- Digesting German Orders surge, China Services PMI on otherwise light
day for statistics; US, UK and EU politics to continue to dominate
- Germany Orders: strength of German and Eurozone demand, above all for
Capital Goods, the key feature; underlines upside GDP risks for 2017
- Chart: UN FAO Food Commodity Price Indices
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** EVENTS PREVIEW **
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The just published 5.2% m/m surge in German Factory Orders are the only major item on the Europe/U.S. calendar, once the overnight Australia Retail Sales, China Services PMI and Indonesia Q4 GDP have been digested. This leaves the terrain clear for markets to focus on the array of policy, most notably the major initiatives in China's agricultural sector, and US/European politics, with Trump's uphill battle to reinstate his visa/immigrant ban the initial point of focus, along with attempt to analyse the potential impact of Trump proposals on corporate tax reform and roll back parts of Dodd-Frank, all as ever against the ongoing backdrop of Trump random edict bingo. Neither LePen or Macron's major policy speeches offered any surprises, and the fate of centre right candidate Fillon is perhaps the more interesting aspect in the short-term. As the SPD close in on the CDU in Germany, trailing 29% to 33% according to one opinion poll, today's press conference by Merkel and CSU leader Seehofer after their 2-day summit to formulate the CDU/CSU's election strategy requires attention.
Germany Factory Orders - the much stronger than expected 5.2% m/m does follow a downwardly revised -3.6% m/m in November, but still leaves headline Orders up 6.4% q/q, and as such providing a sizeable order backlog to underpin manufacturing output in Q1. Domestic Orders continue to be the major driver with a 6.7% m/m rise following -2.8% m/m in November, along with Eurozone Orders (10.0% m/m after -2.0%), while non-Eurozone Orders remain weak (Flat m/m after Nov. -5.3% m/m). In sector terms, Capital Goods Orders was the key element with a 9.7% m/m rise. Overall this underlines that domestic demand in Germany and the Eurozone as a whole looks considerably more robust than many forecasters are assuming, and with such solid momentum going into Q1, the consensus 1.4% y/y forecast for 2017 German GDP looks to be under-clubbed, 1.7%/1.8% looks more likely and 2.0% is a distinct possibility.
Updated - Week Ahead: Data, Events & Earnings Highlights / brief Preview - 6 to 10 February 2017 - ADM ISI
The Week Ahead - Bullet point highlights: 6 to 10 February 2017
- Given the way that the calendar falls, the coming week is very light on US data (Goods Trade Balance, Treasury Budget), but sees a raft of Trade and Industrial Production data in Europe, while Japan has Private Machinery Orders, the UK also has BRC Retail Sales and China sees the latest FX reserves, and possibly Trade data. All of which suggest that politics (US, UK, EU) will once again be the dominant theme, along with any gyrations in China's asset markets following the PBoC's policy tightening, and the BoJ's defence of the perceived 0.10 cap on 10-yr JGB yields in the context of its "yield curve control".
- Central banks: the Fed speaker calendar is unusually quite light for a post-FOMC week, doubtless reflecting a very cautious stance on the policy outlook until the impact of Trump's policies becomes clearer, though the normally very dovish Evans comments on Friday that he 'could see three rate hikes' in 2017 serves as a reminder that assuming a dovish Fed stance may prove to be costly. Elsewhere policy rates are seen on hold in Australia, New Zealand, Peru, Poland, Romania and Thailand. India's RBI is seen cutting its main policy rates by 25 bps, while Mexico's central bank is likely to hike rates by a further 50 bps.
- Govt Bonds: the US sells 3, 10 & 30-yr Treasuries, the UK offers £3.0 Bln of its July-2019 and £.25 Bln of July-2047 Gilts. Eurozone supply will drop to around EUR 10 Bln via a Dutch 10-yr, Austria 2023 & 2026, German 10-yr and as yet to be decided Maturity from Ireland, likely 10-yr. Japan sells 30-yr conventional and 10-yr CPI-linked JGBs.
- Corporate Earnings: the US earnings starts to wind down, while the flow of reports in Europe and Asia will remain busy. Several European banks report earnings, including Italy's Monte dei Paschi di Siena, while the UK has reports BP, GlaxoSmithKline & Rio Tinto. In the US, ADM, Coca-Cola, CVS Health, General Motors, Hasbro, Humana, Mondelez, Nvidia, Time Warner, Twitter, Walt Disney & Yum Brands are among those likely to provide the highlights. This week will also Unicredit launch its EUR 13 Bln rights issue.
- Commodities - EIA and IEA monthly oil market reports; USDA monthly crop world supply and demand estimates. This sector also offered last week's most under-discussed statistic:
World - The FAO Food Price Index at near two-year high in January
- Jan FAO Food Prices 3.7% m/m 16.4% y/y
http://www.fao.org/worldfoodsituation/foodpricesindex/en/
from Marc Ostwald
