Key Events In A Tumultuous Week: ECB, Brexit Vote And A Barrage Of Economic Data

The biggest events of this very week will be the ECB meeting on Thursday and the Brexit Parliamentary vote tomorrow, which however now appears to be indefinitely postponed. On the ECB, Jim Reid notes that DB economists expect a “dovish tightening,” i.e. an announcement that QE will end at the end of the calendar year. To soften this blow, Draghi will also probably argue that policy remains accommodative due to the stock effect of a large balance sheet and the commitment to keep rates low for as long as needed to meet the inflation target. Draghi is likely to tacitly endorse current market pricing, which does not include a hike until into 2020. Any acknowledgement of TLTRO2 being in the offing next year will also be looked out for.

On Brexit there has been a flurry of speculation that tomorrow’s vote could be delayed to avoid a sizeable defeat for the government. Assuming the vote goes ahead, assuming the government lose, what happens next and at what pace, is where all the drama will be. To add to the intrigue the ECJ will this morning (8am) formally rule on whether Britain can unilaterally revoke Article 50. This follows last week’s advice from the EU advocate general that suggested the U.K. should be able to. A myriad of scenarios remain on the table after tomorrow’s vote.

The data highlight next week comes on Friday with the flash global December PMIs due out. At the time of writing little change is expected for the broad Euro Area readings. Another big focus will be the November CPI report due out in the US on Wednesday. The consensus is for a +0.2% mom core reading which should be enough to push up the annual reading to +2.2% yoy. As Reid notes, the market is rapidly removing US hikes from the 2019 outlook (less than one now priced in) and even for next week’s expected hike some doubts are creeping in.

In a busy week for Tier 1 US data we've also got the November PPI report on Tuesday, and November retail sales report and November industrial production print on Friday. Keep an eye on Thursday's claims reading too which are slowly becoming more eye catching in light of the creep higher.

The other data worth flagging in Europe next week includes the October industrialproduction report in the UK on Monday, October/November employment stats in the UK on Tuesday alongside the December ZEW survey in Germany, and final November CPI revisions in Germany and France on Thursday. In China we've also got a number of important releases including November trade data tomorrow, November CPI and PPI on Sunday and November activity indicators (retail sales, industrial production and fixed asset investment) on Friday.

Elsewhere, with the FOMC in blackout mode and the ECB meeting scheduled, it's a quiet week for central bank speak. Indeed only the ECB's Angeloni (Monday), Guindos (Tuesday and Friday), Hakkarainen (Wednesday) and Lautenschlaeger (Friday) are scheduled.

Finally, there's a few other potentially significant events worth flagging. In Italy Deputy PM Salvini is due to hold a press conference in Rome on Monday while PM Conte will speak to Italy's Lower House of Parliament on Wednesday. On a related note, on Thursday EU leaders are due to meet to discuss the bloc's budget, as well as Macron's reform plans, migration and Brexit. On Tuesday there is likely to be plenty of focus on Google CEO Sundar Pichai testifying before the US House Judiciary Committee with likely questions on election meddling and data privacy. On Wednesday the European Parliament is due to vote on the draft free-trade agreement between the EU and Japan, while German Chancellor Merkel answers questions in the Bundestag and the two-day WTO general council meeting kicks off.

Courtesy of Deutsche Bank's Craig Nicol, here is a daily summary of key events in the week ahead:

  • Monday: We kick the week off on Monday in Europe with Germany's October trade balance and current account balance, France's November Bank of France industry sentiment index, the UK's October trade balance, industrial production, manufacturing production, construction output and October monthly GDP print, and the Euro Area's December Sentix investor confidence reading. In the US, only the October JOLTS job openings reading is due. Away from that, BoE Deputy Governor Cunliffe, ECB's Angeloni and Italian Deputy Premier Salvini are due to speak.
  • Tuesday: All eyes on Tuesday will be on the Brexit vote in the House of Commons. Prior to that, we get France's Q3 payrolls data, the UK's October/ November employment stats and Germany's December ZEW survey. In the US, the November NFIB small business optimism index and November PPI report is due. Meanwhile, ECB Vice President Guindos is due to speak while Google CEO Sundar Pichai will testify before the US House Judiciary Committee including likely questions on election meddling and data privacy.
  • Wednesday: The main highlight on Wednesday is the November CPI report in the US. In Europe the only data due is October industrial production and Q3 employment for the Euro Area. The November monthly budget statement will also be out in the US. Away from that the ECB's Hakkarainen is due to make comments, while Italian Premier Conte will speak to Italy's Lower House of Parliament. The European Parliament also votes on the draft free-trade agreement between the EU and Japan, German Chancellor Merkel answers questions in the Bundestag and the two-day WTO general council meeting commences.
  • Thursday: The ECB meeting is the big highlight on Thursday. Data wise we get final November CPI revisions in Germany and France, while in the US we get the latest weekly initial jobless and continuing claims reading along with the November import and export price index prints. Late in the evening, Japan's Q4 Tankan Survey is due out. EU leaders are also due to meet to discuss the bloc's budget on Thursday.
  • Friday: It's a busy end to the week on Friday with the flash December PMIs for Japan, France, Germany, the Euro Area and the US the highlight. Also due out are the November activity indicators in China and October industrial production in Japan. In the US we'll also get November retail sales, November industrial production and October business inventories. The ECB's Guindos and Lautenschlaeger are also due to speak.

