Market Themes to monitor:
- Tensions between Saudi Arabia and Iran
- Oils' decline and the expected inflow of Iranian Oil to the already oversupplied market
- GDP growth, particularly for China
- BoC interest rate decision
United States: Bank holiday on Monday celebrates Martin L. King's birthday; Inflation read is on Tuesday, where CPI remains subdued but has seen a rise from 0.2% to 0.5% on an annualised basis. If the trend continues it will take the pressure off of the FED but if we see it headed bac towards the 0% threshold then expect FED to take a lot of flak regarding their rate hikes; Initial jobless claims appears to have formed a trough around mid-2015. The indicator tends to move in tandem with unemployment, with any upturn preceding a recession. Now FED have a rate hike plan on the table traders will take note of any rise in unemployment very seriously over the coming months; Natural gas storage is gaining more attention whilst Oil prices remain in a rout. Typically the read troughs around Jan-Feb each year but so far has failed to provide any signals of a bottom; Markit manufacturing PMI will reveal if it closes the gap on the contracting ISM read seen last week. Whilst Markit's read has remained above 50 (to show expansion) it has nose-dived recently to suggest it could also break below 50 to send further growth concerns for the US sector and weigh on G4 GDP.
Europe: Inflation on a monthly basis is expected to contract 0.1% and historically, has tended to contract in Feb instead of Jan. Annually it is forecast to remain stable at a mere 0.2% but with numbers so low we have to be on guard for a dip back below 0% and for Euro crosses to weaken; ECB press conference and rate decision will be the highlight from Europe on Thursday. No rate change (or further reductions into the negative territory) are expected but not something to rule out if we consider the weak growth data seen globally so far this year. Also any further changes to their QE program will gain extra attention as this would further weaken the Euro which has remained in a sideways range so far this year. Friday finishes with Markit PMI reads for services, manufacturing and the composite which compared to US and China at least, are expanding at a healthy pace of 54.2, 53.2 and 54.3 respectively.
China: Tuesday will gain the most attention from traders, analysts and commentators as we have retail sales, industrial production and GDP data released simultaneously. Now GDP has crossed below the original 7% threshold and expected to tick lower again to 6.8% then expect this figure to make or break global sentiment the further away from this figure we deviate, in either direction. Whilst GDP is taken with several pinches of salt and assumed to be optimistic of the actual underlying situation, it does still provide a metric to set the tone for global investors; Retail sales troughed in May '15 and expected to tick higher whilst industrial production is forecast to provide further gloom and fall to 6% from 6.2% previous.
United Kingdom: UK Producer prices continue the global trend of contraction, with
CPI on an annualised basis continues to meander around the 0% threshold but core CPI is gaining traction since the trough in May '15 and last hit 1.7% on a monthly basis; Housing prices have cooled slightly in recent months and lending limits have began to take effect; Retail sales remains elevated at 3.9% n an annualised basis, and December's figures are released on Friday.
Australia: Consumer inflation is on the rise and was last seen at 4%, so consumer have a more bullish outlook than traders currently do; Conversely consumer confidence dipped slightly in December but both will be released on Thursday.
Canada: Traders have been shorting the Canadian Dollar to multi-year lows in anticipation of a rate cut, with the bearish trend only accelerating due to falling oil prices. So if the BoC holds rates they will at least have to up their dovish tone in the statement to keep CAD weak. If we do have rates on hold then inflation data on Friday becomes even more important as this could set the tone leading up to the next meeting.
New Zealand: Business confidence has continued its decline since rate cuts were taken into action and Monday confirms if this trend accelerates; CPI data remains subdued around 0.4% on an annualised basis whilst lower dairy and oil prices weigh down the read. RBNZ expect this to tick higher as these leave the equation in early 2016 but for now it is relatively safe to expect a low number for CPI on Tuesday; Business PMI on Wednesday could tick lower as recent data shows employment and new orders are weighing the index down and dragging it towards 50.
THE WEEK AHEAD: GDP and inflation in focus
Market Themes to monitor: