Dentalfloss
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China Trade, US Retail Sales, PPI & Michigan Sentiment top data run,
BoE Credit Conditions survey, BoE and Fed speak, DBRS Italy ratings
review also on tap ahead of long holiday weekend in US
- China Trade: Export profile less disappointing in CNY / volume terms';
Import 'strength' by no mean wholly paced by stronger domestic demand
- US Retail Sales: solid gains seen across all measures following
'disappointing' November; Q4 sales very solid
- US PPI: energy rebound seen pacing headline rise, but underlying trend
very well contained
- US Michigan Sentiment expected to consolidate sharp post-election gains
- US: Fed talk about balance sheet reduction needs to
be heeded
- Chart: China FX flows
..........................................................................
********************
** EVENTS PREVIEW **
********************
So to end the first full trading week of 2017, there are a number of heavyweight items on the economic calendar in the shape of the mixed overnight China Trade data ahead of Brazilian monthly GDP. while the afternoon sees US Retail Sales, PPI and provisional Michigan Confidence. On the policy side of the equation, the Bank of Korea left rates unchanged as expected at 1.25%, while the BoE publishes its Credit Conditions & Bank Liabilities Surveys (where rapid growth in unsecured Consumer Credit growth is the key current concern), which are accompanied by a speech by MPC's Saunders on the labour market, and the afternoon brings a further round of Fed speak. As noted earlier in the week, markets look to be rather over-focussed on what Mr Trump may or may not deliver, and glossing over a changing narrative at the Fed, notably yesterday the 'neutral' Philadelphia Fed President Harker chimed in with Boston Fed's Rosengren in putting Fed 'balance sheet reduction' on the table for FOMC discussion, suggesting that the Fed should start by stopping QE 'reinvestment' at 1.0% rate, with the key point being that this is not "in the market" currently. Yesterday also saw the publication of the 'account of the Dec monetary policy meeting (see: https://www.ecb.europa.eu/press/accounts/2017/html/mg170112.en.html), with rather more vociferous dissent emerging "A few members could not support either of the two options that had been proposed, while welcoming the scaling-down of purchases and other elements of the proposals, in view of their well-known general scepticism regarding the APP and public debt purchases in particular. According to this view, the latter should remain a contingency instrument to be employed only as a last resort in an adverse scenario, such as a situation of imminent deflation, which was not applicable at present, as deflation risks had largely dissipated. Moreover, possible adverse side effects from further sovereign asset purchases, particularly in the medium to long term and related to the interaction with the fiscal domain, needed to be taken into account." As ever on a Friday, there will be a slew of sovereign ratings reviews published, with particular interest in the DRBS eview for Italy. Last but not least, US financial markets will be winding down ahead of the long holiday weekend, with both stocks and bonds closed on Monday for Martin Luther King Day.
** China - Dec Trade Balance **
- Another good example of how the details on Chinese Trade data tell a more important story than the headline data, which showed a sharp than expected 6.5% y/y fall in Exports in USD terms, though this was to a large extent predicated on USD strength, with CNY denominated exports up 0.6% y/y, which is indubitably sluggish, but at least underscores that there was a small gain in volume terms. For some, the as expected 3.1% y/y rise in Imports (or 10.8% y/y in CNY terms) will be seen as signalling strengthening domestic demand. However closer inspection of the commodity sector data, and consideration that the Lunar New Year falls quite early this year (January 28th), as well as evidence of hoarding of raw materials by producers in anticipation of a further rise in prices, and concern about a weakening CNY, rising USD suggest the rising domestic demand perspective needs to be tempered. On the export side the key concern was the rise in energy product exports, with Fuel exports rising to a record, in no small part due to oversupply of the domestic markets. As will be recalled, the initial 2016 oil price rally was unseated in Q2 in part by concerns about a gasoline 'glut' due to Chinese Exports. In terms of the trade outlook, eminently the primary concern is whether the incoming Trump administration opts for a combative stance with chance as appears to be the case, and on the other side of the equation, whether the Chinese authorities' efforts to curb a red hot property market leads to a drop in import demand for sector related raw materials.
** U.S.A. - Dec Retail Sales / PPI **
- Following a rather disappointing Nov Retail Sales, which saw headline sales up just 0.1% m/m and the "control group" measure up 0.2%, December is seen posting a robust headline rise of 0.7% led by Autos, though core measures are also seen up 0.4%/0.5%. The latter would fit both with the optimistic narrative meme that has been evident in post-election consumer and business surveys, as well as the perhaps more salient pick-up in Average Earnings, and indeed a solid contribution from housing related sectors, given the strength seen in Home Sales. Overall this would leave headline Sales running at a 3-mth annualized pace of well over 5.0%, with the core measure around 4.5%, which in turn would imply a very solid contribution from Personal Consumption Expenditure to Q4 GDP. How Q1 fares really depends on how long the 'Trump bump' to sentiment is sustained. PPI is seen up 0.3% m/m led primarily by a rebound in energy prices and a more modest rise in food prices, the latter having been very subdued for a protracted period, which would see the y/y rate pick up to a still veRy subdued 1.6% from 1.3%; core ex-Food & Energy is seen up just 0.1% m/m and slipping fractionally to 1.5%, with a modest drag from Trade services, but as with the headline still very well contained. Last but perhaps not least in the context of some emergent realism on precisely what Trump and his team's policies might provide as a boost to the economy, there is the preliminary Michigan Sentiment reading, which is seen little changed at 98.5, after an 11.0 point rise from October to December.
from Marc Ostwald
BoE Credit Conditions survey, BoE and Fed speak, DBRS Italy ratings
review also on tap ahead of long holiday weekend in US
- China Trade: Export profile less disappointing in CNY / volume terms';
Import 'strength' by no mean wholly paced by stronger domestic demand
- US Retail Sales: solid gains seen across all measures following
'disappointing' November; Q4 sales very solid
- US PPI: energy rebound seen pacing headline rise, but underlying trend
very well contained
- US Michigan Sentiment expected to consolidate sharp post-election gains
- US: Fed talk about balance sheet reduction needs to
be heeded
- Chart: China FX flows
..........................................................................