Finally, here is Goldman with a focus on the US along with consensus estimates, noting that the key economic data releases this week are the PPI report on Tuesday, the CPI report on Wednesday, and the retail sales report on Friday. Goldman does not expect any policy-related speeches by Fed officials, reflecting the blackout period ahead of the December FOMC meeting.

Monday, December 10

  • 10:00 AM JOLTS Job Openings, October (last 7,009k)

Tuesday, December 11

  • 06:00 AM NFIB small business optimism, November (last 107.4);
  • 08:30 AM PPI final demand, November (GS -0.1%, consensus flat, last +0.6%);  PPI ex-food and energy, November (GS +0.1%, consensus +0.1%, last +0.5%); PPI ex-food, energy, and trade, November (GS +0.2%, consensus + 0.2%, last +0.2%): We estimate a 0.1% increase in headline PPI in November, reflecting relatively firmer core prices but a significant decline in energy prices. We expect a 0.1% increase in the core measure excluding food and energy, and a 0.2% increase in the core measure excluding food, energy, and trade, as mean-reversion is likely to weigh on the trade services category.

Wednesday, December 12

  • 08:30 AM CPI (mom), November (GS +0.04%, consensus flat, last +0.3%); Core CPI (mom), November (GS +0.17%, consensus +0.2%, last +0.2%); CPI (yoy), November (GS +2.22%, consensus +2.2%, last +2.5%); Core CPI (yoy), November (GS +2.19%, consensus +2.2%, last +2.1%): We estimate a 0.17% increase in November core CPI (mom sa), which would boost the year-over-year rate by one tenth to +2.2%. Our forecast reflects a sequentially smaller boost from higher used car and household furnishings prices (the latter of which relate to tariffs on Chinese imports). We also estimate a modest pullback in apparel prices—reflecting the trend towards earlier holiday promotions—and we expect another decline in medical care commodities prices due to continued prescription drug price freezes. We expect roughly 0.25% gains in the shelter categories, as alternative rent measures have continued to slow but vacancy rates remain low. We look for a 0.04% increase in headline CPI (mom sa), reflecting a drag from lower gasoline prices.

Thursday, December 13

  • 08:30 AM Import price index, November (consensus -1.0%, last +0.5%)
  • 08:30 AM Initial jobless claims, week ended December 8 (GS 235k, consensus 225k, last 231k); Continuing jobless claims, week ended December 1 (last 1,631k): We estimate jobless claims edged increased by 4k to 235k in the week ended December 8, following a 4k decline in the prior week. The uptrend in initial claims has continued (the current 4-week moving average is 228k), and we believe these increases reflect a legitimate sequential rise in layoff activity.

Friday, December 14

  • 08:30 AM Retail sales, November (GS +0.4%, consensus +0.1%, last +0.8%); Retail sales ex-auto, November (GS +0.5%, consensus +0.2%, last +0.7%); Retail sales ex-auto & gas, November (GS +0.7%, consensus +0.4%, +0.3%); Core retail sales, November (GS +0.7%, consensus +0.5%, last +0.3%): We estimate that core retail sales (ex-autos, gasoline, and building materials) rose at a solid pace in November (+0.7% mom sa), reflecting strong holiday sales trends, both online and at brick and mortar establishments. A post-hurricane rebound in restaurant sales is also likely to boost the ex-auto ex-gas category (GS +0.7%) and headline measures. We estimate a 0.4% increase in the headline measure and a 0.5% increase in the ex-auto measure.
  • 09:15 AM Industrial production, November (GS +0.7%, consensus +0.3%, last +0.1%); Manufacturing production, November (GS +0.3%, consensus +0.3%, last +0.3%); Capacity utilization, November (GS +78.8%, consensus +78.6%, last +78.4%): We estimate industrial production rose 0.7% in November, largely driven by rebounds in the utilities and auto manufacturing categories. We estimate capacity utilization rose four tenths to +78.8%.
  • 10:00 AM Business inventories, October (consensus +0.5%, last +0.3%)

Source: Goldman, DB, Morgan Stanley