Macroeconomics: The Day Ahead for Feb 16

Written by Marc Ostwald, ADMISI’s Global Strategist & Chief Economist

  • Europe Q4 GDP readings, French Unemployment to digest ahead of ZEW  and US NY Fed Manufacturing; busy schedule of Fed and other central  bank speakers; resource sector corporate earnings; UK gilt auctions; markets riding another central bank induced wave of outlook optimism

  • NY Fed Manufacturing: supply chain and weather disruptions impart higher probability of outlier

  • Pandemic and weather related supply chain disruptions brutally exposing infrastructure and business process inadequacies, failings


Lunar New Year & Carnival holidays will continue to restrain trading volumes, and while today’s schedule of data and events certainly has points of interest, markets are once again dining out on vaccince and central bank liquidity induced ‘outook’ optimism, above all evident in numerous commodity prices, as well as rising bond yields/steeper curves and continued equity market euphoria. There are various EU / Eurozone Q4 GDP readings and the much sharper than expected, though ‘classification’ distorted fall in French Q4 Unemployment (8.0% vs. forecast 9.0%) to digest, which underline rather divergent Q4 GDP profiles, even if these are dismissed as historical, with the focus already shifting beyond what will likely be a very weak Q1 in Europe to a hoped for rebound in Q2 and beyond. US / China tensions will also be a talking point again, as reports suggest that China is exploring rare earth export curbs to the US.

Germany’s ZEW survey is expected to a modest setback in Expectations (mirroring the DAX) and no change to a still very depressed Current Situations Index, reflecting extended shutdowns and slow vaccine roll-out.

The only other data item of note will be the US NY Fed Manufacturing survey, which is expected to edge up to 6.0 from January’s 3.5, though with supplier delivery disruptions (above all semiconductors, and not limited to the auto sector) and a major snowstorm, the chance of an outlier look to be quite high.

Otherwise it will be a busy day for central bank speakers, above all Fed, but the narrative of low for a long time with plenty of liquidity pump priming is not going to be unseated, even if there are some that voice dissent about the impact that these measures are having on asset prices. Corporate earnings will be dominated by the resource sector with BHP, Glencore, Devon Energy and Occidental Petroleum all reporting, while the UK holds auction of 3 & 36 year Gilts.

The big Texas freeze will continue to be the other talking point, with refineries being shuttered due to the weather, prompting a short squeeze in Gasoline and Heating Oil as well as NatGas (see charts). As the southern states of the US energy is exposed as inadequate to deal with such extreme (and highly unusual) weather events, there is a broader point to be made. Wherever one looks and whether it is weather or Covid-19 related, or indeed due to something else, the world’s complacency about its infrastructure (health, energy, Semiconductor supply, transport, etc) is being brutally exposed, as is the related over reliance on ‘just in time’ procedures and ‘globalized supply chains’; a fundamental rethink will occur, with a profound impact on economies and corporate modus operandi, and those that cling to established procedures and fail to take radical action to adapt will be swept away by rapidly changing processes.

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