Weekly outlook, 16-20 January

Earnings and volatile markets

Economic Forum in Davos, Earnings Reports, BoJ meeting, and a busy economic calendar should create a tough week. After last week's softer US inflation, consumer Inflation figures from the EU, Canada, UK & US producer inflation will tell us what we can expect from future monetary policies.

World Economic Forum – Full Week

The Annual Meeting will convene leaders from government, business, and civil society from 90 countries will come together this week in Davos, Switzerland, as it returns to its usual January timeslot. Germany's Olaf Scholz is the only G-7 leader scheduled to attend the meeting. In the current tense political and economic situation, hearing experts and economic activists from all over the world will help to understand the situation better.

China GDP & Industrial Production – Tuesday

Q4 GDP data and December industrial production will provide insight into how China's economy performed in the last months of 2022 before opening the borders and ending the Zero-COVID policy. GDP in Q4 can decline by 0.8%, which means that annual Q4 GDP can rise by only 1.8% after a sturdy gain in Q3. Since recently published PMI numbers remain in contraction territory, we expect Industrial production to be weaker, around 0.5%. On the other hand, fixed asset investment is expected to be up 5% year-over-year, and retail sales should slow down to 9.5%. Expected data can put the Yuan in a weaker position against its crosses.

Britain's busy day – Tuesday

UK will release the Average Earnings Index, Claimant Count & Unemployment Rate, CPI, and PPI on Tuesday. While the widespread strike is hitting the UK economy, the labor market is supposed to continue weakening by adding 19.8K new jobs in December, much less than November's 30.5K hiring. Unemployment and Average Earnings growth +Bonus in November are supposed to stay unchanged at 3.7% and 6.1%, respectively. On the inflation front, both consumer and producer inflation can decrease slightly. Overall, expected data would not be encouraging for UK currency or stock markets.

Bank of Japan and CPI – Wednesday

Last week's data showed that Tokyo's CPI raised by 4% in December, and we expect Japan's headline national CPI to have quickened to 4.0% year-over-year. However, consensus estimates predict that this higher inflation is only temporary, and eventually, CPI will fall below 2% again, even in the near term. With increasing uncertainty and inflation, we can expect adjustments in the BoJ monetary policies. Desired data and decisions can support the Japanese Yen.

US data - Wednesday

Wednesday will be another busy day with US Retail Sales, Industrial production, and producer price index numbers, while the Beige book should also be published. Despite November's slowdown, consumer spending is still strong but can slow down again in 2023. December retail sales are supposed to decrease by -0.8%, but, accounting for a 1.1% decline in consumer goods prices last month, actual retail sales are likely to be positive. The industrial production index dropped 0.2% in November. For December, production can decline by -0.1%, and capacity utilization to tick down to 79.6%. US PPI is also supposed to decrease by -0.1% in the last month of 2022. Estimated data can hold the pressure on the US dollar and lift the stock markets.

Earnings of the week

After a promising start last week, hopes for better earnings increase. On Tuesday, Morgan Stanley, Goldman Sachs, Interactive Brokers, and United Airlines Holdings will have an earnings call. We are waiting for the Charles Schwab report on Wednesday, and the Thursday Netflix report will get the investors' attention.