Key Macro Events And Issues In The Week Ahead

In the upcoming week the key focus on the data side will be the US February retail sales figures on Wednesday, which should provide clearer evidence on how the tax increases that took place on January 1 have affected the consumer. In Europe, industrial production and inflation data will be the releases to watch. On the policy side, the focus will be on the BoJ appointments in an otherwise relatively quiet week for G7 central banks. Italy’s newly elected lawmakers convene for the first time on Friday 15 March and the expectation remains that President Napolitano will formally invite Mr Bersani to try and form a new government. He may also opt for a technocrat government. Although clearly preferred by markets, winning political backing may prove challenging.

Week Ahead

March 11-15

• India Trade Balance (Feb): In January, imports rose 6.1% yoy and exports rose 0.8% yoy.

Monday 11th

• Japan parliamentary hearing for BoJ Governor Nominee Kuroda.
• Japan machinery orders (Jan): Consensus expects -1.7% mom following 2.8% in December. GS expects -0.7%.
• France Industrial Production (Jan): Consensus expects -0.2% mom following -0.1% in December.
• Also interesting: Japan Money supply (M2), Czech CPI, Hungary Trade Balance, Malaysia Trade Balance.

Tuesday 12th

• Japan parliamentary hearing for BoJ Deputy Governor Nominees Iwata and Nakaso.
• India IP: We forecast an increase of 0.7%yoy after a decline of 0.6% in the prior month.
• Germany Harmonised CPI (Feb): Consensus expects 0.8% mom following 0.8% in January.
• UK Trade Balance (Jan): Consensus expects -£3.2B, broadly unchanged from December.
• UK Industrial Production (Jan): Consensus expects -1.1% yoy after -1.7% in December. GS expects -0.7% yoy.
• UK Manufacturing Production (Jan): Consensus expects -1.0% yoy following -1.5% in December. GS expects -0.9%.
• US JOLTS Job Openings (Jan): Fed Vice Chair Yellen has cited this report as one to watch as an additional labor market indicator. In December, the gross hiring rate fell to 3.1%.
• Also interesting: Australia NAB Business survey, South Africa and Turkey Current Account Balance.

Wednesday 13th

• France HCPI (Feb): Consensus expects 0.4% mom following -0.6% in January.
• Spain HCPI (Feb): Consensus expects 0.0% mom following -1.8% in January.
• Euro Area Industrial Production (Jan): Consensus expects -2.0% yoy, following -2.3% in December.
• US Retail Sales (Feb): Consensus expects 0.5% mom following 0.1% in January. GS expects 0.6%.
• US Business Inventories (Jan): Consensus expects 0.4% mom following 0.1% in December, in line with previously-released increases in manufacturing and wholesale inventories.
• Also interesting: Australia consumer confidence.

Thursday 14th

• Japan Lower House votes on BoJ appointments.
• India WPI (Feb): GS and consensus expect 6.6% yoy following 6.6% yoy in January.
• Korea MPC: We and consensus expect the BoK to leave the policy rate unchanged at 2.75%.
• Philippines MPC: Our forecast is for no change in the policy rate, currently at 3.50%, in line with consensus.
• New Zealand MPC: We and consensus forecast no change in the policy rate, currently at 2.50%.
• Chile MPC: We expect the policy rate to remain unchanged at 5.00%.
• Brazil MPC minutes
• Swiss National Bank Meeting
• US Current Account Balance (Q4): Consensus expects -$113B following -$107.5B in Q3.
• US Producer Price Index (Feb): GS and consensus expect 0.7% mom following 0.2% in January.
• Also interesting: US Weekly Claims.

Friday 15th

• Japan Upper House votes on BoJ appointments.
• Russia MPC: Our forecast is for the policy rate to remain at 5.50%, in line with consensus.
• Euro area HCPI (Feb): Consensus expects 0.4% mom following -1.0% in January.
• US CPI (Feb): Consensus expects 0.5% mom following 0.0% for the last two months. GS expects 0.4%.
• US Industrial Production (Feb): GS and consensus expect 0.4% mom following -0.1% in January.
• Also interesting: US consumer sentiment.

