The last week had lots of fire works Many of the economic reports were noteworthy but the biggest bang came from central banks. You can see our review of those days here (Jan 19, Jan 20, Jan 21, Jan 22, Jan 23). The coming week also has it own fair share of activities scheduled.
The United States
The big day is Wednesday when the big guys, Federal Reserve, will come out with FOMC Statement. The big question is what they will be saying. The economic data from the U.S. has been coming out good. The unemployment rate has been falling, the GDP is growing a faster clip and the economic activities are perking up. However, the inflation is still nowhere to be seen and the wages are not budging higher. The drop in crude oil is a welcoming sign for the consumers but not for oil services sector, which had been a major sector for creating jobs and economic activities. Many major economies in the western world are flirting with deflation and it might get imported here,
To many, the last FOMC statement sounded hawkish, though, many thought it to be holding on to status-quo too. We think that FOMC will maintain the type of ambiguity that they did last time. Hawks and doves will be able to decipher their tea-leaves in ways that will suit their respective biases. However, we are leaning more toward a rate hike either very late in the year or not at all. Next few months data from US, Europe and Emerging markets will give more clarity. At least there will be no rate hike till the third quarter.
- The Durable Goods Orders m/m and Core Durable Goods will come out on Monday. It is a leading indicator of production. The core do not include transportation items. The expectations are +0.6% for both of them. The recent trend has not been very encouraging
- Conference Board Consumer Confidence will be out on Monday and the forecast is for 95.7, above last month’s reading. It is a leading indicator of consumer spending.
- New Homes Sales are expected to be 452K for December but the recent trend has been lower than forecast – last three months
- On Thursday Unemployment Claims are expected to be 301K
- Also on Thursday, Pending Home Sales m/m are expected to grow +0.6%. The last month it was better than forecast
- Friday is going to another much awaited day as the Advance GDP will come out. The forecast is for 3.1% growth quarter-over-quarter. Last report was a mega one with 5.0% growth,
- Friday is also the day for Employment Cost Index q/q, a leading consumer inflation gauge. The forecast is for +0.6%. The recent trend has been an upside surprises
- Friday will round up with Chicago PMI. The expectation is for 58.1 below last month’s 58.3. Previous two readings were misses.
The big news from Europe has come out on Sunday. Anti-austerity party, Syriza, has won the Greek Parliamentary election. Now the question is how the new leader, Alexis Tsipras, is going to keep the promise of keeping the euro and ending the austerity. The early market reaction is not too good for bulls. Euro declined in early Asian trading. So did the Far-East markets along with the crude oil. Australian markets are closed due to Australia Day and Indian markets due to Republic Day.
- Monday’s big report will be the German Ifo Business Climate, a leading indicator of economic health of the biggest European economy. The expectation is for 106.7 reading above last month’s 105.5
- Monday-Tuesday European Finance ministers are meeting and after ECB’s decision last week, this one may give some indication about the fiscal policies of EU
- On Wednesday, Gfk German Consumer Climate, a leading indicator of consumer spending, will come out. The forecast is 9.2, above last month’s 9.0
- On Wednesday, German 30-year Bonds Auction may be held. It will give us some idea about the yields and demand post-ECB expanded QE decision
- Thursday will see more news from Germany. This time it will be CPI and Unemployment change. The forecast is to be -0.8% ad -9K
- Italian 10-year Bond Auction may be held on Thursday
- Friday is Retail Sales Day. German Retail Sales m/m is expected to be +0.4%; French Consumer Spending is expected to be +0.4%
- EU CPI Flash Estimate y/y is set for Friday. The forecast is for -0.5% and for Spanish CPI -1.5%