LONDON, Nov 27 — With the Euro zone data clocking up strong gains … the latest, record IFO reading suggests strong confidence in more gains ahead. And globally, even Japan, has laid to rest some doubts over its recovery.
World First chief economist Jeremy Cook says: “At the beginning of the year everyone was worried about what would happen with trade as a result of the election of Donald Trump in the grand scheme of things.
“Nothing’s really happened there. And you know a rising tide has lifted all boats and Japan has been one to benefit.”
Japanese retail sales, inflation and manufacturing data this week will test that confidence. While China faces even bigger questions. Factory data on Friday — if lower than hoped — could unnerve investors … already rattled by a major shakeout in China’s bond market.
Cook says: “Yields on 10-year Chinese debt has risen by just over 10 per cent which is obviously a big big move since the end of since the end of September. The choking off of currency liquidity coming into some of the larger banks for example in China means that there is less demand for Chinese 10-year debt … this is something to be watched as the as far as Q4 comes to an end.”
Inflation data is shaping up as the latest litmus test for the euro zone. Flash numbers on Thursday may show it speeding up to 1.6 per cent from 1.4 previously.
And make even louder the calls from hawks among ECB policymakers who want stimulus reined in sooner, rather than later. Their boss Mario Draghi is unlikely to comply.
Cook says: “The ECB was obviously burnt as well back in 2011, was raising interest rates when it really wasn’t suitable to do so. Now they’re very, very scared about the taper tantrum in Europe … So no I don’t think the hawks will get their way on this, the doves will continue to keep options open.”
Others say wage pressures might tip that argument — amid record employment levels in euro zone powerhouse, Germany. Thursday is also the day for it to print its latest jobs numbers. — Reuter
Source: The Malay Mail Online