The Week That Was & A Look Ahead

Markets saw a relatively quiet start to the week as China welcomed in the Lunar New Year. With a lack of Asia impetus, Europe turned introspective.

North Korea flexed its muscles again this week, testing a nuclear war head on Tuesday, prompting a stern rebuke from the international community. The U.S. has called on the country to refrain from additional provocative actions, following reports of plans for more nuclear tests.

Currencies were very much the topic of conversation throughout the week, with Japan’s efforts at reflating its economy coming under scrutiny from politicians ahead of the weekend’s G20 summit.

Following mixed messages sent out by G7 officials (BOE’s chief irked by G7 mixed messages), G20 members were at pains not to single out Japan as a currency manipulator. The G20 has previously asked nations to refrain from market intervention.

Spain insisted it could and would cope without the European Stability Mechanism (ESM). Corporate Italy was facing up to yet more bribery and corruption allegations, alongside the possibility of Silvio Berlusconi having an instrumental part to play in Italy’s governance.

His defence of Giuseppe Orsi of Finmecanica didn’t do a lot to help lift the doubts around his ethics, saying, “Bribes are a phenomenon that exists and it’s useless to deny the existence of these necessary situations when you are negotiating with third world countries and regimes.”

Germany lost its invincibility this week. Alongside France and Italy, Euro zone’s largest member published preliminary growth data showing contraction for the fourth quarter. The Euro-Area as a whole shrank by the most since 2009.

The corporate world provided the positivity for the week, with a number of high profile deals announced. US Airways and AMR finally came out with their proposed tie-up, which would make the new entity the largest airline in the word; the deal was valued at $11billion. Comcast paid $16.7billion for the remaining shares of NBC universal from GE it didn’t already own.

Key Events For Week Commencing February 18

President’s Day in the U.S. will keep markets fairly quiet Monday. Add to this the fact that in the U.K. and parts of Europe it’s schools’ half-term and many may wish to avoid the trading session altogether.

Italian electioneering should keep market players entertained, however, as the race heats up, culminating in next weekend’s results (‘Buffoon Berlusconi’ Slur Spices up Italian Election).

Traders will want to see some signs of a recovery in Europe from Flash Purchasing Managers Index readings on Wednesday. It’s one thing to lament over the Euro zone’s fourth quarter slowdown but backward looking measures are quickly forgotten if we start to see signs of life in first quarter data; and there is no better barometer than the PMI survey.

We’ve heard from a number of voting/non-voting Fed members post the board’s last rate setting meeting. There is a growing swell of opinion that believes that as much as the Federal Reserve wants to pull back on the level of accommodation currently being implemented, data doesn’t show a consistently improving picture as yet. Housing aside, the recovery seems to be moving at a glacial speed. The NAHB, Existing Home Sales, amongst other housing data releases, should back Fed Pianalto’s assessment of the sector (Pianalto Says Benefits From Securities Purchases May Fade).

Finally, keep an eye out for this weekend’s Cyprus election. Eurogroup members have repeatedly said that no decision can begin to be made on a bailout for the country until after a new government has been chosen for the country (Election preview: Cyprus).

Monday Feb 18
Market holiday in US and Canada
08:30 EU FinMin meeting in Brussels
09:00 Austrian National Bank Governor Nowotny meets business journalists
09:00 EU Current Account
13:00 EU President Van Rompuy speaks to EU Parliament on Budget Proposal
23:50 BoJ Publishes Minutes of Jan 21-22 meeting

Tuesday Feb 19
EU Irish Presidency holds meeting on Basel III negotiations
SNB Jordan speaks at Swiss Institute of International Studies
00:30 RBA minutes of prior February meeting
07:00 EU Commissioner Almunia speaks at CER breakfast meeting in Brussels
10:00 German ZEW (Economic sentiment and current conditions)
10:00 EU ZEW (Economic sentiment)

Wednesday Feb 20
BOJ’s Morimoto speaks at Kochi
07:00 PPI Germany
09:00 Italian Industrial order
09:30 BoE Minutes of Prior (6-7 Feb) MPC meeting released
09:30 UK Claimant Count
10:30 Chancellor Merkel and Econ Min Roesler speak at conference
19:00 Fed releases minutes from previous (29-30 Jan) meeting

Thursday Feb 21
ECB Governing Council Meeting hold non-rate setting meeting
07:00 China Trade Balance
07:58 French Flash Manufacturing PMI Flash Services PMI
08:28 German Flash Manufacturing PMI Flash Services PMI
08:58 EU Manufacturing PMI Flash Services PMI
09:30 13:30 US CPI
13:30 US Initial Claims
13:58 US Flash Manufacturing PMI
15:00 US Existing home sales
17:30 Fed’s Bullard speaks on economic and monetary policy outlook before Centre for Global Economy and Business
18:00 Fed’s Williams speaks on monetary policy and the economy before the New York Forecasters Club

Friday Feb 22
07:00 German GDP (Final)
09:00 Italian CPI (Final)
10:00 EU releases Winter 2013 European Economic Forecast
15:30 Fed’s Rosengren and Powell discuss report on “Crunch Time: Fiscal Crises and the Role of Monetary Policy” before the Initiative on Global Markets conference
23:30 Fed’s Tarullo speaks on “International Cooperation in Financial Regulation”