Macroeconomics: The Day Ahead for Feb 18

US data again dominates the statistical schedule after the ‘shock’ of yesterday’s Retail Sales and PPI, and as China returns to the fray following the week long Lunar New Year holidays, and the ECB publishes the ‘account’ of its January policy meeting. There are Australia’s labour data and Sweden’s CPI to digest, while ahead lie US weekly jobless claims, Housing Starts, Import Prices and Philly Fed Manufacturing survey, with various G7 central speakers and the ‘spectacle’ of the US House Financial Services Committee hearing on the Reddit-fuelled stock volatility. France and Spain hold multi-maturity bond auctions and the US sells 30-yr TIPS, while the corporate earnings schedule has results from Airbus, Barrick Gold, Carrefour, EDF, Fortescue, Newmont, Repsol and Walmart amongst others. In terms of the ECB minutes, the main points of interest will the discussion about PEPP implementation flexibility in the context of ‘financing conditions’ (N.B. financing NOT financial), as well as any discussion on the EUR exchange rate.

Yesterday’s FOMC minutes were notable not in terms of the policy outlook, but the assessment of the US financial system: above all they noted that risks were ‘notable’, that “asset valuations pressures were elevated” as against November’s ‘moderate’. They highlighted that “vulnerabilities associated with household and business borrowing as notable, reflecting increased leverage and decreased incomes and revenues in 2020.” While they noted that ‘vulnerabilities stemming from funding risks as moderate. Banks continued to maintain significant levels of high-quality liquid assets and stable sources of funding. In contrast, money market funds and open-ended mutual funds were characterized by significant vulnerabilities associated with liquidity transformation.’

U.S.A. – Jobless Claims, Philly Fed & Housing Starts

Yesterday’s Retail Sales outlier was not that much of a surprise as stimulus cheques combined with out of sync seasonal adjustment due to the pandemic, effectively levelling up the Q4 weakness, but not really offering any insights into how spending will pan out in the current quarter. As for the PPI rise, the across the board strength attests to the breadth of supply chain disruptions and resultant supplier delivery problems, pressurizing commodity and energy pressures for some months, and giving producers greater pricing power. Be that as it may, the focus today will be on weekly jobless claims, particularly as the report is for Payrolls survey week. Initial Claims are expected to dip to 770K after an unexpected rise to 793K last week, and in turn implying a very modest rebound (<100K) in Payrolls), while Continued Claims are seen falling for a fifth week to 4.40 Mln, though other emergency and extended benefits claims are seen rising again. With the exception of a modest setback in December, the Philly Fed Manufacturing Index has been robust since June, and is expected to remain so at 20.0, even if lower than January’s 26.50. Following on from another solid NAHB survey (84 vs. Jan 83), Housing Starts are forecast to edge down 0.5% m/m, which would be a tiny setback of four consecutive monthly gains of between 3.1% and 6.5%.