Trading with point and figure

- Digesting Powell testimony and China PMI setbacks, awaiting Eurozone CPI,
Sweden and India Q4 GDP, US revised Q4 GDP, Chicago PMI and Pending Home
Sales; German 10-yr and Mexico Inflation Report; month end likely to temper
reaction to busy run of data

- Eurozone CPI: weaker than expected German outturn imparts modest downside
risk

- India GDP: expected to revert to trend rate following demonetization and
GST 'shocks'

- US GDP: Retail Sales and Production revisions suggest potential for
larger downward revision, but momentum going into 2018 still solid

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

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

Today's schedule of data looks to be monumental in volume terms, but closer inspection and its juxtaposition to Powell's testimony yesterday and tomorrow suggests that it may be very much second division, especially in the wake of those Powell comments hinting at an asymmetric bias towards tightening, as well as the dampening impact of month end flows. Be that as it may, there are the overnight run of Japan Industrial Production and Retail Sales, China official PMIs and UK BRC Shop Prices to digest ahead of Swedish and Indian Q4 GDP, German Unemployment, Eurozone provisional CPI and the revised US Q4 GDP data and Chicago PMI, while tonight brings the Japan Q4 CapEx, which will be key in determining any revisions to Japan's Q4 GDP. Banco de Mexico's Q1 Inflation Report will bear some scrutiny given that January's CPI drop appeared to be something of a disappointment for Banxico chief Guzman, who sounded a hawkish not on the rate outlook, perhaps unsurprising given a renewed bout of MXN jitters in respect of NAFTA negotiations, and President Pena Nieto's decision to postpone a scheduled meeting with Trump. Germany also re-opens its current 10-yr Bund, while hold Ahold Delhaize, Bayer, Carrefour, Repsol feature on the European earnings schedule, with North America looking to Analog Devices, Lowe's, Salesforce, TJX and Valeant. The Irish border problem looks unsurprisingly to be raising its ugly head once more in respect of Brexit negotiations, and there remains few signs that a solution that is acceptable to all parties concerned is on the horizon.

** Eurozone - February prov. CPI **
- Following on from above forecast Spanish CPI, but a below forecast reading in Germany, today's Eurozone reading is seen marginally lower at 1.2% y/y (vs. Jan 1.3%) at the headline level and unchanged at 1.0% y/y on core CPI. But at the margin, even a downside miss on either today is not materially going to change the tone of the debate on the policy outlook at the ECB, even if market pricing on the rate trajectory has been wound back since mid-January, thanks to a still rather subdue inflation outlook, and the rather more bogus discussion about EUR ' strength' (itself something of an illusion in TWI terms over the past 3-4 months).

** India - Q4 GDP **
- The consensus assumes that the shock from the Q4 2016 'demonetization' and the very haphazard and rather chaotic introduction of the GST (goods and services tax) in July 2017 have been weathered, and growth is reverting to its prior trajectory, with Q4 GDP seen at 7.0% y/y (vs Q3 6.3%) and GVA at 6.7% y/y (vs Q3 6.1%). It is anticipated that robust personal consumption (most evident in strong auto sales) and a pick-up in Government spending and Construction Output will add some impetus for the quarter, though the wildcard could well again prove to be Net Exports that have been a significant drag in recent quarters. Perhaps the key question going forward is how the RBI deals not only with the Punjab National Bank scandal, but the broader issue of cleaning up the high levels of non-performing loans at many of India's major banks, as well as its renewed bout of concerns about the uptick in inflation.

** U.S.A. - Q4 revised GDP, Pending Home Sales **
- The consensus sees a marginal downward revision to Q4 GDP from the provisional 2.6% to 2.5%, though the risks given the downward revisions to December Retail Sales and Industrial Production look to be to the downside. It would however still the 2017 y/y rate at 2.4%, considerably stronger than the 2.1% FOMC had been anticipating at the start of last year, and more pertinently with solid upward momentum going into 2018, which will be of greater relevance in terms of the FOMC debate on whether they may need to signal a faster pace of rate hikes. Pending Home Sales are seen up 0.5% m/m, though the recent strength in this measures is at odds with the low inventory related stall in Existing Home Sales, which would suggest that this may in fact turn out negative, though not implying demand weakness, but rather underlining supply bottlenecks.


from Marc Ostwald
 
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