This week, the data that will be released may indicate the potential impact of the coronavirus outbreak on the economy. These will be preliminary, estimated PMIs for some economies. In addition, investors will get the minutes of recent meetings, including Fed, ECB, RBA or NBP.
However, before we get to the description of macroeconomic data that may be important this week, it's worth starting with what has already been published. The Japan economy has shrunk the most since 2014. In the fourth quarter of 2019, Japan's GDP fell by 1.6 percent in relation to the third quarter, which may push the country's economy into a recession in the first quarter of this year. One of the main reasons why the economy shrunk were the consequences of the sales tax introduced in October. The private consumption has fallen for the first time in five quarters. In turn, corporate spending has fallen for the first time in three quarters. Investment expenditure also decreased and the dynamics of public expenditure decreased as well. It therefore seems that after the first quarter of 2020, the Japanese economy may be in recession, which can become a huge challenge for the government and the Bank of Japan with its already loose monetary policy.
Minutes of the last meetings of the central banks of Australia, the United States, the euro area and Poland, will be published on Tuesday, February 18 at 01:30, on Wednesday, February 19 at 20:00, on Thursday, February 20 at 13:30 and 14:00. As a rule, investors look for confirmation in protocols of their assumptions about the future of monetary policy. It seems that currently, although the market expects monetary policy easing in most cases, interest rates may not change. Only hard economic data from the first quarter (if they will be much worse) could lead to new decisions.
From the perspective of data that may show the impact of coronavirus on the economy, it is worth paying attention to the PMIs, which will be published on Friday. The PMIs may show the initial situation in February in the production and services sectors. The market consensus already indicates a deterioration in the situation in Germany, the euro area or Great Britain, where the industrial sector in the second month of this year was to slow down, and PMI readings could fall below 50 points.
Not without significance for market sentiment, especially for the stock market, further actions or their announcements by the Chinese authorities may be important. Already at the beginning of the week, China once again supported its economy to counteract the effects of the virus outbreak. People's Bank of China (PBoC) reduced the interest rate on medium-term loans by 10 basis points to 3.15%. In turn, at the weekend the Chinese government spent 8 billion yuan to support local authorities, of which 3.5 billion yuan was allocated to the Hubei province, the epicenter of the virus, which at the beginning of the week supported the listing of shares in Asia and seems to lead to the records on European and American stock indices.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
60% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Trade this news from Conotoxia Ltd. platforms
Go to your account
