Another big week of data, especially inflation in several major economies, plus the second estimate of US 4th quarter GDP, and earnings here, in the US, Asia and Europe.
As well we get the delayed mid-month update on the health of Chinese manufacturing.
The inflation reports from the US, Japan and the eurozone will be watched closely to see if disinflation looks like becoming endemic deflation.
The US is likely to see a sharp fall in consumer inflation, and it wouldn’t surprise to see the eurozone’s dip into negative territory deepen. Japan will likely see a further weakening in inflation as a return to deflation again moves closer, further complicating the attempts to stimulate the economy.
In Australia, earnings and the start of the December quarter economic data releases will dominate.
The December quarter data is expected to show that wages growth (out Wednesday) remained at record lows with annual growth of just 2.5% in the three months to December.
December quarter construction data (also Wednesday) is likely to be weak with strength in housing offset by weakness in mining-related engineering construction, while business investment data (out Thursday) will be watched for signs of improvement in non-mining investment plans.
Private credit data on Friday from the Reserve Bank will be closely watched to see if housing investor credit is breaching APRA’s 10% growth limit, according to a weekend note from the AMP’s chief Economist, Dr Shane Oliver.
And the Australian December half profit reporting season ends with over 80 major companies reporting including BHP Billiton, QBE, Worley Parsons, Qantas Westfield and Woolworths.
Aristocrat Leisure holds its AGM in Sydney on Friday.
In the US, Fed chair Janet Yellen’s first round of testimony to the American Congress will dominate this week.
She speaks to the US Senate and House of Representatives economics and banking and finance committees on Tuesday night and Wednesday night (our time), respectively.
The AMP’s Dr Oliver says the main focus on her testimony will be confirmation that the Fed remains on track to raise interest rates this year, but will take its time in doing so.
As well as her testimony, there will be data released on existing home sales (Monday and Wednesday nights, respectively) home prices (Tuesday night) and durable goods orders (Thursday night).
The significant releases will be December quarter GDP on Friday night, which is expected to be cut in this second estimate to an annual rate of around 2%, a sharp cut from the annual rate of 2.6% in the first estimate.
And the headline consumer price index for January (out on Thursday) is expected to be around -0.1% year on year at a headline level with core inflation falling to just 1.5%, or a bit less, year on year.
It will be the week’s most important data release in America and follows a negative reading for producer prices for January which were released last week.
The US earnings season continues to slow with major retailers dominating. Walmart surprised last week with a stronger than expected report, especially in the US where it enjoyed real comparable store growth for a second successive quarter.
The retailers releasing results this week include: Macy’s, Home Depot, Target, Lowes, Home Depot, Dollar Tree, JC Penny, Kohl’s, L Brands, Sears and Gap. Other US companies reporting include Hewlett Packard, Liberty Media, Comcast and Campbell Soup.
Foreign companies reporting include Bayer, Vale, Hochtief, Telefonica, Transocean, Seadrill, Allianz and Anheuserbusch InBev.
The earnings releases will be capped early Saturday morning, our time, by Warren Buffett Berkshire Hathaway which releases its December quarter and 2014 figures and the long-waited annual letter to shareholders (and all investors) from Mr Buffett.
In addition to the regular letter, there will be separate letters from Mr Buffett and his co-founder Charlie Munger about the next 50 years for the company (Berkshire Hathaway’s 50th birthday is 2015).
In Asia, Japan’s end of month data drop of figures for January household spending, industrial production and the labour market will be watched on Friday for signs the recovery that commenced last quarter is continuing.
But the January inflation data, also on Friday, will also be watched closely to see if there’s another drop (as there is expected to be). The Bank of Japan releases the minutes of its latest meeting later today.
In China, the ‘flash’ HSBC China manufacturing PMI (out Wednesday) is expected to be another sub 50 reading, indicating the Chinese economy remains sluggish and in the grip of deflation.
In Europe, European Central Bank (ECB) president Mario Draghi testifies to the European Parliament in Brussels on Wednesday night, our time, delivering the central bank’s annual report.
He is expected to speak on the ECB’s quantitative easing plans, which include the purchase of 60 billion of mostly public sector bonds a month until at least September next year.
The inflation figures will be released tomorrow night in a ‘flash’ report (it’s updated in mid-March). It could show prices falling 0.6% in January, which would be the steepest drop since 2009.