********************
** EVENTS PREVIEW **
********************
So to end the first full trading week of 2017, there are a number of heavyweight items on the economic calendar in the shape of the mixed overnight China Trade data ahead of Brazilian monthly GDP. while the afternoon sees US Retail Sales, PPI and provisional Michigan Confidence. On the policy side of the equation, the Bank of Korea left rates unchanged as expected at 1.25%, while the BoE publishes its Credit Conditions & Bank Liabilities Surveys (where rapid growth in unsecured Consumer Credit growth is the key current concern), which are accompanied by a speech by MPC's Saunders on the labour market, and the afternoon brings a further round of Fed speak. As noted earlier in the week, markets look to be rather over-focussed on what Mr Trump may or may not deliver, and glossing over a changing narrative at the Fed, notably yesterday the 'neutral' Philadelphia Fed President Harker chimed in with Boston Fed's Rosengren in putting Fed 'balance sheet reduction' on the table for FOMC discussion, suggesting that the Fed should start by stopping QE 'reinvestment' at 1.0% rate, with the key point being that this is not "in the market" currently. Yesterday also saw the publication of the 'account of the Dec monetary policy meeting (see: https://www.ecb.europa.eu/press/accounts/2017/html/mg170112.en.html), with rather more vociferous dissent emerging "A few members could not support either of the two options that had been proposed, while welcoming the scaling-down of purchases and other elements of the proposals, in view of their well-known general scepticism regarding the APP and public debt purchases in particular. According to this view, the latter should remain a contingency instrument to be employed only as a last resort in an adverse scenario, such as a situation of imminent deflation, which was not applicable at present, as deflation risks had largely dissipated. Moreover, possible adverse side effects from further sovereign asset purchases, particularly in the medium to long term and related to the interaction with the fiscal domain, needed to be taken into account." As ever on a Friday, there will be a slew of sovereign ratings reviews published, with particular interest in the DRBS eview for Italy. Last but not least, US financial markets will be winding down ahead of the long holiday weekend, with both stocks and bonds closed on Monday for Martin Luther King Day.
** China - Dec Trade Balance **
- Another good example of how the details on Chinese Trade data tell a more important story than the headline data, which showed a sharp than expected 6.5% y/y fall in Exports in USD terms, though this was to a large extent predicated on USD strength, with CNY denominated exports up 0.6% y/y, which is indubitably sluggish, but at least underscores that there was a small gain in volume terms. For some, the as expected 3.1% y/y rise in Imports (or 10.8% y/y in CNY terms) will be seen as signalling strengthening domestic demand. However closer inspection of the commodity sector data, and consideration that the Lunar New Year falls quite early this year (January 28th), as well as evidence of hoarding of raw materials by producers in anticipation of a further rise in prices, and concern about a weakening CNY, rising USD suggest the rising domestic demand perspective needs to be tempered. On the export side the key concern was the rise in energy product exports, with Fuel exports rising to a record, in no small part due to oversupply of the domestic markets. As will be recalled, the initial 2016 oil price rally was unseated in Q2 in part by concerns about a gasoline 'glut' due to Chinese Exports. In terms of the trade outlook, eminently the primary concern is whether the incoming Trump administration opts for a combative stance with chance as appears to be the case, and on the other side of the equation, whether the Chinese authorities' efforts to curb a red hot property market leads to a drop in import demand for sector related raw materials.
** U.S.A. - Dec Retail Sales / PPI **
- Following a rather disappointing Nov Retail Sales, which saw headline sales up just 0.1% m/m and the "control group" measure up 0.2%, December is seen posting a robust headline rise of 0.7% led by Autos, though core measures are also seen up 0.4%/0.5%. The latter would fit both with the optimistic narrative meme that has been evident in post-election consumer and business surveys, as well as the perhaps more salient pick-up in Average Earnings, and indeed a solid contribution from housing related sectors, given the strength seen in Home Sales. Overall this would leave headline Sales running at a 3-mth annualized pace of well over 5.0%, with the core measure around 4.5%, which in turn would imply a very solid contribution from Personal Consumption Expenditure to Q4 GDP. How Q1 fares really depends on how long the 'Trump bump' to sentiment is sustained. PPI is seen up 0.3% m/m led primarily by a rebound in energy prices and a more modest rise in food prices, the latter having been very subdued for a protracted period, which would see the y/y rate pick up to a still veRy subdued 1.6% from 1.3%; core ex-Food & Energy is seen up just 0.1% m/m and slipping fractionally to 1.5%, with a modest drag from Trade services, but as with the headline still very well contained. Last but perhaps not least in the context of some emergent realism on precisely what Trump and his team's policies might provide as a boost to the economy, there is the preliminary Michigan Sentiment reading, which is seen little changed at 98.5, after an 11.0 point rise from October to December.
from Marc Ostwald
