Macroeconomics: The Day Ahead for Feb 22

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

  • Digesting Korea Trade, Japan Services PMI, focus on Ifo Business Climate;  US Dallas Fed Manufacturing survey; Lagarde tops G7 central bank roster; Belgium bond auction, Oil cos lead corporate earnings; EU Foreign Ministers meeting
  • Germany Ifo: further tepid recovery expected as slow vaccine roll-out  tempers recovery hopes / optimism; external demand to pace gains in  trade and manufacturing
  • Week Ahead: business and consumer surveys plentiful, US Durables, France/Spain CPI; Powell testimony; G20 meeting & EU summit
  • US yield rises and curve steepening’s contagion effect – time for  central bank ‘push back’?


The new week gets off to a subdued start in data and event terms. There are the overnight Korea trade data and Japan Services PPI to digest ahead of the likely highlight of the day, Germany’s Ifo Business Climate, with the US awaiting Chicago Fed National Activity Index and Dallas Fed Manufacturing Activity, the latter perhaps being impacted by the big freeze in Texas. Otherwise Lagarde tops the run of G7 central bankers, while Marathon Oil and Occidental Petroleum are among the highlights on the corporate earnings schedule, with Belgium the only notable issuer among govts auctioning debt today. The EU foreign ministers’ meeting to discuss further sanctions against Russia after Navalny’s appeal was rejected yesterday will also be in focus.  But it is the relentless rise in longer-term bond yields, led by the US, that will be in focus, and the extent of the contagion effect can be seen in the attached charts of longer maturity yields in the US vs. Australia, NZ and India. As with so many moves in financial markets, there is doubtless a large volume of ambulance chasing momentum trades in these moves, the question now is whether central banks opt to protest these steepening curve moves, before they spill over in a more material way into other asset classes.

Today’s Ifo survey tops a busy week for Eurozone consumer and business surveys, with a modest bounce to 90.5 from a six month low of 90.1 anticipated, and paced solely by a rise in expectations, with the Current Assessment seen little changed. Friday’s German  PMIs clearly sent very mixed signals with Manufacturing very robust, but Services very weak, the latter presumably weighed down by slow vaccine roll-out, and stubbornly high infection rates prompting extensions of lockdown measures.


RECAP –  The Week Ahead – Preview: 

The new week brings month end, and with it the usual raft of surveys, including Germany’s Ifo and US Consumer Confidence, UK labour data, US Durable Goods, Home Sales & Prices and Goods Trade Balance; the usual rush of major Japanese indicators; Australia’s Q4 Private CapEx, India’s Q4 GDP and some national provisional February HICP readings in the Euro area. Powell’s semi-annual monetary policy report testimony (formerly known as Humphrey Hawkins) tops the central bank agenda in another busy week for central bank speakers, with the RBNZ and Bank of Korea seen holding policy rates this week. Politically the focus inevitably falls on how governments (above all UK and EU) will be looking to ease activity and movement restrictions in coming weeks and months, as well as progress on Biden’s fiscal package, but there are also last Friday’s G7 meeting to digest ahead of this week’s EU leaders’ Summit and the G20 Finance Ministers meeting. Corporate earnings are again plentiful, above all in the commodity sector, which will be looking out for Anglo American Platinum, Anglogold Ashanti, Impala Platinum, Kaz Minerals and Vale; reports from Canadian and European financials are also plentiful. Government bond supply has the US selling $183 Bln of 2, 5 & 7-yr, with Germany, Italy, Belgium and Netherlands holding sales in the Eurozone. In terms of month end, rising bond yields and many equity indices being at or close to their highs, implies rebalancing flows towards bonds out of equities.

It remains the case that market reaction to incoming data is often idiosyncratic and highly selective, with a lot of data continuing to be treated as nothing more than statistical roadkill, or dismissed as heavily distorted. This week’s schedule is busy, but within the US run, only Consumer Confidence and Durable Goods Orders will probably garner much attention, given that the Personal Income/PCE data are merely likely to confirm the boost from stimulus cheques and the Retail Sales jump. Consumer Confidence is seen edging up to 90.0 from 89.3, despite the further drop seen in Michigan Sentiment. Much will depend on how a sharp drop in infection and rising vaccination rates, easing movement restrictions and talk of further stimulus contrast with assessments of the labour market, with weekly jobless claims data implying a further slip in the labour differential (last -3.2 vs. Dec -1.9), and the run of bad weather events may also have some impact. Durable Goods Orders are expected to post a further solid again (1.1% m/m headline, 0.8% core), which would echo the various manufacturing surveys.

