Transcript
Matt Jones
Welcome to "The Long & Short of the Week Ahead", a production of Eurizon SLJ Capital that takes a look at the macro-economic themes of the week ahead and has been recorded for professional investors.
My name is Matt, Head of Distribution for Eurizon SLJ Capital, and I'm joined by Neil Staines, Senior Portfolio Manager.
Welcome back, Neil. It's great to have you here with us again.
Neil Staines
Thank you very much Matt. It's great to be here.
Matt Jones
So it really has been a huge week for data. Exhausting to keep up with and exhausting for the markets, no doubt. What are your reflections or any sort of important inferences going into next week?
Neil Staines
Yeah, absolutely. A very busy week last week. Very action packed. The Fed, perhaps the most critical in essence. They pushed back against the market pricing of a March rate cut. But the overall narrative was in itself very dovish commentary on inflation, wages and labour market stress having eased over the period and the risks towards the goals having become more balanced an explicit dovish bias from the Fed and market movement in accordance.
The Bank of England were a bit more nerdy or academic in that sense, giving their inference towards policy bias on the basis of policy being bookmarked between the interest rate or inflation forecast conditions on market rates and conditioned on constant rates. The inference there being that it would take rate cuts to keep inflation at target over the forecast horizon, slightly more hawkish due to the fact that they are concerned about the energy price drag dropping out of the comparison and therefore pushing up inflation pressures throughout the period. But ultimately, if we think of the Fed as the beta and the Bank of England and the ECB as the alpha.
The whole pack is turning more dovish, if slightly less so on current iterations from the Bank of England and the ECB. In equities, it was an important week for Megacap Tech. And in the rates space, a more friendly quarterly refunding announcement, but with some emerging concerns about commercial real estate and regional bank funding, it was a good week for duration.
Matt Jones
Fantastic. And what about data? What are the prints next week?
Neil Staines
Absolutely. Yeah, we've got a number of prints, although it is a week that kind of starts off with a flurry and kind of tails off a little bit. We have Eurozone Sentix, which is important for investor confidence across global markets at the moment.
It is a very important metric particularly in equity markets in the Asia region we get us ISM services, very important for the inflation growth trade off. And particular focus there will be in the employment component and prices paid. We get China CPI and PPI and that's into the Chinese New Year.
And that will be very important again. Starting to see the removal of deflation at the headline level in China is important for, from a demand perspective and may go towards correcting sentiment. In investment arenas and we also get a continuation of Q4 earnings and more focused or emphasis on the real economy in the U. S. as we move forward. The week starts off busy, as we say, but tails off in terms of activity nonetheless another important week for global macro markets.
Matt Jones
An important week indeed. Thank you for joining us once again and for outlining your thoughts on the week ahead. I look forward to catching up with you again next week.
Neil Staines
Thanks very much, Matt. It's been a pleasure.
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