It will be a busy week filled with the first look at Q4 GDP, corporate earnings, and US debt ceiling gridlock. There is a lot of risk on the table and a key focal point for many will be the modest growth we will see alongside a plethora of data points that are signalling recession warnings. Traders will want to see if the contraction manufacturing and service PMI readings we saw in December show any improvement this month.
Wall Street is also fixating on what will happen with debt ceiling talks. Special measures are being used and that should stave off default until June 5th, but flare-ups will most likely happen along the way.
Earnings season shifts away from the banks and now focuses on broader parts of the economy. Key earnings include results from Tesla, Chevron, the airlines, Lockheed Martin, Visa, American Express, 3m Abbott Labs, JNJ, GE, IBM, and Colgate-Palmolive.
The flash PMIs early in the week will be of keen interest as investors continue to assess how much trouble the economy is in. A relatively mild winter to date has boosted the bloc’s economic prospects as gas prices have fallen considerably. This isn’t expected to be reflected in the PMIs though, with the prospect of much higher interest rates and a tougher global economic environment continuing to weigh. It will be interesting to see if there is any improvement as a result of this and China’s growth prospects.
Regardless, markets expect the ECB to hike by another 150 basis points over the coming meetings and officials have been keen to ensure investors don’t become complacent on that. I expect more commentary along those lines next week.
UK
While the PMIs would typically be the standout release next week, investors may have more of an eye on the PPI inflation data for signs of inflationary pressures subsiding. The CPI data in December declined for a second month but remains far too high, above 10%. We’ll need to see much greater signs of those pressures abating before the Bank of England can become more comfortable.
Russia
The only economic release of note is the PPI data. That aside, the focus will remain on the war in Ukraine.
The SARB is expected to raise interest rates by another 50 basis points on Thursday, taking the repo rate to 7.5%, although they could opt for only 25. Inflation has been heading in the right direction since peaking in the summer and could be back within the 3-6% target range before long. Investors will be looking for signs on whether the tightening cycle is now at or near an end.
Turkey
The CBRT left the repo rate unchanged at 9% in January after opting to pause the easing cycle late last year. The quarterly inflation report may offer insight into whether rates will fall again and when but that aside, I’m not sure it will contain much of note given the logic adopted to justify cutting interest rates over the last couple of years.
Switzerland
Trade data is the only notable release next week.
China
This Saturday is Chinese New Year’s Eve, followed by the Spring Festival. The New Year atmosphere which generally extends until at least the end of January may further stimulate domestic consumption and investment in China. The billions of trips made during the Chinese New Year could bring the second wave of Covid-19 to largely unaffected rural areas and smaller cities. Given that the general population will have a higher level of immunity, the economic impact of a second outbreak should be less in areas that have already withstood the main wave of evacuations.
India
No major data or central bank appearances are expected.
Australia & New Zealand
China’s full reopening since the beginning of January this year and its renewed focus on ‘economic development’ will benefit economic growth in Australia and New Zealand. The largest potential upside from reopening itself sits within the services sector given China is the largest consumer of Australian tourism and education exports.
Australia recently released its CPI for November at an annual rate of 7.3%, in line with expectations but higher than the previous value of 6.9%, indicating that Australia’s inflation level may still not have peaked.
The RBA’s CPI for December will be released on Thursday, as well as its revised CPI average quarterly rate for the fourth quarter. New Zealand’s CPI for the fourth quarter will offer clues on whether sustainable disinflation is underway.
Japan
The Bank of Japan monetary policy decision saw them defer any major decisions until at least Governor Kuroda’s last meeting in March, barring any surprises in the interim. Following that, the summary of opinions on Wednesday could be of interest, as will the December minutes, released Monday. Despite being outdated now, it will provide perspective on the decision to unexpectedly tweak its yield curve control band.
Next week also focuses on the Japan PMI readings, leading index, and Tokyo’s CPI.
