Events to Look Out for Next Week

The FOMC’s more hawkish stance should continue to pressure Treasuries especially ahead of Fed Chair Powell’s testimony next Tuesday. The hawkish environment will prevail in the first quarter especially after the Jobs report add further pressure on higher inflation and increase the odds that Fed could increase rates earlier than March. An ongoing heavy calendar of corporate offerings, the advent of next week’s $110 bln in coupon auctions and the beginning of Q4 earning report releases also weigh at the margin. Data on the inflation index from US and China, US PPI and Retail Sales and the big banks earning reports on Friday 14th should monopolize the attention next week.

Monday – 10 January 2022

Unemployment Rate (EUR, GMT 10:00) – The European jobs market is expected to confirm steadily high unemployment even though the November reading could tick lower to 7.2% from 7.3% last month.
Fed Chair Powell Testimony (USD, GMT 15:00)

Tuesday – 11 January 2022

Retail Sales (AUD, GMT 00:30) – November Retail sales are anticipated at 4.0% m/m following a growth of 4.9% m/m in October.
Industrial Production, Manufacturing Production and Trade balance (GBP, GMT 07:00) – A plethora of data from the UK should show a continued stuttering recovery. It seems Omicron and vaccination progress likely mean the end of the pandemic is in sight, which should help to keep production underpinned, although Brexit challenges remain and PMIs highlighted that the inflow for new work from overseas dropped. Inflationary pressures meanwhile remained elevated.

Wednesday – 12 January 2022

Consumer Price Index (CNY, GMT 01:30) – China has not been immune to rising prices and uncertainty, with the continuing clouds over many real estate developers (Evergrande, Kaisa, Fantasia & Shimao) remaining a concern despite PMIs signaling low level recovery. There are pockets of weakness though and the data will do little to dent expectations for further support measures from the government next year. In December however inflation is expected lower with headline gains at 1.8% from 2.3%, something that will create some room for further stimulus measures.
US Consumer Price Index (USD, GMT 13:30) – This key data point is expected at December gains of 0.4% for the CPI headline and 0.5% for the core, following huge respective gains in November of 0.8% and 0.5%. As-expected December figures would result in a 7.0% y/y increase that would mark yet another 39-year high that eclipses the prior cyclical peak of 5.6% in July of 2008. The headline gain would be a high back to the 7.1% rise in June of 1982. Core prices should also post a new 30-year high y/y gain of 5.4% from the 4.9% high in November, versus a prior 29-year high of 4.5% in June. Widespread production bottlenecks are lifting all the inflation metrics in 2021, such as PPI and the trade price indexes. These respective 39 and 38-year highs will sustain pressure on the Fed to complete the QE taper and rotate to rate hikes as 2022 progresses.

Thursday – 13 January 2022

PPI (USD, GMT 13:30) –The December PPI gains are seen at 0.2% with a 0.6% increase for the core, following respective gains of 0.8% and 0.7% November. As-expected readings would result in the y/y headline PPI metric sustaining the 9.6% pace seen in November, leaving an 8th consecutive all-time high. The massive PPI climb since the start of 2021 exceeded the uptrend in headline and core CPI data, and both sets of gains are chasing outsized increases in the trade price measures, alongside ongoing supply constraints that have provided a powerful lift for the inflation indexes.

Friday – 14 January 2022

Trade Balance (CNY, GMT 03:00– December’s Trade Balance for exports and imports are likely to show a rise at 73.40 bln, in contrast with a pull back in exports and imports headlines which are expected to deduct to 20.0% y/y and 25.9% y/y respectively.
Retail Sales (USD, GMT 13:30) – December’s Retail sales are anticipated at -0.4% declines for both the headline and ex-auto measure, after November increases of 0.3% for both. The headline should be restrained by both a pull-ahead of holiday sales into early-Q4 due to feared supply shortages, and a headwind to holiday activity from the Omicron variant. We expect a continued unwind of the lift from Q1 stimulus, and restraint from the end of extended jobless benefits that have capped Q4 disposable income growth.
Import and Export prices Index (USD, GMT 13:30) –  Expected to rise 0.3% and 0.4% respectively in December. We’ve more generally seen a wide array of price gains attributable to global capacity constraints and supply chain disruptions. A downtrend in the value of the US Dollar into 2021 aggravated the outsized trade price climb since December of 2020, though dollar gains since May of 2021 have capped price increases into Q4.
Michigan Index (USD, GMT 15:00) – The preliminary Michigan sentiment report is expected to reveal a January headline drop to 70.0 from 70.6 in December, leaving the measure back below the prior 10-year low of 70.3 in August, and further below the pandemic-bottom of 71.8 in April of 2020. Confidence has posted a big pull-back since midyear as the updraft with stimulus and vaccines is fading alongside soaring prices that are crushing purchasing powe

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Andria Pichidi

Market Analyst

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