A positive employment report in the U.S., jitters in Europe over a potential Greek exit from the euro and a dramatic rebound in oil prices make for muddled market sentiment. For investors, the number of macro risk factors during a somewhat downbeat earnings season bring into question 2015 return assumptions. Nowhere is the confusion more evident than in the divergence between equities and bonds with yields reaching near-record lows and equities which, despite a rally over recent sessions, are still underwater for the new year. The traditional assumption that nonexistent yields will force investors to cycle into stocks is being challenged as we enter another U.S. dollar-squeeze driven by conditions abroad. Put bluntly, consensus expectations for both the global macro economy and financial markets are neither bullish nor fearful but rather middling. With so little reason for excitement, portfolio managers are looking toward the new week as they did this one, facing offsetting positive and negative developments with no clear potential catalysts for a shift in market trends.
Monday, February 9: January trade data for China released over the weekend will dominate Asian market narratives as investors continue their anxious watch for any signals of a further slowdown in demand. Germany will also issue trade figures, with forecasts for December exports to post a slight rebound, despite continued soft activity measures in neighboring countries combined with sanctions against trade with Russia. Diversified holding company Loews Corp. will release fourth-quarter 2014 earnings on Monday morning, with investors looking for any signal of improvement in net income.
Tuesday, February 10: Consumer and producer inflation figures will be released in Beijing, with consensus forecasts calling for the cost at factory gates to slump to a annualized contraction of 4 percent. As elsewhere, prices in China are feeling the impact of lower energy costs, although the rate of decline is worrying for investors looking for a bottom in industrial activity there. Consensus forecasts for December industrial production in the U.K. are for a marginal rebound for the headline index, despite a monthly contraction in the critical manufacturing segment. In the U.S. wholesale inventories for December are expected to rise at a softer pace than in November. Among the corporations posting fourth-quarter earnings are financial services companies Genworth Financial, UBS Group and Western Union.
Wednesday, February 11: Critical new loan data will be released in China. In recent months Beijing has stepped up the pace of crackdowns on excessive regional government debt levels and so-called shadow banking, even as the People’s Bank of China feeds increasing liquidity into legitimate channels in an effort to soften the blow. In the U.S., Mortgage Bankers Association mortgage application data will be among the only noteworthy economic releases during a largely quiet day. Large-cap U.S. equities reporting earnings include AOL, PepsiCo and Whole Foods Market.
Thursday, February 12: Corporate goods prices for January and December machinery orders are scheduled for release on Thursday in Japan, providing a status update on the progress of Abenomics. In Europe German consumer prices for January and aggregate euro zone industrial production will be released — but Greece will likely remain in the spotlight. With November unemployment expected to remain near 26 percent, Finance minister Yanis Varoufakis is likely to reiterate his government’s commitment to restarting growth through deficit spending. The Bank of England’s monthly inflation letter will provide insight into Bank governor Mark Carney’s thoughts on policy. Weekly jobless claims and oil stockpile data from the Energy Information Administration will be the primary economic data points for U.S. financial markets for the day. In another busy day for financial-sector corporate earnings releases, quarterly reports from AllianceBernstein, American International Group, Credit Suisse Group and Zurich Insurance will be on the top of investors’ radar.
Friday, February 13: Revised fourth-quarter GDP for Germany and France will put the two biggest European Union economies back under the microscope for investors distracted by the ongoing drama in Athens. In a familiar divergence, German growth levels are expected to improve from initial estimates while across the Rhine, forecasts for France call for a reduction in estimates. Import and export prices for January are scheduled for release in the U.S., with low oil inputs expected to weigh on both measures. A critical release for the U.S. consumer sector will be the University of Michigan initial sentiment index release for February. London–headquartered Rolls-Royce Holdings will announce fourth-quarter financial results. The company has recently executed a round of layoffs in an attempt to cut costs, primarily in its aerospace unit.
