Stock markets across the Asia-Pacific region are mostly trading lower this morning ahead of looming policy decisions from a number of major central banks. Nevertheless, overall market risk sentiment has been broadly constructive since the start of the year, supported by evidence that inflation is on the way down and optimism that some of the downside risks to global growth prospects have subsided.
The business barometer survey for January was released overnight. It showed overall business confidence started the New Year on a positive note, rising for a second month in a row. Headline business confidence rose by 5 points to 22%, its first back-to-back increase since September 2021, taking it to the highest level for six months. It has made significant headway towards the long-term average of 28%. The upturn was again driven by a more optimistic assessment of the wider economy which has posted sizeable gains since November’s nadir. Firms’ own trading prospects were unchanged on the month but continued to outperform economic optimism, suggesting some resilience in the outlook for business activity in the face of economic headwinds. Year-ahead anticipated staffing levels edged higher, but the broad trend is still lower since the summer. Businesses’ pay growth and own pricing expectations eased but remain near highs. The latter fell for the first time in five months.
Ahead of a triptych of monetary policy updates from the US Federal Reserve, the European Central Bank (ECB) and the Bank of England (BoE) later in the week, today’s economic data slate is unlikely to garner much market attention. Ahead of tomorrow’s preliminary estimate of Q4 Eurozone GDP, today’s reading from Germany should attract some attention. Recent indicators suggest the Eurozone economy held up better than expected late last year and may have skirted a contraction in Q4. Germany is forecast to have registered flat growth in Q4, however, a stronger outturn would fuel expectations of a better outturn for the Eurozone as a whole. Spain will release preliminary CPI figures for January, with forecasts centred on a further softening in the annual rate – from 5.5% in December to 4.8% in January – supporting expectations that aggregate Eurozone inflation all softened further this month. A number of Eurozone confidence measures for January are due with broad improvements.
Meanwhile, overnight, Japan will release December labour market, industrial production and retail sales data. Elsewhere, China PMIs for January will be interesting to assess the impact of the shift from a zero-Covid policy to economic reopening.
The US dollar has started the week slightly firmer in response to investor caution about this week’s policy updates. GBP/USD has edged back below 1.24, while EUR/USD has eased back to around 1.0850.