Singapore
The release of the December inflation will be followed closely. MAS sees core inflation averaging 3.5%–4.5% this year.
Economic Calendar
Saturday, Jan. 21
Economic Events
- US Treasury Secretary Janet Yellen visits Senegal, Zambia, and South Africa
Sunday, Jan. 22
Economic Events
- Germany Chancellor Scholz and French President Macron hold a joint news conference after a Franco-German cabinet meeting in Paris
- Italian PM Meloni visits Algiers
Monday, Jan. 23
Economic Data/Events
- US Conference Board leading index
- Euro area consumer confidence
- EU foreign ministers meeting in Brussels
- Russian Foreign Minister Lavrov is expected to travel to South Africa’s Pandor
- ECB’s Panetta speaks in the European Parliament
- ECB President Lagarde makes a speech at the Deutsche Boerse annual reception
- Bank of Japan releases minutes of its December meeting
Tuesday, Jan. 24
Economic Data/Events
- US flash PMIs; Richmond Fed Manufacturing
- Australia Judo Bank PMI, business confidence
- Chile PPI
- European flash PMIs: Eurozone, Germany, UK, and France
- Japan PMIs, department store sales
- Mexico international reserves, bi-weekly CPI
- New Zealand performance services index
- Thailand trade
- South Africa leading indicator
- ECB’s Knot speaks at the Future of the Financial Sector conference in Frankfurt
- German Foreign Minister Baerbock addresses the Council of Europe in Strasbourg
- SNB’s Vice Chairman Schlegel speaks in Zurich
- Earnings from Danaher, General Electric, Intuitive Surgical, Johnson & Johnson, Lockheed Martin, Microsoft, Raytheon Technologies, Texas Instruments, 3M, Union Pacific, and Verizon
Wednesday, Jan. 25
Economic Data/Events
- US MBA mortgage applications, Philadelphia Fed non-manufacturing activity
- Australia CPI, leading index
- Canada rate decision: Expected to raise rates by 25bps to 4.50%
- Germany IFO business climate
- Japan leading index
- Mexico economic activity IGAE
- New Zealand CPI, credit card spending
- Russia PPI, weekly CPI
- Singapore CPI
- Thailand rate decision: Expected to raise rates by 25bps to 1.50%
- The Republican National Committee winter meeting is held
- Nordic economic outlook published by Finland’s Nordea Bank
- Germany’s Economy Ministry publishes its annual report with updated forecasts
- BOJ announces the outright purchase amount of government securities
- Earnings from Abbott Laboratories, ASML Holding, AT&T, Boeing, IBM, and Tesla
Thursday, Jan. 26
Economic Data/Events
- US Q4 GDP, new home sales, initial jobless claims, goods trade balance, US durable goods, wholesale inventories, retail inventories
- Canada CFIB business barometer
- Japan PPI services, machine tool orders
- Mexico unemployment rate
- Russia gold, forex reserves
- Singapore industrial production
- South Africa rate decision: Expected to raise rates by 50bps to 7.50%
- New Zealand releases financial statements for the five months to Nov. 30
- BOJ releases summary of opinions from January meeting
- Earnings from American Airlines, Blackstone, Comcast, Intel, LVMH Moet Hennessy Louis Vuitton, Mastercard, SAP, Southwest Airlines, and Visa
Friday, Jan. 27
Economic Data/Events
- US personal income/spending, University of Michigan consumer sentiment, pending home sales
- Australia PPI, export/import price index
- Japan Tokyo CPI
- Mexico trade balance
- New Zealand business confidence
- Singapore home prices
- South Korea business survey
- Thailand foreign reserves, forward contracts
- Spain GDP
- Earnings from American Express, Chevron, and HCA Healthcare
Sovereign Rating Updates
- Denmark (Fitch)
- Greece (Fitch)
- Hungary (S&P)
- Netherlands (Moody’s)
- Portugal (DBRS)
