Italy's elections will set the tone for markets early this week, giving way to budgets later on. Here is your guide.
On Tuesday, markets expect the Conference Board’s Consumer Confidence Index to climb to 62.4 from 58.6 in January and two closely followed housing gauges to show that America’s housing stock gained further value in December. The S&P/Case-Shiller home price index is likely to have risen 6.6% from a year earlier. The Federal Housing Finance Agency’s national home price index probably rose 0.7% from November to December.
Economists surveyed by Dow Jones expect separate government data on new home sales – also scheduled for Tuesday – to show that sales were up 3% last month. The National Association of Realtors’ pending homes sales index – which will follow on Wednesday – is expected to show a 3% monthly uptick for January.
Wednesday will also bring durable goods orders data. Analysts surveyed by Bloomberg suspect that new orders fell 4.0% from December to January following the previous month’s 4.3% rise. Excluding transportation, orders probably rose 0.2%.
On Thursday, a second read of fourth quarter gross domestic product (GDP) is expected to show that the world’s largest economy eked out 0.5% quarterly growth during the final three months of 2012.
On Friday, the government’s latest personal incomes and outlays (spending) report is likely to show that incomes fell 2.3% from December to January. Consumer spending likely increased 0.2% over the same period.
In addition to this week’s data, markets will be listening closely to Federal Reserve Ben Bernanke’s semi-annual update to Congress this week and watching for progress on budget talks between Congressional Democrats and Republicans.
Italy’s election will dominate European markets on Monday. Italians began voting on Sunday in an election many fear could trigger a renewed euro crisis should no stable government emerge. Voting stations will remain open until 3pm local time (2pm GMT) on Monday. Exit polls are anticipated shortly thereafter and final results are expected by early Tuesday.
According to final pre-election polls published two weeks ago, the centre-left Democratic Party of Pier Luigi Bersani appears likely to win a narrow majority. But the alliance of the Freedom People Movement and Northern Alliance led by former Prime Minister Silvio Berlusconi may yet put in a strong showing.
The first gauge of market sentiment toward Italy will come at a bond sale scheduled for 10am GMT on Monday morning. Europe’s fourth largest economy will sell up to €4.25-billion in two-year zero coupon and inflation-linked bonds.
The yield on Italy’s benchmark 10-year bond sat at 4.44% on Friday. Traders expect that yields could fall to around 4% if Italians vote in a stable government capable of continuing planned economic reforms and debt management. If election results are inconclusive, yields could creep back up towards the 5% level.
Beyond Italy’s election, investors will turn their attention to March’s manufacturing purchasing managers’ index (PMI) readings for the 17-member eurozone and its two largest constituent economies – Germany and France – at the close of the week. Analysts expect all three forward-looking measures to remain unchanged with Germany the only one of three signalling expansion on Friday.
This week will be a busy one for Japan, Asia’s second largest economy. Officials will release January’s retail sales data on Wednesday, January’s industrial output and housing starts data on Thursday and last month’s consumer price index (CPI), employment and household spending data on Friday.
Economists surveyed by Markets News International forecast a 0.8% year-on-year drop in retail sales, the first decline in three months. Industrial output is expected to rise for the second consecutive month, by 1.5% from December. Housing starts likely rose 8.8%, year on year, their fifth straight gain.
National core CPI likely declined 0.2%, year on year, in January, the same rate of deflation observed in December. The country’s 4.2% unemployment rate probably remained unchanged. Household spending likely rose 0.3% from a year earlier. If the forecast proves accurate, January would mark the first rise in spending in two months.
Elsewhere in Asia, India’s finance minister, Palaniappan Chidambaram, will present the country’s annual budget to parliament on Thursday. Analysts will be paying particularly close attention to government’s plans to contain the country’s fiscal deficit at a targeted 4.8% of GDP in the 2013/14 financial year.
On Friday, investors will turn their attention to official manufacturing PMI readings from the China Federation of Logistics and Purchasing and National Bureau of Statistics. China’s official PMI is expected to rise from 50.4 in February to 50.9 in March, indicating a slight uptick in the pace of China’s economic recovery.
Mexico – Latin America’s number two economy – will release fourth quarter current account data on Monday. Markets expect the country’s current account deficit to have swelled to $4.2-billion in the fourth quarter from $3.7-billion in the third.
On Tuesday, Mexico will release last month’s trade figures. Analysts at 4CAST forecast a significant drop in the country’s trade deficit, from $962-million in December to $600-million in January.
On Tuesday, Brazil’s Getulio Vargas Foundation’s consumer confidence index is expected to slide from 117.9 to 116 and government data is likely to show that the country’s unemployment rate rose from 4.6% to 5.2%. Lending data is forecast to show that the personal loan default rate in Latin America’s largest economy remained unchanged at 7.9% in January.
On Friday, Brazil’s statistics agency will release fourth quarter and 2012 full year GDP figures and the country’s Trade Ministry will release February’s trade figures. The Bank of Mexico will report January’s overseas remittances figures.
Brazil’s central bank estimates that Brazil’s economy expanded by 1% in 2012 from a year earlier. Brazil’s trade deficit swelled to a record $4-billion in January – largely as a result of the delayed inclusion of oil imports made at the end of last year into January’s figures – but is expected to have narrowed to $1-billion last month.
Markets expect remittances figures in Mexico to show their seventh consecutive monthly decline. Consensus is that Mexicans living abroad sent $1.5-billion home in January, down from $1.7-billion sent in December.
Middle East and Africa
Namibia’s Finance Minister Saara Kuugongelwa-Amadhila, will table her government’s 2013/14 budget in Parliament on Tuesday. South Africa’s Finance Minister Pravin Gordhan will follow suit on Wednesday.
Namibia’s last two budgets have been expansionary in nature as Kuugongelwa-Amadhila sought to protect the country from the effects of economic difficulties beyond the small economy’s borders. But analysts expect this year’s budget to curtail spending.
Markets will be watching South Africa’s budget speech for more specificity on a number of key initiatives. Corporates, consumers and investors will be looking to Gordhan to provide funding details of the government’s ambitious National Development Plan, National Health Insurance initiative and plans for youth employment subsidies among other programmes.
Beyond Wednesday’s budget speech, economists and investors will be on the lookout for a number of data releases in South Africa – the continent’s largest economy – this week. Statistics South Africa (Stats SA) will release November’s tourism numbers and January’s liquidations figures on Monday and fourth quarter GDP figures on Tuesday. The South African Revenue Service will release January’s preliminary trade figures and the South African Reserve Bank will release January’s money supply and private sector credit extension data on Thursday.
Elsewhere on the continent this week, Morocco and Namibia will release their money supply data for January. Ghana will release December’s money supply along with January’s gross reserves figures and Zambia will release February’s consumer inflation figures. Namibia and Zambia’s central banks will also announce their interest rate decisions.
Matt Quigley writes the weekly economic preview for the Mail & Guardian Online. You can follow him on Twitter.