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Confidence and substance

| Posted by: Paul Donovan | Tags: Paul Donovan

  • German ifo business confidence data comes out in the wake of stronger than expected Euro area business sentiment reported yesterday. Markets are minded to be cheerful when it comes to Euro area economic activity, and it would be churlish to deny them the opportunity - but sentiment data is not an especially solid foundation.
  • US durable goods orders are due, in an economy that is looking for the much anticipated revival in capital spending. There has been stronger investment in the US, it is just that firms have chosen to invest in labour capacity not capital capacity. With higher skilled labour costs rising, perhaps capital spending should pick up.
  • Higher labour costs have contributed to the higher inflation rate in the US (it does keep surprising on the upside). We may hear from Fed President Evans on that subject in remarks today - Fed speakers are seeming to assume that rates will rise this year, in spite of the pretence of data dependency around the decision.
  • With Brazil scaling back defence of the Real, emerging market currencies could be a market focus. The tired old arguments of currency wars may resurface - in spite of evidence that (for instance) Japanese exporters have only lost US market share in the wake of the 60% drop in the yen against the dollar.