Market movers ahead
US consumer confidence and housing market data will be in focus. After a weak December reading, we expect new home sales to decline further in January due to bad weather. The latest disappointing US data are likely to be reflected in February consumer confidence.
Second release of US Q4 GDP figures. We expect GDP growth to be revised down to 2.4% q/q AR from 3.2% q/q AR.
In the euro area, we expect inflation to remain at 0.7% y/y in February. Since January, oil prices have risen but the movement in EUR/USD tends to counter the upward pressure on inflation.
Data on monetary developments may show some improvement in credit growth as the snapshot of banks' balance sheets for the ECB's AQR has been taken. It is likely that the ECB will ease again if credit growth continues to be weak and inflation stays low.
German IFO expectations are likely to show a small decline from a high level.
Global macro and market themes
The global manufacturing cycle seems to be peaking at the beginning of 2014, as ISM/PMIs for US, China and the euro area have all started the year on a weak note.
We believe this is a temporary dent in the global manufacturing cycle as Chinese tightening has slowed Chinese investment spending and some temporary boosts to the US are fading and dampening US growth for a while.
Central bank easing is on the agenda again. Comments from ECB members continue to suggest that all options are on the table but lately it seems consensus is building that a halt to sterilising the SMP programme is the preferred measure. The Fed so far seems little affected by recent data.
While stocks have recovered strongly from the January sell-off, we continue to have a cautious stance on equities. In core bond markets, we still see the pressure mostly on the downside for bond yields in the short term.
To Read the Entire Report Please Click on the pdf File Below