Economic week ahead: SA waits on latest rates decision amid Ukraine tension
Central bank decisions in South Africa and Nigeria, key economic reports in the US, Europe and Asia and the evolving situation in Ukraine will keep economists and investors on their toes this week. Here is your guide to the meetings, data releases and other events likely to move markets over the days ahead.
Central bankers in Nigeria and South Africa – the continent's two largest economies – will announce their latest rates decisions on Tuesday and Thursday, respectively.
Tuesday's monetary policy committee meeting at the Central Bank of Nigeria (CBN) will be the first since President Goodluck Jonathan suspended CBN Governor Lamido Sanusi – a highly regard inflation fighter and outspoken critic of corruption – last month.
Most analysts expect acting governor Sarah Alade and her colleagues to keep the central bank's benchmark interest rate on hold at its current 12% for the 15th consecutive month in a bid to curb liquidity and support Nigeria's local currency, the naira. But others say a rates hike is imminent.
A significant minority of analysts expect that continuing naira weakness and broader inflationary pressures will precipitate a rates hike in the near term. Economists at FBN Capital, Morgan Stanley, Renaissance Capital and Standard Bank are forecasting rates rises of between 50 and 200 basis points, for example.
South Africa's central bank surprised markets in January with a 50 basis point hike to its benchmark repurchase rate, the first in five years. Consensus is that further policy tightening is inevitable this year, but most economists expect the Reserve Bank's monetary policy committee to leave the repo rate unchanged at 5.5% this month.
Markets are pricing in an additional one and a half percentage point in rates hikes this year, but many say this is excessive. Reserve Bank governor Gill Marcus said earlier this month that forecasts for significant policy tightening were "overdone".
February's new home sales report is the first big release on the US data calendar this week. Analysts expect Tuesday's report to show that the seasonally adjusted annualised rate of new home purchases slowed to 440 000 units last month from 468 000 in January, which was the strongest rate since July 2008.
Also on Tuesday, the Conference Board's consumer confidence index – the first of two consumer barometers due out this week – is forecast to edge up to 78.4 this month from 78.1 in February. The Reuter's/University of Michigan's consumer sentiment index – which follows on Friday – is likely to edge up to 80.5 from 79.9 last month.
On Wednesday, the durable goods orders data for February – an indication of how busy factories will be in the coming months – may show that new orders rose by 1% last month following a 1% decline in January. Core orders, which exclude volatile transportation orders, probably rose by a more modest 0.3%.
A final reading of fourth-quarter gross domestic product (GDP) growth is due out on Thursday. Consensus is that the world's largest economy expanded at an annual rate of 2.7% in the final three months of 2013.
Finally, on Friday, attention will shift to this month's personal incomes and outlays (spending) report. Consumer spending accounts for more than two-thirds of the economy, so this release is always closely scrutinised. Consensus is that Americans' personal incomes rose by 0.2% from January to February and that spending increased by 0.3% over the same period.
Crimea will continue to cast a dark shadow over European markets this week. Analysts will be watching a series of purchasing managers' index (PMI) releases and corporate sentiment reports this week to see if the uncertain situation in Eastern Ukraine has begun to worry business leaders in Europe.
Markets will be on the lookout for PMI reports from Germany and France – Europe's two largest economies – as well as composite readings for the eurozone as a whole on Monday. The eurozone's composite PMI rose to a 32-month high last month, but may give back some ground this month. Although the index will undoubtedly continue to signal expansion, analysts will be watching closely to see if business pessimism is mounting in the face of growing political tensions in the region.
On Tuesday, attention will shift to business sentiment gauges from France's National Institute of Statistics and Economic Studies (INSEE) and Germany's Ifo Institute. INSEE's latest business confidence index is expected to hold steady, but Ifo's indices – particularly the institute's expectations component – may fall slightly as tensions with Russia increase.
Also on Tuesday, data in the United Kingdom is likely to show that inflation slowed further in January to 1.6% from a year earlier. If the consensus proves accurate, January would mark the second consecutive month in which consumer inflation ran well below the central bank's 2% target.
On Wednesday, US President Barack Obama – in Europe for a three-day summit of G7 leaders – will hold a joint press conference with European Council head Herman van Rompuy and European Commission chief José Manuel Barroso. The US and Europe have begun co-ordinating their response to Russia's invasion of Ukraine and markets will be watching for any signs of escalating pressure this week.
China's largest banks will take centre stage in Asia over the coming days. Collectively, the four institutions are expected to report their slowest profit growth since the global financial crisis of 2008. Analysts surveyed by Bloomberg forecast combined net income for 2013 of 791-billion yuan, an 11% increase on the year.
Agricultural Bank – China's third-largest lender – may report a 14% gain in annual profit on Tuesday, the strongest performance of the bunch. Bank of China, which will follow on Wednesday, is expected to post an 8.5% rise in earnings.
On Thursday, analysts surveyed by Bloomberg expect ICBC – China's largest bank by assets – to report that net income was up by 9.5% in 2013, allowing the lender to hold on to its title as the world's most profitable bank.
Finally, on March 30, China Construction Bank – the nation's number two lender – is likely to report year-on-year growth of 11%.
China's banks are facing significant headwinds. The world's second-largest economy is forecast to grow 7.4% this year, its slowest rate of expansion since 1990. Nonperforming loans have increased for nine consecutive quarters and concerns are mounting that a growing number of borrowers – particularly property developers – will default on their obligations in the coming months.
Making matters tougher for lenders, competition is to increase as China's government loosens interest rate controls – which bolstered profits at the country's largest lenders – and opens the industry to more private-sector lenders.
Elsewhere in the region, markets will be on the lookout for a slew of Japanese economic data at the end of the week. Officials will release last month's consumer inflation, retail sales and house spending figures on Friday.