the accompanying BoJ survey of corporate wage settlement intentions implies another round of robust wage rises at larger companies (notably Fast Retailing – owner of Uniqlo – announced an 11% increase yesterday). In the UK, the latest KPMG/REC Employment survey was notable for seeing a further drop in demand for both permanent and temporary staff, though pay for permanent staff edge higher, the latter pointing to persistent labour skills shortages despite looser labour demand, while the sharper than expected drop in BRC Shop Prices to -1.0% y/y, due to non-food discounting points to retailers having to resort to discounting to shift inventories ahead of Christmas. German Industrial Production was stronger than expected at 1.5 m/m, boosted above all by a weather related 5.6% m/m increase in Energy output, and a 2.1% m/m rebound in Construction after four months of flat or lower readings, per se not indicative of a brighter outlook. The FOMC minutes did not really offer any fresh insights other than reinforcing the view that the FOMC has turned cautious on further rate cuts due to a) misreading the labour market in Q3, and acknowledging that the then softer readings did not in fact signal the risk of a sharper drop in labour demand, and b) the lack of visibility about policy changes from the incoming Trump regime, and some potential for these to boost inflation risks.
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