ON DECK FOR FRIDAY, FEBRUARY 21
KEY POINTS:
- Markets ending the week on an up-note
- Global PMIs: quicker growth in Japan and India…
- ...but France’s economy sharply deteriorated…
- ...as the rest of the EZ, UK and Australia were steady
- UK consumers charged ahead into the new year
- Canadian retail sales: Strong Q4, January uncertain
- BoC’s Macklem to talk trade. Again.
- US to update home sales, PMIs
3–2. Nothing else matters this morning. The US hockey team fought hard at the inaugural ‘Four Nations’ tournament and should be proud of their efforts, but Canada prevailed and shut Trump up after another one of his nasty posts ahead of the game. Nothing could be sweeter than a quiet DJT but I’m certain it won’t last. Maybe Putin will give him a consoling hug. We Canadians are not known for bragging in loud obnoxious fashion, but frankly, for all that the US administration has put my country through with its unjustified assault, endlessly demeaning insults and slanderous betrayal, I hope that one hurts. Bad.
Markets May End the Week Positively
Ok as for the other more trivial stuff, Friday is so far on the road to ending the week on a positive note for markets. NA equity futures are a little higher and so are European cash markets. Sovereign yields are slightly lower with EGBs rallying once France’s PMIs hit. Gilts are slightly underperforming at the front-end following strong retail sales and a steady PMI. The dollar is broadly stronger ahead of US data. On tap in the NA session are Canadian retail sales (strong December and Q4, uncertain January), another speech from the BoC’s Macklem and some US data.
Global PMIs—France’s Economy is in Trouble
The monthly PMIs dump showed quicker growth in Japan and India, steady readings in the Eurozone, UK and Down Under, but France came in much weaker (charts 1–3). Here’s the rundown:
- The Eurozone composite PMI held unchanged at 50.2, signalling no material economic growth. Services decelerated (50.7, 52.3 prior) and manufacturing’s contraction ebbed a touch (47.3, 46.6 prior).
- Germany’s overall PMI edged up a half point as manufacturing contracted a little less (46.1, 45 prior) and services slipped (52.2, 52.5 prior).
- France was the deadweight. Its overall PMI fell 3.1 points to 44.5 as services shrank at a quicker pace (44.5, 48.2 prior) and manufacturing contracted at a little slower pace (45.5, 45 prior).
- The UK composite PMI held steady (50.5, 50.6 prior) as a slight improvement in services (51.1, 50.8 prior) was offset by a nearly two-point drop in manufacturing (46.4, 48.3 prior).
- Australia’s composite PMI held steady (51.2, 51.1 prior) signalling no change in the economy’s momentum at a modest growth pace. Services and manufacturing both picked up a little.
- Japan’s composite PMI inched a half point higher to 51.6 as services and manufacturing picked up somewhat.
- India’s composite PMI increased to post faster growth (60.6, 57.5 prior). That was all due to faster growth in services (61.1, 56.5 prior) as manufacturing slipped a touch to post still rapid growth (57.1, 57.7 prior).
UK Consumers Post Fastest Growth in Eight Months
UK retail sales rebounded smartly last month by posting a volume gain of 1.7% m/m SA (0.5% consensus, -0.6% prior revised from -0.3). Ex-gas sales volumes were up 2.1% (0.9% consensus) for the first gain since August and the biggest one since May.
Canadian Retail Sales—Strong Q4, January Uncertain
The N.A. session will be focused on Canada. Retail sales (8:30amET) are expected to be strong for December based on Statcan’s advance ‘flash’ guidance that pointed to a 1.6% m/m SA nominal gain. We’ll get the final revised estimate and details like volumes that should leave solid Q4 gains intact (chart 4), plus the preliminary estimate for January.
BoC’s Macklem to Talk Trade—Again
BoC Governor Macklem delivers another speech on trade, this one titled “Trade friction, structural change and monetary policy” and will host a press conference afterward. The speech headlines hit at 12:30pmET and the presser starts at 2:10pmET. I don’t expect the speech to offer new perspectives relative to Macklem’s prior guidance on the competing challenges that trade conflicts pose for monetary policy. Risk may lie in the press conference after CPI that registered warm m/m SAAR readings for the preferred core gauges.
A Pair of US Releases
The US updates existing home sales (10amET) and S&P PMIs (9:45amET).
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