Calendar of key European events through the end of March

• 12 March: Italy auction. Bills.
• 12 March: Spain auction. Bills.
• 13 March: Italy auction. Bonds.
• 13 March: (prelim) EMU Industrial production (Jan ’13).
• 14 March: Greece – Unemployment (Q4 2012).
• 14 March: New Slovenian government. The new government is due to be presented to parliament on 14 March by the PM-designate Alenka Bratusek. Should the parties fail to reach agreement on a coalition, early elections are likely. See separate article in this issue of Focus Europe.
• 14-15 March: EU Leaders’ summit meeting. The quarterly leaders’ meeting will take place as usual in Brussels. The first phase of the 2013  European Semester, which coordinates member state economic, fiscal and employment policies, will be completed. Progress against the 2012 targets will be assessed and guidance will be offered to member states on the 2013 Stability and Convergence Programmes and the Europe 2020 flagship initiatives.
• 15 March: New Italian parliament convenes. Paraphrasing the words of the President of the Republic (La Stampa), the political fog is so dense that spotting the right lighthouse is a huge challenge. The earliest signal – a fragile compass – could come from the elections of the presidents of the two houses – particularly that in the Senate. That should occur on 15 March or the following day. Note that 16 March is a Saturday so the election of the President of the Senate could be postponed until 18 March. First, the President of the Senate is the second highest institutional office in Italy. Second and most important, her/his appointment may or may not be the result of a compromise among the parties  – note that after three sessions the appointment of the President of the Senate does not require an outright majority. The election of the President of the Senate takes place in maximum four rounds. In the first two it is necessary the outright majority of all Senators. If no majority is found, the following day there are two further sessions. In the first, it is required the majority of the Senators taking part to the vote and if necessary in the second the run-off is between the two candidates with the largest share of votes. Following a draw in this last attempt, the  older candidate becomes the President of the Senate. Hence, we will see the first concrete signal of possible future collaborations or lack thereof.
• 19 March: Spain auction. Bills.
• 19 March: ES – Public debt according to the Excessive Deficit Procedure (Q4 2012).
• 21 March: Spain auction. Bonds.
• 25 March: Italy auction. Bonds.
• 26 March: Italy auction. Bills.
• 27 March: Italy auction. Bonds.
• By end March: Greek tax reform/tranche payment. EUR34.3bn of the EUR49.1bn instalment was paid to Greece in December. The remaining EUR14.8bn will be disbursed in Q1. Of this, EUR7.2bn covered bank recapitalisation and resolution costs and is due in January. The rest, to finance deficits, depends on ‘milestones’ being reached. In March, the milestones are setting quarterly targets for mandatory reductions in public sector employment through end 2014 and well as a deal to reduce healthcare costs.

SocGen's summary of the Top Issues fo the Week Ahead

ITALY’S PARLIAMENT CONVENES

Italy’s newly elected lawmakers convene for the first time on Friday 15 March and the expectation remains that President Napolitano will formally invite Mr Bersani to try and form a new government. He may also opt for a technocrat government. Although clearly preferred by markets, winning political backing may prove challenging.

MARKET ISSUES: The chances of forming a durable, stable and pro-reform government in Italy remain low. Last Friday, Fitch downgraded Italy from A- to BBB+ with a negative outlook. The risk is that further downgrades follow. Hope is that the euro area leaders agree a shift in policy  to deliver a much-needed boost to growth. As discussed above, we see little evidence that such a shift will come ahead of renewed market pressure.

US JOBS … CONSUMER SPENDING NEXT

Last Friday’s 236K gain in February non-farm payrolls pushed the Dow Jones to new highs. Focus this week is on the consumer and we look for a +0.9% mom gain for February retail sales. Adding to the evidence of sustainable recovery, we also look for a 0.7% gain in February industrial production and look for a favourable reading on the weekly initial claims. The one source of potential disappointment next week is the preliminary University of Michigan Confidence report where canvasses released so far suggest a pullback to 73.

MARKET ISSUES: Stronger data releases inevitably see the QE exit debate revived. A 0.6% mom jump up in headline February CPI could add fuel the debate, but with a gain of just 0.1% mom on the core we see no concern on the inflation front at present and maintain our call for no exit from QE anytime soon.

NORGES BANK ON HOLD

A strong NOK and labour inflows have kept inflation in check and this combined with new prudential measures to cool housing markets should allow the Norges Bank to keep rate on hold this Thursday.

MARKET ISSUES: The bias remains titled towards rate hikes further out and this should continue to underpin the NOK despite efforts to “talk it down”.

NO SNB EXIT

While growth has beaten market expectations, inflation remains below the SNB’s latest projections. Moreover, while the CHF has softened, we believe that the central bank will want to see a prolonged period of softness before attempting any exit strategy; even more so given the on-going political impasse in Italy.

MARKET ISSUES: The buoyant mood of financial markets has seen the CHF weaken. Global market  sentiment is set to remain the key driver of the CHF.

Source: Goldman, DB, SocGen