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Economic Calendar - Top 5 Things to Watch This Week

EconomyFeb 11, 2018 04:54AM ET
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© Reuters. Top 5 things to watch this week in financial markets

Investing.com - Inflation readings will matter most for global financial markets in the week ahead, with the U.S., UK and Germany all set to release CPI numbers in the coming days.

Recent chatter that the world's leading central banks will step back from easy policies and raise rates at a faster pace than is currently priced into the market due to a pickup in inflation has sparked a global bond market selloff this year, with yields in the U.S., Europe and Asia all spiking higher.

Elsewhere, Japan is to publish preliminary data on fourth-quarter economic growth as traders look for further signs on the strength of the economy and hints on when the Bank of Japan will start withdrawing stimulus.

Meanwhile, Australia is to publish the closely-watched employment report as investors seek further hints on wage growth and the course of inflation.

Ahead of the coming week, Investing.com has compiled a list of the five biggest events on the economic calendar that are most likely to affect the markets.

1. U.S. Inflation Reading

The Commerce Department will publish January inflation figures at 8:30AM ET (1330GMT) Wednesday.

Market analysts expect consumer prices to rise 0.3%, faster than December’s 0.1% increase, while core inflation is forecast to inch up 0.2%, a touch slower than December when consumer prices recorded their largest increase in 11 months.

On a yearly base, core CPI is projected to climb 1.7%, compared to 1.8% a month ago. Core prices are viewed by the Federal Reserve as a better gauge of longer-term inflationary pressure because they exclude the volatile food and energy categories. The central bank usually tries to aim for 2% core inflation or less.

Rising inflation would be a catalyst to push the Fed toward raising interest rates at a faster pace than currently expected.

At the same time Wednesday, the Commerce Department will publish data on retail sales for January. The consensus forecast is that the report will show retail sales increased 0.5% last month. Core sales are forecast to gain 0.2%.

Rising retail sales over time correlate with stronger economic growth, while weaker sales signal a declining economy. Consumer spending accounts for as much as 70% of U.S. economic growth.

Besides the inflation and retail sales reports, this week's calendar also features U.S. data on producer prices, building permits, housing starts, industrial production, weekly jobless claims, consumer sentiment, as well as surveys on manufacturing conditions in the Philadelphia and New York regions.

The Fed held interest rates unchanged last month and raised its inflation outlook, signaling that borrowing costs will continue to climb under new central bank chief Jerome Powell. Traders are currently putting the chances of a 25-basis-point hike by the Fed at its March meeting at around 76%, according to Investing.com's Fed Rate Monitor Tool.

Meanwhile, on Wall Street, equities could see more volatility in the week ahead as the stock market continues to slug it out with the bond market over rising interest rates.

The S&P 500 and Dow lost 5.2% in their worst week since January 2016, as the 10-year Treasury yield continued its ascent towards the 3%-level. Unless the market plunge intensifies and damages the economy, the Fed is unlikely to budge from its plan to raise borrowing costs three times this year, some analysts said.

Earnings in the week ahead include consumer companies, such as Loews (NYSE:L) on Monday, PepsiCo (NASDAQ:PEP) on Tuesday and Coca-Cola (NYSE:KO), Kraft Heinz (NASDAQ:KHC) and Campbell Soup (NYSE:CPB) on Friday.

2. UK CPI Figures

The UK Office for National Statistics will release data on consumer price inflation for January at 0930GMT (4:30AM ET) on Tuesday.

Analysts expect annual CPI to edge down to 2.9% from December's near six-year high of 3.0%. Core inflation is forecast to rise slightly, from 2.5% to 2.6%.

In addition to the inflation report, traders will focus on monthly retail sales data for further indications on the continued effect that the Brexit decision is having on the economy.

The Bank of England kept interest rates steady last week, but signaled it was likely to raise rates sooner and by more than it thought a few months ago as it seeks to keep a grip on inflation.

Politics is also likely to be in focus, as market participants keep an ear out for any news regarding the ongoing Brexit negotiations.

While Britain's economy is lagging behind the global recovery, it has held up better than the gloomy forecasts made at the time of the 2016 vote to leave the European Union.

3. Germany Consumer Prices

Germany will publish final inflation figures for January at 0700GMT (2:00AM ET) Wednesday.

The report is expected to confirm that consumer prices in the region's largest economy rose 1.6% last month. The data is often seen as a barometer for how prices are faring across the euro zone.

Final readings on French and Spanish inflation figures will also be on the agenda.

In addition to the inflation data, the euro zone will publish a second estimate on fourth-quarter economic growth, which if they remain strong could push the European Central Bank another step closer to ending its mass stimulus program.

Individual GDP reports for the likes of Germany, Italy and the Netherlands are set to add evidence to a booming economy.

The ECB last month said it will keep its €2.5 trillion stimulus program in place for as long as needed and stated that there are "very few chances" that it will change interest rates this year. Despite those remarks, market players remain convinced that easy monetary policy in the region is coming to an end sooner rather than later.

The central bank cut its monthly bond purchases from €60 billion to €30 billion back in October, but extended the program until the end of September 2018, citing muted price pressures.

4. Japan Preliminary Fourth-Quarter GDP

Japan will publish preliminary fourth-quarter economic growth data at 8:50AM Tokyo time on Wednesday (2350GMT Tuesday).

The report is expected to reveal that Japan's economy expanded by 0.2% in the last three months of the year, compared to growth of 0.6% in the preceding three-month period. The economy is expected to show growth at an annualized rate of 0.9%, which would mark a sharp slowdown from growth of 2.5% in the third quarter.

Private consumption, which accounts for roughly 60% of gross domestic product, was seen rising 0.4% in the fourth quarter, after it showed a decline of 0.5% in the previous three-month period.

In addition to the GDP report, Japan is also slated to produce data on core machinery orders, which is looked at as a good indicator of capital spending in the coming six to nine months.

There have been some indications recently that the Bank of Japan is setting the ground to begin discussions on winding back its quantitative easing program, triggering speculation it will follow the Fed and ECB and start normalizing policy sooner than expected.

5. Australia Employment Report

Australia is to produce January employment data at 11:30AM local time (0030GMT) on Thursday.

The consensus forecast is that the data will show jobs growth of 9,000 last month, following an increase of 34,700 in December, with the unemployment rate forecast to dip to 5.4% from 5.5%.

The Reserve Bank of Australia kept interest rates unchanged at a record-low of 1.5% for the 16th straight meeting earlier this month and maintained its neutral policy stance, as it balances the risk of fueling further borrowing in the country's property market against tepid inflation.

Stay up-to-date on all of this week's economic events by visiting: http://www.investing.com/economic-calendar/

Economic Calendar - Top 5 Things to Watch This Week
 

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Comments (5)
Andres Florez
Andres Florez Feb 11, 2018 9:46PM ET
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Thanks, very helpful!
Paul Smith
Paul Smith Feb 11, 2018 8:54PM ET
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Thank you!
Siva Kumar
Siva Kumar Feb 11, 2018 4:53PM ET
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Thanks
Shadow Trader
ShadowTrader Feb 11, 2018 2:12PM ET
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Yes, wonderful article.
Clayton Broomes Jr
Clayton Broomes Jr Feb 11, 2018 12:10PM ET
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Very good to know. Thank you.
 
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