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 After reassuring European growth on Friday and weak U.S. retail
sales on Thursday, major data will be in short supply.
Moreover in the United States, where the impact of severe weather is
still being determined, the Presidents Day holiday on Monday will
shorten the working week.
The stand-out indicator may prove to be the flash Markit/HSBC
Purchasing Managers' Index (PMI) for China, with the February number
due for release on Thursday.
Last month's report showed activity in China's factories contracted
in January for the first time in six months, suggesting a slowdown
at the end of 2013 had continued into the new year.
The index sent a chill through growth-sensitive markets in Asia,
depressing shares, commodities and the Australian dollar. China is
the biggest export market of resource-rich Australia.
"If we get an intensification of China slowdown fears through these
PMI numbers then that could set another unsettling tone to market
sentiment," said James Knightley, senior economist at ING.
Economists are expecting another reading below the 50-level which
denotes falling activity, although the survey covers the period of
the lunar New Year holiday, meaning it may offer a less reliable
view.
"If we do get another sub-50 reading you will see more stories about
the China slowdown coming through. That may in itself lead to more
concern about the prospects for global growth and emerging market
activity in general," Knightley said.
Conversely, purchasing manager indices for the euro zone for both
manufacturing and services, also due on Thursday, are seen stable to
slightly higher.
They could provide a first indicator of whether an emerging market
slowdown is weighing on Europe. January's survey showed the private
sector in the single currency bloc started the year in much better
shape than expected.
However, that survey was mainly conducted before currencies from the
rand to the rouble tumbled on concerns about reduced growth and a
shrinking of cheap money due to U.S. monetary tightening.
Germany's ZEW index of analyst and investor sentiment, due on
Tuesday, should also add to picture. It is seen remaining at its
highest level in nearly eight years.
FED VIEW ON FROZEN ECONOMY
In the United States, indicators are proving hard to interpret with
large swathes of the country gripped by the polar vortex or the
latest dump of fresh snow late on Thursday that wreaked havoc from
Georgia to Maine.
Housing starts and existing home sales data due next week are likely
to be no exception.
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Are poor numbers a real sign of weakening demand or purely a product
of the bad weather?
It is a key question for the Federal Reserve as it reduces its
monthly purchases of Treasuries and mortgage-backed securities.
Janet Yellen, newly installed at the helm of the Fed, said last
Tuesday that the central bank was on track to keep reducing stimulus
even though the labor market recovery was far from complete.
Markets received a jolt last month with data showing U.S. employers
hired the fewest number of workers in almost three years in
December, while hiring in January was also muted.
The December numbers were likely central to the Fed's deliberations
at its last meeting at the end of January. Minutes to that meeting
are due to be released on Wednesday and should show how solid
sentiment was within the committee behind tapering monthly bond
purchases.
"My sense is that they may well look through the weak job numbers
and remain optimistic," said Laura Rosner, economist at BNP Paribas.
One set of figures relatively immune to bad weather is inflation.
There have as yet been few signs of a broad pick-up of prices even
as the economy gathers steam.
U.S. consumer prices grew by 1.5 percent in December from a year
earlier, a rate seen inching up to 1.6 percent in January, although
core inflation, stripping out volatile energy and food components,
is seen easing to 1.6 from 1.7 percent.
The Fed targets 2 percent inflation, although it tracks a gauge that
tends to run a bit below CPI.
Persistently low inflation is expected to lead the Fed to hold
interest rates near zero for a long time, although some economists
believe higher home prices should gradually feed through into rents,
driving up the basket of prices by the year end.
(Additional reporting by Jason Lange in
Washington and Jonathan Standing in Beijing; editing by Toby Chopra)
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