Written Commentary
Written by Marc Ostwald, ADMISI’s Global Strategist & Chief Economist
UK CBI Retailing and US Consumer Confidence; Powell testimony front and centre, BoC’s Macklem also in focus; IP week starts; Italy, UK and US debt auctions; Retailers top US corporate earnings
UK labour data: Claimant count fall a positive, but ILO and FLS data poor and set to deteriorate further on slow easing of lockdown
US Consumer Confidence: modest rebound expected; labour market perceptions key; easing lockdown vs. run of bad weather events
US 10-yr TIPS yield
I will be speaking at Trends Research e-symposium this afternoon at 15:00 GMT “Knowledge revolution and global economic development prospects” – details here.
EVENTS PREVIEW
There is rather more on today’s data and events schedule than Monday, but markets are in one of their navel gazing moments as month end approaches, unsure on which way to jump given the relatively sharp steepening of yield curves in recent weeks, led by the US. So Powell’s semi-annual testimony to the Senate Banking Committee will be very much front and centre, with BoC governor Macklem’s speech also likely to get plenty of attention. They follow on from Lagarde yesterday repeating ECB concerns about “financing conditions”, stressing “sovereign yields are particularly important… Banks use those yields as a reference when setting the price of their loans to households and firms. Accordingly, the ECB is closely monitoring the evolution of longer-term nominal bond yields”. In this respect, it should also be noted that US real yields are also starting to rise in this latest move, and while still deeply negative, this is something the Fed will be far more sensitive to than the rise in nominal real yields. Statistically US Consumer Confidence will be the key item on the agenda; there are also UK labour and Australian & Thai Trade data to digest, while ahead lie final Eurozone CPI, UK CBI Retailing, US House Prices and regional surveys from the Philadelphia and Richmond Fed. International Petroleum also gets under way, while Fresenius, Home Depot and Macy’s will be among the headlines in today’s run of corporate earnings, with Govt bond auctions in Italy (2-yr Zero), UK (29-yr) and US (2-yr).
UK Labour data were once again a mixed bag, with FLS Employment down 114K against expectations of -30K, though the Claimant Count fell 20.4K, while the ILO Unemployment Rate rose to a five year high of 5.1%. While Average Weekly Earnings were much stronger than expected at 4.7% y/y, this is down to the proportion of job losses being higher among low income workers. Given the very cautious steps announced yesterday to roll back lockdown measures, and not withstanding furlough scheme extensions, labour market conditions are set to deteriorate for a rather more protracted period.
US Consumer Confidence is seen edging up to 90.0 from 89.3, despite the further drop seen in Michigan Sentiment. Much will depend on how a sharp drop in infection and rising vaccination rates, easing movement restrictions and talk of further stimulus contrast with assessments of the labour market, with weekly jobless claims data implying a further slip in the labour differential (last -3.2 vs. Dec -1.9), and the run of bad weather events may also have some impact.
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