Inflation remains the main story as markets try to figure out just how high yields might climb. 

PCE inflation

 

With rising bond yields seen as the cause of the recent equity market hurt, market attention remains firmly fixed on inflation data this week. Of particular importance will be the Personal Consumption Expenditures price index, which is the Federal Reserve’s preferred inflation measure and therefore is closely parsed for signs of future monetary policy decisions.

The latest CPI inflation reading delivered a surprisingly firm number, rising 0.5% against projections for a gain of 0.3%. On an annualised basis, headline CPI rose to 2.1% against expectations for 1.9%.

Although we are seeing signs of rising inflation, it’s not all one way. The last PCE gauge slowed to 0.1% in December from 0.2% in November, somewhat short of expectations. Year-on-year, PCE inflation ran at 1.7%. The core PCE measure, which strips out volatile components, rose to 0.2% from 0.1% in November, leaving the annual rate unchanged at 1.5%.

So it’s all to play for and with markets increasingly expecting inflation to climb and yields rising, the chances are that volatility is here to stay.

Eurozone inflation

 

The final day of the month sees the release of the flash estimate for Eurozone CPI inflation in February. The persistent lack of any real signs of underlying price growth pressures has weighed on the European Central Bank’s decision on when to exit its extraordinary monetary stimulus programme.

Readings for January showed annual inflation at 1.3%, which was in line with expectations but came after price growth cooled in December and was the slowest annual pace since July. The core CPI rate, which strips out volatile components such as energy and food, climbed to 1% from 0.9% in December.

FTSE finals

 

Yet more final results from FTSE 100 companies with a particularly busy day on Tuesday as Croda International (CRDA), Direct Line Insurance Group (DLG), Fresnillo (FRES), and GKN (GKN) are all due to update the markets. Other blue chips to report this week include Bunzl (BNZL), Admiral Group (ADM), CRH (CRH) and ITV (ITV).

US retail results

 

 A shocker for Walmart shares last week has teed up extra interest in this week’s batch of major retailer earnings. The stock fell 10% as it struggled to keep up with Amazon’s pace.  Online sales in the US rose by 23% but this was down from the 50% growth seen in the previous nine months. Problems for bricks and mortar retailers are well known but Walmart has been mounting an increasingly powerful challenge to Amazon’s ecommerce dominance.

Key retail stocks reporting this week include Macy’s (M), Gap Inc (GPS), Nordstrom (JWN), Foot Locker (FL) and JC Penney Co (JCP).

Manufacturing PMIs

 

March kicks off with the usual round of manufacturing PMIs for the US, UK and China. UK manufacturing activity enjoyed a post-Brexit bump as a weaker pound appeared to boost demand. But there are signs of a levelling off in activity with the latest index falling to 55.3 in January from 56.2 in December. Nevertheless, boosted by strong global growth, this remains well above long term averages.

Indeed, the picture is replicated elsewhere with both China and US manufacturing activity seeming to slow in January. Markets will be watching to see whether a further decline in activity signals the beginning of the end of the late-cycle global expansion.

 

Economic Calendar

(All times GMT)

Monday, 26 February

15:00 – US new home sales

21:45 – New Zealand trade balance

Tuesday, 27 February

05:00 – Bank of Japan CPI inflation

08:00 – Spanish flash CPI inflation

09:00 – Eurozone M3 money supply

13:00 – German preliminary CPI inflation

13:30 – US durable goods orders

15:00 – US CB consumer confidence

23:50 – Japan preliminary industrial production, retail sales

Wednesday, 28 February

00:00 – New Zealand ANZ business confidence

00:01 – UK BRC shop price index, GfK consumer confidence

01:00 – China manufacturing & non-manufacturing PMIs

07:00 – German GfK consumer climate

07:45 – French consumer spending, preliminary CPI inflation, preliminary GDP

08:00 – Swiss KOF economic barometer

09:00 – Credit Suisse economic conditions

10:00 – Eurozone CPI flash estimate

13:30 – Canada raw materials price index

13:30 – US preliminary Q1 GDP (second estimate)

14:45 – US Chicago PMI

15:00 – US pending home sales

15:30 – US crude oil inventories

Thursday, 1 March

00:30 – Australia private capital expenditure

01:45 – China Caixin manufacturing PMI

09:00 – Eurozone final manufacturing PMI

09:30 – UK manufacturing PMI, net lending figures

13:30 – Canada current account

13:30 – US core PCE, personal spending, weekly unemployment claims

15:00 – US ISM manufacturing PMI

23:30 – Japan household spending, Tokyo core CPI inflation, unemployment rate

Friday, 2 March

07:00 – German retail sales

08:00 – Spanish unemployment rate

09:30 – UK construction PMI

13:30 – Canada GDP

15:00 – US revised UoM consumer sentiment

Sunday, 4 March

All day – Italy parliamentary election

Corporate Calendar

 

Monday, 26 February

Associated British Foods (ABF) – trading update

Bunzl (BNZL) – final results

Hammerson (HMSO) – final results

Keller Group (KLR) – final results

Berkshire Hathaway (BRK/A) – Q4/2017

Tuesday, 27 February

Croda International (CRDA) – final results

Direct Line Insurance Group – final results

Fresnillo (FRES) – final results

GKN (GKN) – final results

Greggs (GRG) – final results

Provident Financial (PFG) – final results

Macy’s (M) – Q4/2018, EPS estimate 2.616

Wednesday, 28 February

Admiral Group (ADM) – final results

Bakkavor Group (BAKK) – final results

Foxtons Group (FOXT) – final results

Informa (INF) – final results

ITV (ITV) – final results

St James’s Place (STJ) – final results

Taylor Wimpey (TW) – final results

UBM (UBM) – final results

Thursday, 1 March

Allied Irish Banks (ALBK) – final results

Bovis Homes Group (BVS) – final results

Cobham (COB) – final results

Costain Group (COST) – final results

Capita (CPI) – final results

CRH (CRH) – final results

Laird (LRD) – final results

National Express Group (NEX) – final results

Rentokil Initial (RTO) – final results

Robert Walters (RWA) – final results

WPP (WPP) – final results

Gap Inc (GPS) – Q4/2018, EPS estimate 0.584

Nordstrom (JWN) – Q4/2017, EPS estimate 1.251

Friday, 2 March

Spire Healthcare Group (SPI) – final results

Revolution Bars Group (RBG) – interim results

Foot Locker (FL) – Q4/2018, EPS estimate 1.254

JC Penney Co (JCP) – Q4/2018, EPS estimate 0.468

Sources: Bloomberg/Companies

 

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