Macroeconomics: The Day Ahead for Feb 25

With month end in the headlights, there is a very busy schedule of data, events and corporate earnings, in all cases dominated by the US. From the overnight session there are the as expected no change Bank of Korea rate decision, Australia’s Q4 CapEx and Germany’s GfK Consumer Confidence to digest. Ahead lie numerous national and Eurozone business and consumer confidence surveys, the first Feb CPI reading (Belgium) in the Eurozone along with M3, Canada’s CFIB Business Barometer and a deluge of US data: weekly jobless claims, Durable Goods Orders, revised Q4 GDP, Pending Home Sales and KC Fed Manufacturing. There are plenty more Fed speakers, the start of a two day EU summit, while Italy and the US hold bond auctions. A busy day for US corporate earnings has a very distinctly ‘new economy’ / tech feel to it, with the following likely to be among the headline makers: AirBnB, Beyond Meat, Dell, Doordash, FirstSolar, HP, Moderna, Nikola, Renewable Energy Group, Salesforce.com, VMware and Workday. While risk assets continue to find buyers on pretty much any and every dip, the upward shift in real yields (largely driven by oil and commodity price rises), above all the US (10-yr real yields up 25 bps in Feb along, even if if still negative), and the fact that the US 10-yr nominal yield at 1.40% is now only a shade below the S&P500 dividend yield offer grounds for caution. As for the EU summit, the mismanagement of the collectivized Vaccine roll-out and how to speed up roll-out and increase EU area production will be the main issue, and could well prove to be the source of considerable tensions.

U.S.A. – Durable Goods Orders & Weekly Jobless Claims

Durable Goods Orders should post solid gains at headline and core, with aircraft orders set to give a boost thanks to seasonal adjustment and a reactive correction from December’s weakness; Headline Orders are seen up 1.0% m/m, with the core CapEx proxy of Non-defence Capital Goods ex Aircraft posting another solid 0.8% m/m rise, putting this well above pre-pandemic levels (>7.0% y/y), and echoing continued strength in various surveys’ Orders indices (notwithstanding the setback in the ISM Manufacturing sub-index). Initial Claims have confounded expectations of an improvement during the past 3 weeks, but are still expected tp drop back to 825K from last week’s 861K, but with last week’s Texas storm having a highly uncertain impact, there is scope for a very large outlier (either direction); Continued Claims are seen easing very modestly to 4.460 Mln from 4.494 Mln. The second reading for Q4 GDP is expected to be revised up fractionally to 4.2% from 4.0%, with Personal Consumption seen unrevised at a relatively sluggish 2.5% despite the downward revision to Retail Sales; but the focus has already move to Q1, with incoming data prompting most forecasters to revise Q1 estimates up – Atlanta Fed Q1 GDP Now 9.5% SAAR, NY Fed 8.3%.