The threat of another US government shutdown, with temporary funding expiring on this Friday, February 15 and intensifying concerns surrounding Brexit will dominate the week ahead.
President Trump will not get the funding for his wall on the Mexican border, so will he start another shutdown or declare a national emergency?
He lost the long shutdown in December and January and can’t afford another standoff on this issue.
Tensions in the US and global markets will escalate – with the US dollar rising, US bond yields falling and gold and silver getting a kick along if there is no sign of a deal before Friday (Trump loves doing a last minute ’save’, but it looks like he will be forced to agree to another face-saving arrangement later this week that doesn’t give him what he wants.
And while that might ride things over there is an even bigger brawl approaching on the US debt ceiling which becomes a problem from mid-March and a real concern later in the year.
Trump and Congress will fight and argue over that and the US Treasury will cut outlays and borrowings to avoid using up the remaining liquidity and breaching the debt ceiling. That could go on for several months.
But eventually it will have to be tackled or the entire US government will shut – especially the defence department and Trump will not the responsibility for that – it would destroy his already shrinking re-election chances next year.
Republicans used the debt ceiling to attack President Obama and we can expect the Democrats to return fire, especially in the House of Representatives.
A national emergency call by Trump over the wall could complicate the debt ceiling issue and even see a quick resolution of that. You can run an emergency with no money.
Meanwhile, US Treasury Secretary Mnuchin and Trade Representative Lighthizer will be in Beijing for another round of trade talks, with the March 1 deadline for the talks likely to be extended until President’s Trump and Xi next meet.
On the data front in the US, the AMP’s Dr. Shane Oliver says we can expect core CPI inflation for January (Wednesday) to fall slightly to 2.1% year on year, December retail sales (Thursday) to show reasonable underlying growth and industrial production (Friday) to show a reasonable gain.
It will also be another busy weak in the US earnings reporting season for 65 S&P 500 companies down to report (See separate story).
Several Fed officials, including Cleveland Fed president Loretta Mester and Kansas City Fed president Esther George, are scheduled to speak during the week.
In Australia, the December earnings season kicks up into top gear (see separate story) with 40 ASX 200 companies expected to release interim or full-year figures. Watch especially for reports from Super Retail Group, JB Hi-Fi, AMP, Aurizon, Transurban and Domain Holdings.
The major economic releases this week are housing finance (tomorrow). The NAB business survey (also tomorrow) and the Westpac Melbourne Institute’s consumer confidence survey (Wednesday). All three are expected to remain soft to weak.
Overseas and the Chinese January data is expected to show a further fall in exports and imports on Thursday but it will again be influenced by the timing of the Lunar New year so we can expect a rise in exports and imports (and a fall in both in the February data this time next month).
Chinese consumer and producer price inflation data on Friday for January will be weak, though pork prices should be watched with swine flu sweeping through China’s pig herds.
In Europe, Brexit negotiations continue but data out this week on UK production and GDP (tonight) and especially retail sales on Friday will underline the country’s growing economic weakness.