European Outlook: Asian stock markets headed south. U.S. stock futures are also in the red and only the FTSE 100 future is posting marginal gains. The correction in stock markets seems to be continuing Reflation trades have run out of steam for now and investors remain hesitant as indices remain at lofty highs. It may need another trigger though, to push the FTSE 100 lastingly above 7300 and the DAX above 11800. The correction on bourses should continue to underpin bond futures, with long yields heading south again yesterday especially in Eurozone peripherals after yesterday’s BoE minutes confirmed that the central bank is considering temporary deviations from QE purchases according to the bank’s capital key. Today’s calendar includes Eurozone current account and BoP data as well as U.K. retail sales and Swedish inflation data.
FX Update: The dollar has consolidated losses, with major pairings showing less than a net 0.2% chance since the New York close yesterday as London interbank traders take to their desks. USDJPY has settled in the mid 113s after logging a low of 113.07 in the New York PM session yesterday, which completed a near two-big figure drop from Wednesday’s peak. EURUSD has steadied in a narrow range shy of yesterday’s 1.0670 high. It’s a similar picture in other pairings. We retain a bullish view on the dollar the back of the contrasting Fed versus most other central bank policy outlooks, with the former expected to trigger three more 25 bp hikes this year.
US reports: revealed a round of big upside surprises for business and consumer sentiment, alongside solid labor market and housing sector readings, hence adding to the robust round of data released on Wednesday. We saw a February Philly Fed surge to 43.3 that left the strongest reading since January of 1984, when payrolls rose 446k and GDP growth reached 8.2%, and the ISM-adjusted measure rose to a 6-year high of 57.8, leaving a spike reminiscent of the small business optimism surge. We saw a rise in yesterday’s Bloomberg Consumer Comfort Index to a 10-year high of 48.1. We saw small 5k rise in initial claims to a lean 239k in the second week of February, leaving an average thus far for the month of just 237k. Finally, we saw a 2.6% January housing starts drop with a 4.6% permits increase that beat estimates thanks to upward revisions to prior starts figures that left a strong trajectory for both measures to likely Q1 new cycle-highs, after solid but weather-boosted Q4 figures.
New Zealand and Japan: New Zealand’s calendar has Producer Price Index during the weekend (Sunday). Additionally, Japan will release adjusted Merchandise Balances and Import, Exports data for January late on Sunday as well.
Main Macro Events Today
- UK Retail Sales – The UK’s official retail sales report for January is up today, where a 0.9% m/m is expected, rebound after the unexpectedly sharp 1.9% m/m drop in December, though be warned as already-released January surveys of the sector by the CBI and BRC suggest downside risk.
- US CB Leading Indicator – US Leading Indicator released by the Conference Board for January, expected to be unchanged following the 0.5% in December.
- Canada Foreign securities – Canadian calendar today, features International Securities transactions for December, where $11.59B expected from $7.24B reported last time.
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