Transcript
Matt Jones
Welcome to "The Long & Short of the Week Ahead", a production of Eurizon SLJ Capital that takes a look at the macro-economic themes of the week ahead and has been recorded for professional investors.
My name is Matt, Head of Distribution for Eurizon SLJ Capital, and I'm joined by Neil Staines, Senior Portfolio Manager.
Welcome back, Neil. It's great to have you here with us again.
Neil Staines
Thank you very much Matt. It's great to be here.
Matt Jones
So diving straight in looking into next week, we have an array of developed markets, central bank policy meeting minutes. What are the main points of focus for markets?
Neil Staines
Yeah, thank you very much, Matt.
That's right, at the moment markets are very focused on the debate over the balance of risks from an economic and inflation standpoint and how that plays out into central bank policy. And next week, we get the minutes from the February meeting of the RBA and the late January meetings from the ECB and the FOMC.
Now starting with the RBA, the demand dynamic in Australia, certainly has been impacted by significant inward migration. However, recent disappointing unemployment and the lower inflation trajectory alongside a more balanced global disinflation will be a big focus. And to see how. That impacts the balance of thinking and the balance of risks as seen by the RBA in the minutes this week.
More importantly, perhaps, we get the minutes from the Jan 25th ECB meeting. Now there is becoming or emerging a clearer split between members of the Governing Council on the South, or predominantly from the southern states where they see risks of cutting interest rates too late and more predominantly from the more conservative northern states where they see risks emanating of cutting too soon or too preemptively.
So anything that may be seen to shift that balance or the perception of that balance will be important and certainly will be watched very closely by markets and also perhaps any hints on the end of QE reinvestments and the timing they're in, but likely most importantly the minutes from the FOMC meeting on Jan 31st.
Now, given the recent evolution or developments that we've seen in the employment, CPI and retail sales data and the significant pushback. That we've had in terms of right expectations. This is going to be a very big focus. Now we concentrate a little bit more on this on the blog and how we see. This data, perhaps as the high point in the economic and price momentum that we see this year, certainly in terms of momentum but it's going to be a clear focus with the debate over the balance of risks to central bank policy going forward and for the rest of this year, we also get a host of central bank speakers it's going to be a big week for minutes and a big week for developed central banks.
Matt Jones
So aside from the speakers, what about the data? How will this week's releases shape the ongoing central bank debate?
Neil Staines
Yeah, thanks Matt. Alongside the Central Bank narratives obviously gonna be dominated by the data. Now we have seen over recent weeks the UK, Japan and Germany are either in or flirting with technical recession. And this set against the US data, which continues to suggest a robust expansion. Again, something that we explore in this week's blog. Now, the global PMI data out this week will be a clear gauge of this global growth divergence or as we anticipate going forward a m ore uniform slowdown but there'll be particular focus on the forward looking elements of the the PMI this week. So a big emphasis there. We also get importantly the ECB negotiated wage settlement data. Now that's going to be very important also in shaping the expectations of the ECB policy dynamic going forward. So again, a big focus there and German IFO data Germany, a big focus for the the evolution or the momentum in the European economy and the divergence in particular between the current data or current activity data and the forward looking expectations data is again, going be something that is a key emphasis for markets.
Matt Jones
So outside of the central bank sphere, what other factors or events will markets be alert to over the course of the next week?
Neil Staines
Yeah, thanks, Matt. It's going to be again, it's slow start to next week with the US out on President's Day holiday. But there'll be a couple of areas where we see significant focus outside of those we have mentioned so far.
Then in the equity market the current backdrop, particularly in the U S has been one of demand resilience driving price resilience. And, ultimately that has led to risk asset outperformance. If we add in the fact that there's been a significant AI tailwind. It's been very positive for equity markets. Nvidia, who have been a bellwether for this AI momentum of late release their actually Q4 24 earnings next week, and that will be very important, not just for US indices, but also for wider risk sentiment. And then also next week we get the return of China. After the week long, or ten day long in some regions Chinese New Year holiday break will we come back with New Year cheer?
The recent positive holiday activity data has suggested that we may see a bit of a resurgence in sentiment. And it's also the start of the Year of the Dragon, all of which are going to be very important for equity sentiment and for broader market sentiment. Minimal data next week, but a deeply significant week for markets.
Matt Jones
Fantastic. Thank you, Neil. I look forward to catching up with you again next week.
Neil Staines
Thanks very much, Matt. It's been a pleasure.
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