- Investors hope for a recovery in Europe, Asia
- Decent US data, good start of the year
- China may run out of fuel
Europe – will there be a recovery?
The December data showed a surge in auto sales in Europe (+21% y/y). That would be a fantastic news for troubled EU manufacturing sector if not for the fact that it was a sell-off of high-CO2 inventory ahead of another painful regulatory change. What is more sales data outside of the EU did not look encouraging at all. The bright side is that EU consumers hold up really well. Will that be enough to revive the industry? We’ll get an important update this Friday with a series of flash PMIs.
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Global business conditions have stabilized at depressed levels. Source: Macrobond, XTB Research
Key economic event this week: ECB conference (Thursday, 1:30pm GMT), German manufacturing PMI (Friday, 8:30 am GMT)
US – promising start to 2020
We got a large data pack from the US last week. Markets seemed to be very happy, unwilling to notice the outlier nature of some publications (especially housing starts surging to 13-year highs on warm December weather). However, a rebound in regional activity indicators is a positive sign. Yes, both NY and Philly Fed had been erratic in the past and this time they could have been affected by trade-related optimism but in absence of other information we should take it as a promise to be verified by the PMI data on Friday and then ISM prints at the beginning of February.
A spike in conditions on the East Coast could be a good sign for the US. Source: Macrobond, XTB Research
Key economic event this week: PMI indices (Friday, 2:45 pm GMT)
Asia – how much fuel left in the tank?
Economic data from China brightened somewhat in December. Although 2019 growth slowed to the lowest in nearly 30 years, industrial output accelerated towards the end of the year, responding to higher PMIs. Indeed when we track a relationship between credit impulse (advanced by 9 months) it heralds a pickup in the PMI above 51 points which should at least stabilize growth in coming months. The question is: what next? China seems to restricting mortgage lending again (perhaps one of the reasons behind signing the trade deal) and if credit impulse fades now, growth recovery would be short lived. In effect, China may need outside help to gain some momentum.
2019 stimulus should help revive growth – but what’s next? Source: XTB Research
Key economic event this week: BoJ decision (Tuesday)
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