In the Eurozone, the only other items of note outside of the array of surveys are likely to be the provisional HICP readings in France and Spain, with the former seen reversing some of January’s sharp rebound thanks to a delayed start to seasonal sales, with Spain’s HICP seen little changed. Rising petrol prices are likely to exercise continued upward pressure across the Eurozone, particularly given adverse base effects from 2020, when fuel prices fell.

On the central bank front, Powell’s prepared testimony is unlikely to deviate from the FOMC minutes in terms of the economic and policy outlook, expressing some optimism due to fiscal stimulus and vaccine roll-out, while emphasizing that policy will remain ultra-accommodative until both price and employment targets are met on a sustained basis, and rejecting any discussion of tapering or withdrawal of support as being premature at the current juncture. Per se, nothing new, but it will be interesting to see if members of the Congressional committees pick up on the financial stability issues raised by Fed staff in last week’s FOMC minutes. As a reminder: the assessment of the US financial system was that risks were ‘notable’, that “asset valuations pressures were elevated” as against November’s ‘moderate’. They highlighted that “vulnerabilities associated with household and business borrowing as notable, reflecting increased leverage and decreased incomes and revenues in 2020.” They also noted that ‘vulnerabilities stemming from funding risks as moderate. Banks continued to maintain significant levels of high-quality liquid assets and stable sources of funding. In contrast, money market funds and open-ended mutual funds were characterized by significant vulnerabilities associated with liquidity transformation.” While Powell may prefer not to comment on fiscal stimulus directly, above all not the detail, there are likely to be some questions about the steepening of the yield curve, both in terms of drivers and the impact of a sustained rise in yields on debt servicing costs. In broader terms, it will be interesting to see if this week’s raft of Fed speakers offer any pushback on the rise in longer term Treasury yields, beyond the rather trite observation about it signalling market optimism on the economic outlook.

Elsewhere, China’s PBOC will remain in the spotlight, given that the rather unusual liquidity withdrawals immediately after the Lunar New Year holidays continues to point to gradual policy tightening, and a close eye needs to be kept on daily CNY fixings, with little or no sign of any material pushback on the strength of the CNY (as ever, keep an eye on CNY cross rates with JPY, KRW and EUR, all of which are of as much if not greater sensitivity than USD/CNY). While the RBNZ is expected to keep policy on hold, it’s overall tone may be a little more hawkish, above all given the much stronger than expected Q4 labour data, and the push back on ‘riskier’ mortgage lending as the housing market again starts to overheat. As for the Bank of Korea, it is expected to keep policy on hold and signal no change for a protracted period, but its economic forecast update will be closely watched for signals on when it might become less accommodative. More immediately, it is expected that it will continue to deploy ad hoc purchases of government debt, rather than formal QE, as the govt prepares a further supplementary budget, above all in response to the surge in Unemployment in January due to additional lockdown measures.


On the corporate earnings front, outside of the aforementioned mining sector companies, Bloomberg suggests that the following will likely be among the highlights:

  • Banks/Financials: Bank of Nova Scotia, Royal Bank of Canada, Bank of Montreal, National Bank of Canada and Toronto-Dominion Bank, HSBC, Standard Chartered, Munich Re, AXA, and Lloyds Banking Group
  • Telecoms: Telefonica Brasil, Telecom Italia, Telefonica, Deutsche Telekom, and Emirates Telecom
  • Utilities: First Solar, Drax, Iberdrola, Endesa, Cheniere Energy, Veolia, Suez and Exelon
  • Medical: Medtronic, Moderna, Jazz, Fresenius and Bayer
  • – Energy / Commodity: Centrica, Williams Cos, Occidental, Petrobras, Transocean
  • – Tech and web commerce:, Rightmove, HP Inc., Etsy, Airbnb, DoorDash, Dell, Aixtron and Nvidia
  • Food &drink Anheuser-Busch, Beyond Meat and Shake Shack;
  • Retail: Best Buy, Casino, Woolworths, TJX, Lowe’s, Fnac Darty and Home Depot
  • Other: Accor, Aston Martin Lagonda, Peugeot, BAE Systems, DraftKings, Toll Brothers, Thomson Reuters, ViacomCBS, Virgin Galactic and Qantas Airways

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