The paths of the two central banks of the United States and the Eurozone take different trajectories. In a decisive week for the markets, the meetings of the Federal Reserve and the ECB are scheduled. Meetings that come after a series of macro data that surprised, positively. The supposedly inevitable recession in the US is not materializing, while prices have gradually begun to cool down. The Eurozone economy is also showing good signs of stability, as demonstrated by the latest PMI indices. But here the game to curb inflation is a step backwards. That is why the views on the next move of the two central banks are slightly different.
Lagarde rest falco
Kevin Thozet, a member of Carmignac’s Investment Committee, is clear on the ECB’s side: “There is no doubt that on 2 February it will bring deposit rates to 2.5%. All the more so since a 50 basis point hike is already been widely anticipated in its forward guidance,” he wrote in a note on Friday. Same forecast, an increase of half a percentage point, also from BofA Research. The questions are all about “how long” this phase of increases from 50 points will last, if it continues beyond March and then goes to 25 points. “We think Lagarde is likely to continue aggressive monetary policy considering that the European economy surprised to the upside after its latest 2022 statements and interest rate cap expectations in this tightening cycle have eased, so such as those related to downside surprises on gas prices,” he argued. “In his communication on monetary policy – he wrote Ulrike Kastens, Dws European economist – Lagarde will probably announce an unchanged and more restrictive monetary policy course. That would also be an argument for another 50 basis point rate hike in March.”
In short, in Rbc BlueBay AM speculate that the ECB will also “make a relatively hawkish assessment” because “although falling energy prices are clearly helping the inflation outlook (as well as government deficit positions), core inflation remains high and could take a tight monetary policy for several quarters”.
Among the elements on which clarifications are expected from Lagarde’s words, also the Quantitative tighteningor the reduction of the balance sheet: we know that it will be 15 billion a month, it remains to be seen how it will be articulated on the various asset segments put in the belly.
More margins for Powell
As for the Fed, Thozet always wrote, “with the latest data on headline inflation and the main economic indicators also surprisingly bearish, the trend of disinflation is confirmed. This means that from now on the Fed should raise rates at a pace slower and proceed next week with a “normal” 25 basis point hike.” For the next meetings, then, “we expect at least 2 more increases of 25 basis points, bringing rates to 5-5.25% (terminal level for the process of increasing the cost of money)”, predicts the IG market strategist Italy, Federico Vetrella.
Aside from the two central banks, the week is also busy as Chinese players return to the market on Monday after the Lunar New Year holidays. On the macro front, the calendar foresees starting from Tuesday from PMI indices Chinese manufacturing and services which should record a return above the 50 points threshold for both, given that these are the first surveys carried out after the recent reopenings. Also on Tuesday, the preliminary German inflation expected to rise again in January will be published, which will form the appetizer of the preliminary inflation of the Eurozone on Wednesday, with the core component which will be the special observation. Both core and headline inflation are expected to ease slightly, with the latter expected to settle at 9% from 9.2%, while the swap market prices it just below 9%. On the same day, the US manufacturing ISM should continue to remain in contraction territory, while on Friday the ISM services index should return to expansion area after the surprise downwards of the previous data. On the same day, we will also have data on the US labor market which should show a slowdown in both the pace of new jobs and wage dynamics. In the end, the quarterly season in the USA is about to end with the big names in the tech sector (Amazon, Alphabet and Apple) who will communicate their accounts, while the calendar in Europe is starting to fill up with the publication of data from some important banking institutions, including Intesa and Unicredit.
Here are the main events on the breaking latest news agenda:
MONDAY JANUARY 30
– Spain: January inflation and December retail sales – Germany: GDP fourth quarter 2022
– Eurozone: economic sentiment, consumer confidence in January – Istat: producer prices in December – Transport: Asstra National Conference “Mobilitevolution: local public transport companies for the future of the country”, with Andrea Gibelli, Edoardo Rixi, Adina Valean, Raffaele Fitto, Massimiliano Fedriga, Luigi Ferraris. Infrastructure Minister Matteo Salvini concludes.
