E Markets: Retrenchment

Thursday, February 14: German and Japan 4Q GDP, China trade, China M2 and new loans, USD PPI, retail sales. 

  • 0650 pm Japan 4Q GDP preliminary  (q/q) -0.6%p 0.4%e (y/y) -2.5%p +1.4%e / Price index -0.3%p -0.4%e / Capex -2.8%p +1.8%e
  • 07000 pm Australia Feb consumer inflation expectations 3.5%p 3.4%e
  • 1000 pm China Jan trade surplus $57bn p $33.5bn e / exports (y/y) -4.4%p -3.3%e / imports -7.6%p -9%e
  • 0130 am French 4Q unemployment 9.1%p 9.1%e
  • 0130 am India Jan WPI 3.8%p 3.65%e
  • 0200 am German 4Q GDP preliminary (q/q) -0.2%p 0.1%e (y/y) 1.1%p 0.8%e
  • 0200 am German Jan WPI (m/m) -1.2%p +0.3%e
  • 0400 am China Jan M2 8.1%p 8.2%e / New Loans CNY1.08trn p CNY2.8trn e / TSF CNY1.59trn p CNY3.25trn e
  • 0500 am Eurozone 4Q revised GDP 0.2%p 0.2%e (y/y) 1.6%p 1.2%e
  • 0500 am Eurozone 4Q employment (q/q) 0.2%p 0.2%e (y/y) 1.3%p 1.5%e
  • 0545 am UK 10Y Gilt sale
  • 0830 am Canada Dec new home prices (m/m) 0%p 0%e (y/y) 0%p 0.1%e
  • 0830 am US weekly jobless claims 234kp 225ke
  • 0830 am US Jan PPI (m/m) -0.2%p +0.1%e (y/y) 2.5%p 2.1%e
  • 0830 am US Dec retail sales (m/m) 0.2%p 0.2%e /ex-autos 0.2%p 0.1%e 
  • 1000 am US Nov business inventories (m/m) 0.6%p 0.2%e

Friday, February 15: US government shutdown risk, China CPI/PPI, UK retail sales, US industrial production, Michigan consumer sentiment

  • 0345 pm RBA Kent speech
  • 0830 pm China Jan CPI (m/m) 0.0%p 0.5%e (y/y) 1.9%p 2%e
  • 0830 pm China Jan PPI (y/y) 0.9%p 0.4%e
  • 1130 pm Japan Dec final industrial production (m/m) -1%p -0.1%p (y/y) 1.5%p -1.9%e
  • 0300 am Spain Jan final CPI (m/m) -0.4%p -0.4%e (y/y) 1.2%p 1.2%e
  • 0430 am UK Jan retail sales (m/m) -0.9%p +0.1%e /ex fuel -1.3%p +0.2%e (y/y) 3.0%p 3.4%e
  • 0830 am Canada Jan ADP employment change -13k p -3k e
  • 0830 am US Jan export prices (m/m) -0.6%p -0.1%e / import prices -1%p -0.1%e
  • 0830 am US Feb NY Empire Fed manufacturing 3.9p 7e
  • 0915 am US Jan industrial production (m/m) 0.3%p 0.1%e / manufacturing 1.1%p 0.4%e
  • 0955 am Atlanta Fed Bostic Speech 
  • 1000 am US Feb preliminary Univ. Michigan consumer sentiment 91.2p 94.5e
  • 0400 pm US Dec Long-Term TIC flows 

ConclusionsIs this just about uncertainty? The blinking of central bankers last week stands out and the link of this to the market and financial conditions worries many investors as a signal that independence of central bankers is waning and the rise of populist politics will continue. The global economic policy uncertainty remains at the heart of the problem. The Chart from the FT on this point seems clear and yet its not yet fully reflected in risk assets. The logical view maybe that faith in central bankers isn’t yet gone but will likely be tested as the year moves forward. 

The real issue isn’t about market stability but economic growth as the world seemingly stopped its easy expansion in 4Q. The indicators on global growth from industry are troubling to say the least. The ECRI report from last week is worth studying for those that are trying to square the rally up in copper and iron ore last week with the gloom of EU economic forecasts. 

For the week ahead, the relationship of the US dollar to break-even inflation and expectations of it are going to matter. This is a market waiting for policy mistakes and looking for them anywhere. The USD up trade hit risk appetites and maybe a signal for more trouble at home. The move lower in Fed rate moves leaves open the question about inflation risks going forward and puts the CPI/PPI data as key risks for trouble should they show any upside surprise. 

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