ON DECK FOR MONDAY, JANUARY 16
KEY POINTS:
- Markets are off to a light start to a potentially very active week
- BoC surveys to inform wage and inflation expectations
- PBoC resists rate cut, Chinese bond yields rise
- CDN manufacturing, home sales on tap
- US markets shut for MLK Jr day
- Global Week Ahead reminder
As reminders, please see the Global Week Ahead in publication format here and for clients the slide deck format is here.
Global markets are little changed across asset classes so far this morning due to a combination of light global developments and the US MLK Jr holiday.
The USD is little changed on balance. Sovereign yields are pushing higher by a few basis points across European markets but moved slightly lower in Japan ahead of the BoJ’s decision later this week. N.A. equity futures are slightly negative and European cash markets are little changed. Mainland China’s equities rallied by about 1%+ but HK was flat. The Nikkei was broadly lower across sectors despite speculation that the BoJ might ease policy measures.
The PBoC left its 1-year Medium Term Lending Facility Rate unchanged at 2.75%. Most within consensus had expected this. Markets had thought there may have been a possibility of a rate cut and so when it was not delivered the 2-year Chinese government bond yield moved up a few points. The PBoC also offered less of a liquidity injection into the Lunar New Year than had been expected. Other China headlines were muted as its revised Covid death tally is only slightly less fake following the WHO’s prior stern rebuke.
Canada updates several readings this morning including the BoC’s quarterly surveys of business and consumer expectations (10:30amET). Key will be inflation expectations as neither businesses nor consumers have demonstrated belief that the BoC will achieve 2% inflation over the medium-term (charts 1, 2). The limited and lagging sample of opinion behind these surveys is always reason for caution in terms of attaching too much significance to them, but the BoC references them when it deems appropriate to do so and so it’s worth it for markets to do so as as well. Also see charts 3–7 for key inflation and labour readings up to now in the business survey and charts 8–10 for the consumer survey’s gauges. Tomorrow’s inflation report will be more consequential to pricing next week’s BoC move.
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