– Poste Italiane: presentation of the Polis Project – House of digital services. With Economy Minister Giancarlo Giorgetti
– Istat: extra-EU foreign trade for December 2022 – Istat: production prices for industry and construction for December 2022
– Confindustria: Ex Ilva: meeting between trade union organizations (Fim Fiom Uilm) and representatives of Acciaierie D’Italia – Ita: Ita-Union meeting on wages – Ryanair: accounts
– Energia: annual meeting Baker Hughes a Firenze.
TUESDAY 31 JANUARY
– Japan: December unemployment rate, retail sales and industrial production
– Japan: consumer confidence
– China: January manufacturing PMI
– France: GDP fourth quarter 2022
– France: January inflation and producer prices – Germany: December retail sales and import prices – Germany: January unemployment rate – Germany: January preliminary inflation – Istat: December employed/unemployed
– Eurozone: Pil quarto file stre
– Istat: fourth quarter GDP estimate
– Istat: contractual wages for the fourth quarter of 2022 – Usa: Chicago pmi (15.45)
– Usa: house price index November (15) – Digital: Presentation of the research “Digital calls: does Italy answer?” of the Digital Agenda Observatory of the School of Management of the Milan Polytechnic, remotely, Paolo Zangrillo, Minister for Public Administration and Alessio Butti Undersecretary for Technological Innovation and Digital Transition.
– Work: Presentation of the Report “Subsidiarity and…
social development”, created by the Foundation for Subsidiarity, in collaboration with Istat, with Marina Elvira Calderone, Minister of Labor and Social Policies, Gian Carlo Blangiardo, President of Istat.
– Farnesina: XI control room for internationalization with Minister Urso
– Mef: preview presentation of the 2023 numismatic collection, with the intervention of Minister Giancarlo Giorgetti.
– Banks: EBA disseminates the guidelines and methodology of the 2023 bank stress tests
– Trimestrali Amd, Caterpillar GM EXXon Mobil, Pfizer e McDonalds.
WEDNESDAY FEBRUARY 1
– China: manufacturing PMI
– S&P Global: PMI manufacturing Spain Italy Germany France Eurozone
– Eurozone: December unemployment rate – Eurozone: January inflation
– Istat: data on the consumer price basket for the year 2023
– Istat: preliminary January inflation – Usa: January manufacturing PMI
– Usa: construction spending in December
– Use: weekly oil inventories
– Usa: Fed rate decision, followed by Powell’s press conference.
– Cars: January registrations
– Mef: state sector requirement
– Inail: ‘Isi Call 2022, press conference with the ministers of Labor Marina Calderone and Agriculture Francesco Lollobrigida and the president of Inail Franco Bettoni.
THURSDAY FEBRUARY 2nd
– Copasir: hearing of the Minister of Enterprise and Made in Italy, Adolfo Urso.
– Work: Table on self-employment convened by the Minister of Labor Marina Calderone
– Ferrari: count
– EIB: group activities in Italy in 2022.
– Germany: trade balance
– France: trade balance
– Gb: BoE decides on rates
– ECB: rate decision and Lagarde press conference – Usa: applications for unemployment benefits
– ECB: Lagarde message for the 10th anniversary of the Franco-German Business Awards 2023 in Paris.
FRIDAY 3 FEBRUARY
– Aspen Institute: Italy and France, strategies for energy and security with Giorgetti, Urso, Descalzi, De Puyfontaine.
– China: Caixin composite and services in January – S&P Global: PMI composite and services Spain Italy France Germany Eurozone
– France: industrial production in December – USA: unemployment rate and new jobs in January – USA: S&P Global composite and services in January – USA: non-manufacturing ISM in January
– Confindustria: meeting of Confindustria Taranto with Bonomi – Bankitalia: presentation of the book by economic historian Gianni Toniolo, “History of the Bank of Italy.
Formation and evolution of a central bank, 1893-1943″, with intervention by the Governor of the Bank of Italy Ignazio Visco.
– Procurement: conference “The new Procurement Code: simple regulatory change or real cultural change?”, with Matteo Salvini, Alessandro Morelli, Marcella Caradonna President Odcec Milan, Vinicio Nardo President Bar Association of Milan, Michele de Tavonatti Vice President CNDCEC and Maria Pia Nucera National ADC President
– Intesa Sanpaolo: balance sheet results