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Summary Of The Upcoming Week’s Key Events

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Goldman summarizes the major events in the last 7 days and presents what to look forward to in the holiday-shortened week.

Week in Review

Last week saw a return to matters European after a lull over the holiday period. The statements from the flurry of high-level meetings early in the week didn’t yield much information on progress towards implementing the December summit and other initiatives. Importantly, Merkel praised Italy’s reform and debt-cutting efforts was very positive, marking a sea-change from the rhetoric last summer. The week ended on a sour note, with S&P finally announcing its ratings review of the Eurozone nations. In the event, 9 countries were downgraded either by one or two notches and all but two of the European Sovereigns have been put on negative watch implying a 1-in-3 chance of a further downgrade by the end of 2013. France was downgraded by one notch, Spain and Italy by two. While the announcement was made after European markets closed, it had been rumoured through afternoon trading causing European yields to rise notably. We will have to wait for the bond markets in Europe to open to fully assess the market response. In conjunction with the downgrade developments, the Euro made marginal new lows against the Dollar. The other focus at the end of the week was developments in the Greek PSI debate. On the one hand, there are suggestions that the Greek government will force PSI on all bond holders. On the other hand, there are hints that the European governments will increase the second bail out due to weak PSI. Bottom line, the discussion remains muddy and a source of market uncertainty.

Week Ahead

After the fairly muted Wellington open, the reaction of the European bond markets to the S&P downgrade will be the next focus of attention. One benefit of the S&P ratings action is that it takes away one source of uncertainty. Given a French downgrade wasn’t widely anticipated, market focus on this issue may well be short lived. Related to the European downgrades is the rating of the EFSF, which was also put on credit watch in early December. S&P have commented that they are in the process of evaluating the impact of the sovereign downgrades on the EFSF rating. For the AAA rating to be maintained it would require further commitments from European governments. Remaining in Europe, newswires report that Greek debt talks will resume Wednesday, thus the Greek PSI is likely to remain a focus all week.

Aside from the European situation, the week brings some key data. The year kicked off with much better than expected business surveys across the world, which when fed into our GLI with the rest of the data resulted in an improvement in the monthly momentum to 0.04%mom, the first positive print in many months. This week brings the first batch of business surveys for January – the Empire and Philly Fed surveys out of the US, which are expected to improve slightly. As usual after the Philly Fed survey we will publish the Advanced reading of the GLI for January, which as usual will guide our thinking on the outlook for global IP. Setting aside the European situation, an improvement in the GLI momentum is favourable for risky assets and tends to lead to a weaker Dollar.

From a pure FX perspective, the data points of the week are the TIC data for November and the Euroland Balance of Payments for the same month. Given the upside surprises in the US data through the last 4 months of last year, we will examine the TIC data for signs that foreign buying of US assets, particularly equity, has picked up. The October data showed a rebound in foreign interest in US equity after 3 months of net selling, however the equity inflow that month was tiny compared to history. Foreign demand for USTs dropped sharply as the ‘operation twist’ trade was unwound. If foreign buying of US equity is strong, it would provide evidence that relatively strong US growth is behind the decent Dollar TWI performance since last September, rather than just risk aversion. More broadly, the TIC data indicates the extent to which the US current account is being financed by sustained inflows. On the other side of the Atlantic, the Euroland balance of payments data will be scrutinized for signs of capital outflow spurred by the ongoing European situation. Examining the Euroland portfolio investment flows indicates that foreign selling of Euroland assets is being more than offset by Euroland selling of foreign assets, keeping the Euroland BBoP in positive territory.

Monday 16 January

  • India WPI (Dec): Consensus expects a reading of 7.4%yoy after 9.11%yoy previously. We expect a reading of 7.3%yoy.
  • Also of interest: Japanese Machinery orders (Nov), Philippines remittances (Nov), Swiss producer and import prices (Dec).

Tuesday 17 January

  • China Q4 GDP: Consensus expects a reading of 8.7%yoy after 9.1% previously. We expect a print of 8.8%.
  • China IP (Dec): We and consensus expect a reading of 12.3% after 12.4% previously.
  • China FAI (Dec): We and consensus expect a reading of 24.1% after 24.5% previously.
  • China retail sales (Dec): Consensus expects a print of 17.2% after 17.3% previously.
  • UK CPI (Dec): We expect the reading to soften to 4.3%yoy from 4.8%yoy
  • Canada Monetary Policy Meeting: Rates are expected to remain unchanged at 1%.
  • Also of interest: US Empire survey (Jan), Singapore exports (Dec),

Wednesday 18 January

  • Malaysia CPI (Dec): Consensus expects a print of 3.1% after 3.3% previously.
  • US PPI (Dec): We expect a rise of 0.3%mom, the same as the previous print, compared to a consensus forecast of 0.1%mom. On the ex food and energy measure we are in line with consensus at 0.1%mom.
  • US TIC Data (Nov): In light of better US data than elsewhere in the final months of last year, it will be interesting to see if there is any evidence of a pick up of foreign appetite for US assets, particularly equities.
  • US IP (Dec): We expect a rise of 0.6%mom vs consensus at 0.5%. The previous print was -0.2%mom.
  • Also of interest: Australia Westpac Consumer Confidence (Jan).

Thursday 19 January

  • Australia Employment change: Consensus expects a rise of 10k in employment and an unchanged unemployment rate of 5.3%. We are more bearish and expect no change in employment, 0k and unemployment to rise to 5.4%.
  • Philippines Monetary Policy Meeting: Consensus expects a 25bp cut to 4.25% as do we.
  • Euroland Balance of Payments (Nov): The current account was in deficit to the tune of -7.5bn at the last reading.
  • US CPI (Dec): We expect a rise of 0.18%mom on the headline reading and 0.1%mom on core. The consensus expects 0.1%mom for both readings.
  • US Philadelphia Fed Survey (Jan): We expect basically an unchanged reading of 7.0 against a consensus forecast of 11.
  • GS Global Leading Indicator (Jan – A): After the Philly Fed survey we will publish the advanced reading of the GLI for January. The December reading showed an improvement in monthly momentum to -0.3%mom which is encouraging for the outlook for IP.
  • Also of interest: US Claims, Spanish and French bond auctions.

Friday 20 January

  • Taiwan Export Orders (Dec): Consensus expects a decline of -0.5%yoy.
  • Taiwan IP (Dec): Consensus expects a decline of -7.25%yoy.
  • UK Retail sales (Dec): We expect a reading of +0.2%mom after -0.7% previously. Consensus expects +0.7%.
  • Canada CPI (Dec): Consensus expects a decline of -0.1%mom.

Sunday 22 January

  • Croatia: Referendum on EU accession. Most recent polls show 55.1% of the voters in favour down from 60% at the end of December and up from 50% a year ago.

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