- Modest day for data has UK Retail Sales, Canada Manufacturing Sales and
US Michigan Sentiment.... but all eyes on politics: US Senate vote on
debt ceiling and Sunday SPD Congress vote on Grand coalition; monthly
equity options expiry
- UK Retail Sales: seen retreating from November Black Monday boost,
focus on 3mth/3mth in terms of trend
- Charts: US 10 yr yield & Germany/US 10 yr yield spread
..........................................................................
********************
** EVENTS PREVIEW **
********************
Outside of UK Retail Sales, the day's data schedule will hardly have markets quaking in their boots, with US Michigan Sentiment and Canadian Manufacturing Sales the only other items that may attract attention. Schlumberger tops a modest schedule of US earnings reports, with January equity options expiry also on hand. The big question is whether a short-term US debt ceiling will be signed into law with the Senate vote hanging in the balance, and once again serving as a reminder that, for all the bluster around the tax reform bill, Congress remains a legislative quagmire. The other political item of note is the SPD congress on Sunday, where the delegates will vote on whether to approve formal grand coalition negotiations with the CDU/CSU. This is far from assured, despite all the positive noises from the SPD leadership, with the grassroots of the SPD seemingly very unenthusiastic - smaller regional membership votes in Berlin and Sachsen-Anhalt have voted against, though it will be vote from NRW (ca. 20% of all delegates) which will be decisive. For all the divergence of views about where Europe is headed, above all in respect of migration and freedom of movement, let it be understood that if the SPD Congress torpedoes a new grand coalition, it will be a bad day for Europe including the UK. A rudderless Germany may appeal to Brexiteers and more than likely Trump supporters, but actually benefits nobody, above all those bemoaning Germany's supposedly excessive surpluses. This period of better global and above all European growth is the moment to seize the nettle of long overdue reform, and the window of opportunity will likely be short.
Highlights for next week include preliminary UK (seen at 0.4% q/q 1.4% y/y) and US Q4 GDP (seen at 3.0% SAAR), UK labour data, along with the ECB and BoJ meetings.
** U.K. - December Retail Sales **
- UK Retail Sales are always "noisy" in the November through March period, with headline sales see down 0.9% m/m after jumping 1.1% m/m on the back of Black Friday promotions in November, with base effects implying that this would see the y/y rate rebound to 2.6%. As ever, it would be well advised to cut through the mth/mth noise and indeed erratic base effects, and keep an eye on the 3mth/3mth rate, which has been relatively steady in recent months, swinging between 0.8% and 1.1% since August, a relatively solid pace despite the well documented pressures on real wages. The anecdotal evidence has been very divergent with a weak BRC Retail Sales reading contrasting with a solid pick-up in Visa' Consumer Spending measure, and that in turn serves as a timely reminder that 'outliers' are not infrequent at this time of the year, and are best treated with care.
frpm Marc Ostwald