Week Ahead
This week the US CPI figures and delayed US employment report take centre stage following the partial government shutdown. Later today, remarks are due from the Fed’s Waller and Bostic, the ECB’s Lane, and the BoE’s Mann. On Tuesday, attention turns to US retail sales and earnings from Barclays and Ford, while the Fed’s Hammack and Logan speak at separate events. China’s PPI and CPI releases are scheduled for Wednesday, after which market focus will increasingly shift toward the US labour market data and the federal budget balance. In Europe, the ECB’s Schnabel will address the economic outlook, while Cipollone participates in a fireside chat. Thursday begins with UK GDP and industrial production data, followed by US initial jobless claims and existing home sales. Central bank commentary remains active, with contributions from the Fed’s Logan and Miran and the ECB’s Cipollone, Radev, Stournaras and Lane. Friday’s data includes China’s house price data, euro area GDP, and US CPI.
Markets appeared to suffer from an "AI hangover," last week as investors worry that the massive spending by big tech companies is not yet translating into clear profits. This anxiety, combined with a historic crash in gold and silver prices and uncertainty over a more aggressive stance from the Fed's new leadership, created a perfect storm of volatility. Sentiment eventually picked up at the end of the week. The yield on the 10-year closed 3bps lower at 4.21%, while the S&P Index closed marginally lower. The dollar, DXY Index, rose 0.66%, and Brent Crude fell 3.73% to $68.05pb.
Last week’s data highlighted a fragile US labour market, with rising layoffs and weakening demand strengthening the case for 50bps of Fed easing by year-end. While initial jobless claims jumped to 231k and the Challenger survey reported the highest January job cuts since 2009, broader stability was noted in the JOLTS report, where both quit and layoff rates remained unchanged. However, labour demand appears increasingly concerning; job openings hit their lowest level since April 2020, and private indicators like Revelio Labs suggest a potential contraction in payrolls ahead of this Wednesday's rescheduled official non farm payroll print.
Elsewhere, China’s policymakers released the "No. 1 Central Document," a major annual blueprint that this year prioritises "Rural Revitalization" and food security as pillars of the new 15th Five-Year Plan. Additionally, the PBOC took a landmark step to bolster the renminbi's international appeal by introducing a 0.05% interest rate on digital yuan (e-CNY) balances; the first yield offered by a major central bank digital currency. These moves, combined with aggressive liquidity injections to prevent a seasonal cash crunch, kept the renminbi steady.
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