Week Ahead: Interest Rate Anxiety Intensifies

Can earnings season soothe investors’ nerves?

It’s been a turbulent start to the year in the markets and that’s unlikely to change as we enter earnings season. Fear of high inflation and accelerated monetary tightening has driven much of the volatility seen in financial markets over the past two weeks and is unlikely to ease any further. soon, with a peak still ahead of us.

Earnings season could help soothe nerves in the weeks ahead as we are reminded that the economy is still in good shape despite the challenges it faces. But even that comes with an element of uncertainty given that Omicron hit in late November, which will no doubt have had an impact. Of course, as we have seen over the past two years, there are also winners when consumers stay home and restrictions are imposed.

Ultimately, however, central banks currently remain high on the list for investors and the week ahead offers a selection of meetings, minutes and speakers that are sure to attract plenty of attention. It’s hard to look past CBRT as one of the highlights for next week. After an aggressive easing cycle that has cost a lot of money, will the central bank finally slam the brakes?

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The week ahead is busy with economic data and earnings results. Goldman Sachs (NYSE:), Bank of America (NYSE:) and Morgan Stanley (NYSE:) will close big bank earnings, while Procter & Gamble (NYSE:) may provide better insight into the scale of price increases additional that the consumer can expect.

On Tuesday, activity should have cooled in January. Wednesday is all about real estate activity which could show both up and down slightly.

On Thursday, they are expected to resume their decline, while they should improve, and could show a slight decline.

Blackout dates are in effect for the Fed, so it will be quiet until the FOMC meeting on Jan. 26. While financial markets are pricing in more than a 90% chance of the Fed raising rates in March, they seem to be forming a range just below the 1.80% level.

EU

With the ECB among the minority of central banks still singing from the transitional hymn sheet, the focus this coming week will be on the ECB’s accounts from December, comments from policymakers including the President Christine Lagarde on Monday, and the final inflation figures for December. At 5%, it is uncomfortably high and the central bank could soon give in like the others if the pressures do not ease quickly.

UK

The week will be a data dump week for the UK, with the labor market, and everything will be released. But Wednesday is undoubtedly the star, with the governor due to speak hours after the CPI is released, which could make for some interesting comments. Three or four rate hikes are expected this year, so expectations are quite hawkish, but as we’ve seen recently, there are growing fears that more may be warranted.

Russia

No major data or economic events next week, so the focus will remain on the various geopolitical risks at the center of which Russia has found itself. A possible invasion of Ukraine tops the list, with a week of intense talks between the United States and Russia apparently failing to yield a breakthrough.

Russia is also intrinsically linked to the energy crisis in Europe which is intensifying as new failures of French reactors put additional pressure on limited reserves.

South Africa

Inflation data next week is expected to show mounting price pressures, rising to 5.7%, which will increase calls for further rate hikes from the SARB.

Turkey

A rare period of relative stability for CAF which should not last, since CAF meets next week. Can the central bank resist the urge to cut again or are bigger losses on the horizon? Not cutting could provide some support for the reading as it could signal the end, for now, of the easing cycle.

China

China releases Q4 and Monday. Markets are bracing for slower growth, with a consensus of 3.5%, down from the 4.9% gain in Q3. It would be the weakest GDP report since the second quarter of 2020.

Retail sales are forecast at 3.8% year-on-year in December, from 3.9% previously. The government has adopted a zero COVID strategy, which has restricted travel and restaurants. Weak income growth is also hurting consumers and dampening consumer spending.

China’s real estate sector remains in deep crisis, with no sign of improvement on the horizon. Evergrande (HK:) and other developers owe billions and investment growth and household lending has declined. The government has eased restrictions on housing finance, but these measures have so far proved ineffective.

China was liberated on Saturday. The previous version, however, showed 3% growth and is widely considered low impact data.

Also on Monday, before the GDP release, the PBOC will decide whether or not to keep the MLF rate at 2.95%.

India

No major economic data or events next week.

Australia

Australia releases key jobs data for December next week. is expected to slow to 60,000 from 366,100 in November. The is expected to decline to 3.5% from 3.6%.

Prices hit their highest level in three months as heavy rains hit Brazil’s mining region, raising supply concerns.

New Zealand

It’s a quiet economic calendar next week. On Thursday, New Zealand releases the for December. The PMI was flat in November, reading 50.6 points.

