The Global Markets Weekly – 2/15/13

Posted February 20, 2013 by rvillareal

Japan Go-Ahead

Though Japan’s fourth-quarter GDP growth undershot forecasts just modestly, coming in at -0.1%, instead of the expected +0.1%, the composition of the decline vividly spotlighted the role of international factors in damaging the economy. [private]

There was reasonable strength in purely domestic demand, with personal consumption spending and residential investment adding 0.3 and 0.1 points, respectively, to overall growth, while government spending added 0.2 point.  The great weakness was in exports, which subtracted 0.5 point, and in business investment—heavily influenced by export conditions—which subtracted 0.3 point.

Private inventory investment cut 0.2 points from total growth, probably a constructive thing, while a decline in imports added 0.4 points—but whether that reflected greater market share for domestic production or was tied to production losses was not clear.

With effective winks and nods from the G7 and the G20 countenancing aggressive policy easing that can be credibly described as aimed purely at restoring domestic economies, Japan will continue on its aggressively reflationary course.  There have been only helpful effects—politically, economically, and on the yen—so far.

• U.S.: This week the focus shifts to the housing sector, where the question is whether another step up in demand is yet occurring, and to inflation, where an issue of renewed disinflation may be developing. .
•  Eurozone: Very much the most closely watched pieces of data during the coming week will be the February PMI Flashes on Thursday.  This is especially as the last three sets of numbers, particularly in the final readings, largely provided more rays of hope. Further improvement is generally expected this time around. One area of focus, given the higher euro, may be the behavior of export orders.
• UK: An array of numbers this week may show a more solid side to the economy, most notably the Labor Market figures on Wednesday.  It will be interesting to see if the MPC minutes (Wed) show any acknowledgment of an underling pick-up in activity.
• Japan: The schedule is much thinner than last week, including as important economic indicators only January merchandise trade data (Wednesday) and the December all industry activity report (Wednesday, too). The week also brings a potentially important Washington meeting between PM Abe and U.S. President Obama on Friday.
• Emerging Markets/Regions:  Mexico’s, Q4 GDP is on the calendar. Expectations are for a modest uptick of the annual rate, basically confirming that a very mild growth-downturn has bottomed.  In Turkey, The central bank (TCB) will meet.  We expect no policy change this month, following the lowering of the overnight rate in January.

gmw_021513[/private]