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Good Morning: The Long & the Short of it and The Bigger Picture - 14 February 2019 - ADM ISI PLUS "Early Morning Squawk"





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Ostwald, Marc
08:56 (10 minutes ago)



to Marc






- Very busy day for major data - digesting China Trade, Japan, German Q4
GDP; prov. CEE and revised Eurozone GDP on tap ahead of US PPI, Claims,
and 'old' Retail Sales & Business Inventories, Canada Manufacturing Sales:
UK parliament debates Brexit again, smattering of Fed speak, Egypt rate
decision; UK 10 yr and plenty of corporate earnings

- US PPI: energy to weigh on headline, core to rise around average; Trade
Services the wildcard; Capital Goods and Consumer Durable prices in focus

- US Retail Sales: gasoline prices seen weighing on headline, core measures
expected to sustain strong recent trend

- China Trade: better than expected but likely distorted by LNY effects,
export rebound encouraging but US/China trade talks still key

- German GDP: Govt spending supports, trade a 'wash', Private CapEx weak,
Q1 should be better, but ........

- Japan Q4 GDP: domestic rebounds from Q3 weather and natural disaster
effects, external demand weighs

- Attachment - Early morning squawk:
see also https://www.mixcloud.com/widget/ifr...ADM/the-good-morning-squawk-14-february-2019/


..........................................................................

********************
** EVENTS PREVIEW **
********************

Another barrage of statistics awaits, and mostly of the "to be digested" variety: Japan and German Q4 GDP, China Trade and UK RICS House Price Balance (worst since 2011). Ahead lies a barrage of European Q4 GDP readings, with the focus on the CEE area and any revisions to the Eurozone Q4 GDP, while the US has PPI and Initial Claims, and a catch-up on December's Retail Sales and November's Business Inventories, while Canada looks to Manufacturing Sales. There will be the very unedifying spectacle of yet another UK parliamentary debate and vote on matters Brexit, which will almost certainly do nothing to unlock the ongoing gridlock. The UK also sells £2.25 Bln of 10-yr Gilts, while today's array of corporate earnings sees AstraZeneca, Airbus, Commerzbank, Credit Agricole, Credit Suisse, Nestle, Puma, Renault, Schneider Electric and Vivendi featuring in Europe, and across the pond Coca-Cola, FNMA, FHLMC, Nvidia and Bombardier seems likely to grab some headlines amongst others.

** U.S.A. - January PPI / December Retail Sales **
- PPI is likely to echo yesterday's CPI, in so far as energy prices are seen pushing down on headline PPI, seen at 0.1% m/m 2.1% y/y (vs. Dec 2.5% y/y), but both core measures are forecast to rise a very 'average' 0.2% m/m which would edge y/y rates down to 2.5% y/y (ex-Food & Energy) and 2.7% y/y (ex-Food, Energy & Trade). As ever the key wildcard remains Trade Services (last -0.3% m/m vs. prior +0.3% m/m, 1.6% and -0.3%); if surveys are correct then there should be some easing of upward pressures on items such as capital and consumer goods on softer domestic demand, though this has been touted for a few months, but the evidence theretofore in official data has been ratehr scant. Retail Sales are a 'catch-up' item, with the slide in gasoline prices set to weigh on headline sales (forecast 0.1% m/m). but core measures (ex-Autos & Gasoline and 'Control Group') are projected to post a 0.4% m/m gain, which follows 0.5% and 0.9% respectively in November, per se underlining ongoing strength in Private Consumption.

** Egypt - rate decision **
- The drop in inflation, a recovery in the EGP and indeed ion FX reserves has prompted speculation that a 50 bps rate cut to 16.25% Deposit and 17.25% Lending might well happen at today's meeting, though the consensus looks for no change.

== Overnight Data review ==
- Japan Q4 GDP - basically in line with forecast at 1.4% SAAR or 0.3% q/q, with CapEx better than expected 2.4% q/q just about recovering from the rev. -2.7% q/q in Q3, Private Consumption missing slightly at 0.6% vs. f'cast 0.7%, external demand (i.e. net exports) deducted 0.3 ppt as against a forecast of -0.4 ppt. The key question is how much of the rebound in domestic demand was a case of catching up on the weather and natural disaster contraction in Q3, and thus rather exaggerated relative to underlying trend.

- German Q4 GDP - this unsurprisingly missed at flat q/q 0.6% y/y. While the stats office did not put exact numbers to the detail (due next week), they said that Net Exports were flat for the quarter, Private Consumption rose slightly, Govt spending and surprisingly CapEx rose 'significantly', though private CapEx only rose 'slightly'. Q1 should see a respectable rebound (perhaps 0.4% q/q), but beyond that there are still plenty of questions, above all the aspect that the recovery in the auto sector may well be more than offset by weakness in export demand (both Asia and Eurozone).

- China Trade - This being data for the month before the Lunar New Year holidays, any extrapolation on longer term trends is ill-advised, given that Q4 imports were as we know weak, and the January data look to be a case of 'front-loading', above all of raw materials and other commodities ahead of the holidays. The latter looks to be above all evident in copper and iron ore, while the rebound in soybean imports from December still leaves imports down 18% y/y vs. last January. NatGas Imports continue to see a strong upward trend as the country continues its move away from coal, but this is a protracted process. Encouragingly exports were stronger than expected at 2.9% y/y vs. a forecast of -1.9%. In a broader context, it is worth noting that the current run of stimulus measures is anticipated to add somewhere between 3 and 7 ppts to GDP, this does not in fact completely offset the overall contraction (ca 7.5%) in credit in 2018, per se it is even more important that the current optimistic noises on US/China Trade talks actually turn into some form of trade agreement. There will still be sticking points, above all in the areas of Intellectual Property Rights (IPR) and Security, but at least the threat of a further escalation will dissipate.
 
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