Japan

Inflationary pressures in Japan are much lower than those in the UK or the US, but are nonetheless rising after years of deflation. The Bank of Japan is expected to maintain its ultra-accommodative policy on Tuesday, but will likely revise its view on inflation risks for the first time since 2014.

Inflation remains well below the bank’s 2% target, but the BoJ may consider raising interest rates before reaching it.

Economic Calendar

Sunday January 16

The National Retail Federation of the United States opens its annual Retail’s Big Show at the Javits Center in New York

Monday January 17

Economic data/events

  • US stock and bond markets are closed for the Martin Luther King Jr. holiday.
  • China GDP, retail sales, industrial production, surveyed unemployed, real estate investment, medium-term loans
  • Handelsblatt Energy Summit with German Economics Minister Habeck
  • Euro region finance ministers meet in Brussels
  • Japanese Prime Minister Kishida addresses parliament
  • Sales of existing homes in Canada
  • CPI Poland
  • Japanese industrial production, basic machinery orders, tertiary industry index
  • Singapore Electronic Exports
  • Russia Trade
  • Norway Trade
  • Remittances to the Philippines Abroad
  • Rightmove UK house prices
  • Sight deposits in Switzerland, Bloomberg Economic Survey January
  • Turkish central government fiscal balance

Tuesday, January 18

Economic data/events

  • US cross-border investment, empire making, NAHB housing market index
  • BOJ Rate Decision: No Change in Monetary Policy, May Adjust View on Inflation Risks
  • Japanese industrial production, capacity utilization
  • EU finance ministers meet in Brussels and hold a policy debate on global minimum taxation for multinational companies.
  • Australian consumer confidence
  • Housing starts in Canada
  • Registrations of new cars in the euro zone
  • Expectations from the ZEW survey in Germany
  • New Zealand house sales
  • Russia Trade
  • Mexico’s international reserves
  • Claims for unemployment insurance in the UK, unemployment
  • CPI Poland
  • Producer and import prices in Switzerland
  • Mining, gold and platinum production in South Africa
  • Property price index in Turkey
  • Sweden Riksbank Gov Ingves speaks during a panel at a blockchain and stablecoin conference

Wednesday January 19

Economic data/events

  • Housing starts in the United States
  • UK CPI, house price index
  • French President Macron addresses the European Parliament
  • BOE Governor Bailey addresses the UK Parliament Treasury Committee
  • IPC Canada
  • CPI Germany
  • IPC South Africa
  • Construction output in the euro area
  • Australia Westpac consumer confidence
  • Card spending in New Zealand
  • Retail sales in South Africa
  • Current account Russia
  • Banking profits of BoA and Morgan Stanley

Thursday January 20

Economic data/events

  • Sales of existing homes in the United States, first claims for unemployment
  • ECB December Policy Meeting Minutes
  • BOJ December Meeting Minutes
  • UK RICS housing prices
  • Norway Rate Decision: Should keep rates stable
  • Turkey Rate Decision: Should Keep Rates Stable
  • Hungary Rate Decision: Rates Expected to Hold Stable
  • Eurozone CPI
  • Hong Kong CPI
  • CPI Russia
  • Japan Trade
  • Preferential Chinese Lending Rates, Fast Global Payments
  • Australia Unemployment, Consumer Inflation Expectations, RBA FX Trades
  • New Zealand food prices, heavy traffic ANZ Truckometer
  • Germany PPI
  • Taiwan export orders
  • Unemployment in Mexico
  • Spain real estate transactions, trade
  • Business and industry confidence in France
  • Unemployment in the Netherlands, consumption expenditure
  • Consumer confidence in Poland
  • EIA Crude Oil Inventory Report
  • Netflix releases earnings after the bell

Friday January 21

Economic data/events

  • Conf. Board Main Index
  • CPI Japan
  • UK retail sales
  • BOE Mann speaks at the Official Monetary and Financial Institutions Forum
  • Retail in Canada
  • Eurozone consumer confidence
  • The Bank of Italy publishes the Quarterly Economic Bulletin
  • Consumer confidence in Turkey
  • New Zealand Manufacturing Index Performance, Net Migration
  • Singapore Property Prices
  • Switzerland Money supply
  • Russia Money supply
  • Thailand trade, futures, foreign exchange reserves
  • China FX Net Settlement
  • Poland sold industrial output, construction output, employment, PPI

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