and on Monday, I look forward to joining Dr Stu and his guests on the 'N@ked Short Club"
"Live from El Muro Del Trumpestupido in Monterey on Monday, February 11th from 9-10pm on Resonance FM: 104.4FM within London, on Digital/ DAB in London, Brighton and the English South Coast and also accessible worldwide via www.resonancefm.com."
The Week Ahead - Preview: 11 to 15 February 2019
As is typical for the second week of the month, it will be a busy week for economic data in the US (even though some of the reports will be Dec rather than Jan), the UK and China, with German and many other EU countries along with Japan publishing preliminary Q4 GDP. The RBNZ and Sweden's Riksbank top the run of central bank policy meetings, and there will be plenty of Fed and ECB speakers. Politics will again be a key potential market mover with the UK parliament set to debate alternatives and amendments to the Withdrawal Agreement, though a 'meaningful vote' may be delayed until the end of the month. Elsewhere sensitivity to US/China trade negotiation news will remain elevated, and in domestic terms so will the looming deadline for a second round of US govt shutdown on Friday, as well as any further stimulus news in China. The Munich Security Conference starts on Friday with the notable absence of French president Macron, underlining that France finds itself rather isolated in its relationships with both Germany and indeed Italy, with the withdrawal of the French ambassador to Rome underlining the worst bilateral relations in some 150 years. The week ends with elections in Nigeria. Elsewhere the ECJ reviews Poland's proposed Supreme Court law changes, while oil markets will be watching OPEC's monthly report very closely, above all in terms of current output OPEC+ cut efforts. Govt bond supply sees the launch of new Dutch 10-yr, the regular mid-month BTP sales (3 & 7-yr), off the run German 30-yr and 10-yr UK Gilt, which is accompanied by another busy run of corporate earnings.
- In the US CPI, PPI, Industrial Production, NY Fed, NFIB & Michigan Sentiment surveys top the run in terms of 'up to date' data, while Retail Sales (Dec) and Business Inventories (Nov) are on the catch-up list. CPI is unsurprisingly expected to continue to see downward pressure on headline (forecast 0.1%/1.5%) from energy prices, but core CPI is seen at a very average 0.2% m/m that would edge the y/y rate down to 2.1%; PPI and Import Prices are anticipated to echo CPI in terms of key elements. As for Industrial Production, the broad based strength outside of the resource sector (above all Autos) seen in December's 10 month high of 1.1% m/m for Manufacturing is likely to dissipate, with headline Production forecast at 0.1% m/m, with Manufacturing at 0.2%; the December data above all highlighted that the drops seen in sector surveys (NY Fed due this week) were not the augurs of a sharp slowdown, as rather too many commentators have suggested. The consensus for December Retail Sales sees a similar pattern to November with lower energy prices weighing on headline (f'cast +0.1%), but core sales measure remaining robust (0.4% m/m vs. Nov. 0.5%). The NFIB survey is forecast to dip further to 103.5 from 104.4, but remain high on any historical measure, and despite the headline drop in recent months, it has been noticeable that Order Flows, Employment and Investment intentions continued to see a lot of strength. JOLTS Job Openings and Treasury Budget are also due.
China returns to the fray with inflation, trade and monetary aggregates topping its run. CPI is expected to e broadly steady at 2.0% y/y vs. December 1.9%, though Lunar New Year effects can create some transient distortions. But all eyes will inevitably be on PPI, which it is expected to be fall to 0.4% y/y, only a shade above Sept 2016's 0.1%, and as such set to prompt some loose market chatter about China exporting deflation. The latest round of stimulus and PBOC liquidity measures are expected to result in a big boost to Chinas' lending data, with New Yuan Loans seen skyrocketing to CNY 2.975 Trln from 1.08 Trln, and Aggregate Social Financing jumping to CNY 3.3 Trln from 1.59 Trln.
Tedious as it may be to repeat, but all incoming UK data are clearly subordinated to the Brexit 'cliff edge'. Be that as it may, they are expected to offer a supporting rationale for the Boe's decision to cut its 2019 GDP forecast to a lowly 1.2% y/y. The week kicks off with a whole array of activity data including Q4 and monthly Dec GDP, with the former dropping to 0.3% q/q vs. Q3 0.6%, and Dec seen flat m/m after 0.2% in November. In the detail on Q4, Private Consumption (0.3% q/q) and Govt Spending (0.5% q/q) are expected to offset a drag from Fixed Capital Formation and Business Investment, and Net Exports seen neutral. In terms of the monthly data, the Trade Balance is seen little changed at £-11.95 Bln, while Industrial Production (0.1% m/m) and Manufacturing Output (0.2% m/m) are forecast to claw back most of their November drops, with Construction Output just about expanding (0.1%) after a better than expected November (0.6%), though the pivotal (in GDP terms) Dec Index of Services is seen unchanged m/m after November's 0.3%. As is well documented January CPI and RPI are heavily influenced by seasonal factors - retail discounting and the usual and very large unwind of the spike in airfares and holiday prices at Christmas. Be that as it may CPI is seen at target at 2.0% y/y after 2.1% in December, with core unchanged at 1.9% y/y, while PPI Input and Output are seen little changed vs. December and overall very well contained. The RICS House Price Balance is unsurprisingly anticipated to remain depressed at -20 (Dec -19), while the seasonal very volatile Retail Sales are projected to post a meagre 0.2% m/m increase after dropping 0.9% in Dec following the Black Friday predicated jump of 1.3% m/m in November; the key as ever will be to focus on the 3mth/3mth comparison (last -0.2%).
German Q4 GDP is projected to post a meagre increase 0.1% q/q following Q3's -0.2% q/q, which given the poor run of industry and construction data will require strength in Personal Consumption and Govt Spending, in so far as Net Exports are likely to make a small positive contribution. Elsewhere in the CEE area the Visegrad group of countries and Romania are expected to continue to see a robust pace of expansion (0.7%/0.8% q/q), while Dutch Q4 GDP is forecast at 0.5% q/q, with pan Eurozone seen confirmed at 0.2% q/q. As is well known the sharp 0.6% q/q in Japan's Q3 GDP was predicated on bad weather and a series of natural disasters, with Q4 projected to bounce 0.4% q/q (1.4% SAAR), thanks to a solid rise in Private Consumption (0.7% q/q) and a rebound in Business CapEx (1.8% vs. Q3 -2.8%) offsetting a drag from Net Exports. Other statistical highlights are likely to include Indian CPI, WPI and Industrial Production, Australian Housing Finance and Canadian Manufacturing Sales.
- While both the RBNZ and RBA have spent recent months highlighting the possibility of the next move in rates being down, and a weak set of Q4 labour market readings last week, the RBNZ is expected to hold rates, though it may opt for a more dovish tone to it. As for Sweden's Riksbank which embarked on a very low rate hike trajectory in December, rates are seen on hold at this meeting and is expected to deliver just one 25 bps rate hike to 0.0% in Q3
during 2019. In the EM space, the drop in inflation, a recovery in the EGP and indeed FX reserves has prompted speculation that a 50 bps rate cut to 16.25% Deposit and 17.25% Lending might well happen at this week's meeting. Elsewhere rates are likely to be unchanged in Fiji, Namibia and Uganda.