The Global Markets Weekly – 1/3/14

Posted January 6, 2014 by rvillareal

Welcome Back

International markets return full bore from holidays this week, but face differing workloads in terms of scheduled major economic indicators and central bank doings—meaning some zones could have much greater influence on currency levels.

Japan is the passive player, having received its major group of monthly data during Christmas week, and with nothing really important happening until mid-month.  Developments abroad will wash ashore.

The Eurozone., in contrast,  is active through the week, with a string of meaningful indicators—services PMIs, consumer price indexes, and EU Commission sentiment indexes—leading up to the monthly ECB meeting and press conference on Thursday. The U.K. has important indicators too—the services PMI, and merchandise trade—and also has a central bank meeting on Thursday.  No action is expected from either the ECB or the BOE, but big surprises have occurred.

Though the U.S. has a cluttered schedule, the big item comes only on Friday—the December employment report.  Other arriving indicators, and several speeches from Fed officials, have nowhere near the same potential impact in shaping expectations about the economy and monetary policy.  Those expectations can influence the whole world.

• U.S.: Virtually the sole focus will be the December employment report (Fri). Data earlier in the week are likely to get only momentary attention. Even extreme readings would not disrupt the increasingly embedded scenario of steady labor market improvement.
• Eurozone:  The ECB Council meeting (Thu) may attract a less attention than of late given the increased likelihood that the ECB is now on hold possibly for some time.  But better economic news may be on the cards, most notably in terms of the various Industrial Production updates due this week.
• UK:  The BoE monthly verdict (Thu) will get the usual (limited) attention as (yet) another stable decision is all but certain.  Given some high-profile disappointing sales figures from some retailers, questions about the consumer backdrop may revive.
• Japan:  :  The first week back from the holidays looks to be very quiet, at least on the data front, with the only reasonably important releases being December vehicle sales (Mon) and the November business conditions composite indexes (Fri)..
• Emerging Markets/Regions:  In China, key items are trade data and CPI. The latter is likely to show a sideways to slightly down move, inconsequential from a policy standpoint, while for trade, a moderate single-digit pace of growth of both exports and imports will produce another large surplus,  In Korea, the BOK meets with policymakers inclined to hold rates at current levels.  In Mexico, the November CPI should change little compared to the recent past, with inflation staying below the 4% central bank ceiling.  In Brazil, annual IPCA CPI inflation should be flat to slightly down, and as such not a policy or outlook changer. In Turkey, November industrial production is likely to show a modest rebound.

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