Macro Brief: Neither good nor bad

Macro 4 minutes to read

Christopher Dembik

Head of Macro Analysis

Summary:  Mixed updates from China suggests that economic improvement is underway but not forcefully so. Elsewhere the market seems unconvinced by the ECB's ability to address its mandate and in the US, GDP is likely to disappoint.


We had plenty of interesting Chinese data yesterday which seems to have raised concerns about Beijing's ability to stimulate the economy. In our view, the Beige Book for China was rather positive since it confirmed that the economic recovery is at work, mostly driven by rising indebtedness – which is not surprising. At the same time, we got data indicating that industrial profits dipped in January and February mostly because of low PPI and weak industrial production. The economic picture remains mixed and the consequences of China’s stimulus is slow to have an impact on hard data, even if some encouraging signs are popping up here and there. 

In addition, the ECB Watchers conference was a quite event. Mario Draghi tired to reassure investors by stating that the European Central Bank is “not short of instruments to achieve our mandate”. He mostly pointed out to easier TLTRO terms if needed and openly discussed the benefits and disadvantages of negative rates on the banking sector profitability. However, we doubt he really managed to convince traders and investors that the ECB is well-equipped to face the coming recession.

Today’s market session includes a myriad of central bankers’ speeches and a lot of indicators, but the focus should be the third estimate of the US Q4 GDP. The consensus expects that GDP will reach 2.4% QoQ SAAR versus previous at 2.6% and personal consumption at 2.6%. However, investors should be ready to face a more disappointing print. At Saxo, we consider that there is a high risk of downward revisions of consumption and residential investment in Q4 that could push GDP lower, around 2.1-2.2%. 

Today’s Calendar (All Times GMT)

9:10 ECB, De Guindos’ speech
12:30 USA, Q4 GDP
13:00 Germany, CPI
15:00 USA, Manufacturing survey from the Federal Reserve Bank of Kansas City
17:15 Fed, Williams’ speech
21:20 Fed, Bullard’s speech
 

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