News & Analysis

Week Ahead – Central Banks, Preliminary PMI figures, and Inflation Data

February 17, 2020

By Deepta Bolaky
 @DeeptaGOMarkets

 

Week Ahead

 Central Banks Minutes, Preliminary PMI figures, and Inflation Data 

The outbreak of the coronavirus will remain the primary downside risk for the markets in the near term. After an unexpected surge in the number of cases following a change in the counting methodology, there are early signs of easing in the number of new cases.

The daily new cases have reduced for the third consecutive days but remain slightly higher compared to the number of cases before the change in the counting methodology. The following days will be crucial in determining whether the rate of infections is slowing down.


Source: World Meters

Investors will be watching carefully whether the Coronavirus has been contained in and outside China. Any signs of the spread of the virus reaching a peak will be good for risk sentiment.

Central Banks

Investors are gearing up to a muted start to the week with a public holiday in the US for President’s Day.

Central bank liquidity has been the focus as it continues to prop up assets prices. Keeping that in mind, attention will remain on central banks’ intervention and the mechanism of monetary policy on the economy.

We expect investors to scrutinise minutes and speeches to gauge the intention of central bankers in the era of low levels of interest rates:

Monday: ECB ‘s Lane Speech

Tuesday: RBA Meeting Minutes

Wednesday: FOMC Minutes

Thursday: PBoC Interest Rate Decision, ECB’s De Guindos Speech and Monetary Policy Meeting Accounts

Friday: ECB’s Lane Speech, Fed’s Brainard Speech

Australian Employment Report 

In 2019, conditions in the labour market and wages data had shown little change. Investors are therefore looking for signs that the unemployment rate will decline and the labour market will tighten which will then provide some upward pressure on wage outcomes. Wage price index on Wednesday and jobs reports on Thursday will, therefore, be scrutinised for more insights on the labour market. 

PMI – Preliminary figures 

Australia 

The ongoing drought, the effects of the bushfires and the coronavirus are disrupting Australian businesses. The virus is a new source of uncertainty for the economy and investors will probably monitor to gauge whether the preliminary PMI figures on Friday will be affected by the impact of the virus. 

Eurozone 

The data coming out from the Eurozone area has been pretty disappointing considering that 2020 was supposed to be a year of recovery for the bloc. The manufacturing sector has contracted last year but has incrementally improved over the months. As companies are increasingly getting caught in the fallout from the coronavirus outbreak, PMI figures in the manufacturing and services will help to gauge if there is any shift in the outlook. 

UK and US 

Similarly, in the UK and the US, investors will also monitor the effects of the virus on the manufacturing sector. In the coming days, the measures taken to contain the spread of the virus and how the virus situation is evolving will help to determine whether the impact will be short-lived. 

Other Key Economic Indicators

  • Inflation: With lack-lustre inflation growth forcing central banks to resume controversial monetary easing policies, CPI figures in the UK, Canada, Japan and Eurozone as from Wednesday will attract attention.
  • ZEW Surveys in the Eurozone and Germany. 
  • Retail Sales in Canada: As market participants are scaling back rate-cut expectations in the coming months following recent comments from the BoC, they will keep monitor leading indicators to gauge any slowdown that may shift the outlook.
Tuesday, 18 February 2020
Indicative Index Dividends
Dividends are in Points
ASX200WS30US500US2000NDX100CAC40STOXX50
1.9093.1030.2110.0120.59600
ESP35ITA40FTSE100DAX30HK50JP225INDIA50
2.719000000

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