Latest China GDP report kicks off the week for traders

Jan 18, 2016

After another ugly week in markets driven by renewed concerns on the health of the Chinese economy and crude price declines, investors await the latest GDP report from Beijing.

Markets will also have to digest a string of monetary policy decisions, corporate earnings in the US and the headlines emerging from Davos.

Business leaders, central bankers, heads of state and celebrities will gather in Davos, Switzerland, on Wednesday for the annual World Economic Forum. This year, the overarching theme is ‘The Fourth Industrial Revolution’ — namely the rapid changes taking place in technology that are disrupting every industry in every country.

Mary Barra, chief executive of General Motors, Satya Nadella, chief executive of Microsoft and Tidjane Thiam, CEO of Credit Suisse are among the co-chairs of the summit.
With the Shanghai Composite back in a bear market and concerns about China driving investor pessimism around the world, the nation’s GDP report published on Tuesday is sure to be closely watched.

Economists expect that Chinese GDP expanded 1.8 per cent sequentially and 6.9 per cent from the year ago quarter.

The European Central Bank is expected to keep interest rates unchanged on Thursday after increasing stimulus at the end of last year. “Although the recent deterioration will clearly be a source of concern for the Governing Council (GC), we think members will want to see the impact of the measures just decided in December before announcing another package,” economists at Barclays noted.

Investors will tune into ECB president Mario Draghi’s post-meeting press conference after the announcement for clues on whether the central bank will announce new measures in coming months.

But the ECB isn’t the only central bank announcing monetary policy decisions next week. The Bank of Canada is set to unveil its decision on Wednesday — after the loonie has weakened for 13 straight days and has declined to its lowest level against the US dollar since April 2003.

Meanwhile, Brazil’s central bank is expected to lift the Selic rate by 50 basis points to 14.75 per cent on the same day.

Despite a holiday-shortened week in the US, for Martin Luther King day on Monday, investors will have crucial economic data to parse.

Federal Reserve policymakers expressed “significant concern” about low inflation when they raised interest rates last month — that concern is expected to be confirmed this week as economists expect that US consumer prices were largely unchanged in December from the previous month. So-called core inflation, which strips out food and energy prices, is expected to have climbed 0.2 per cent.

Investors will also get a snapshot of the US housing market with the updates on homebuilder confidence, existing home sales and housing starts.

Corporate America continues to post earnings next week with 42 S&P 500 companies due to report results. Bank of America, Netflix, Morgan Stanley, Goldman Sachs, Starbucks, Schlumberger, General Electric and Southwest Airlines are all on the roster.

 

Source: Financial Times