This week’s key economic data, the BoE’s rate decision (Thu) and the US employment report (Fri) will keep markets on their toes. This morning’s China Caixin manufacturing PMI came in below expectations, however, remained in expansion, just, at 50.1.
Also today we have a host of PMI prints, and US ISM manufacturing data, and we will hear from the Fed’s Bostic (and again on Tue) and Musalem. US Factory orders and durable goods are due on Tuesday, we also have the Alphabet quarterly earnings report, and the Fed’s Daly speaks on an economic forecast panel. China Caixin services PMI hits the screens on Wednesday and later we have eurozone services, PMI and PPI prints as well as US trade data. Chatter from the Fed’s Goolsbee and Barkin, and the ECB’s Lane may also be of interest. Eurozone retail sales, Germany factory orders and US initial jobless claims follow on Thursday. Amazon earnings will garner market focus, as will comments from the Fed’s Waller. The all-important US employment report and Uni. of Michigan consumer sentiment readings close the week.
Asset classes will likely remain volatile this week given Trump’s weekend announcement of punitive tariffs against Canada, Mexico, China, and threats against the EU. The news, this morning, triggered a major market sell-off, with the dollar surging 1% and stocks slumping across global markets. The protectionist measures, set to take effect February 4 barring last-minute deals, have already prompted retaliatory tariff announcements from Canada and Mexico, while China vowed “corresponding countermeasures” and plans to file a WTO complaint.
Last week kicked-off with DeepSeek news catching markets off guard, later we had further tariff noise from the US. The Fed held rates, as expected, the hawkish hold was followed by a marginally dovish Powell. Next the ECB cut rates by 25bps, Lagarde reiterated data dependence, and gave no future guidance on rates. US GDP missed expectations for 2.6%qoq Q4’24 expansion, coming in at 2.3% (down from 3.1%). The Fed’s favoured inflation reading, PCE was bang in-line with market expectations: headline up 2.6%yoy; core rose 2.8%yoy. Interestingly, the three-month annualised core rate fell to 2.2% – its lowest since July – signalling improving inflation trends that could support continued Fed rate cuts while maintaining economic growth.
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