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The Bank of Japan


Here are the week’s key events: 

Central banks get their first outing of the year with the Bank of Japan, European Central Bank and Bank of Canada all convening for monetary policy decisions. Earnings season hits full stride on Wall Street with Netflix and Tesla among the top companies to report. US inflation data rounds out a busy week for investors.



Keep your eyes on the yen ahead of the Bank of Japan decision due overnight into Tuesday morning. Japan's wholesale inflation was flat in December, slowing for the 12th consecutive month, easing pressure on the BoJ to act. But pay negotiations are key and ex BoJ official Maeda says a wage-price-spiral is already underway. He says a 4% gain in wages will pave the way for the central bank to raise rates and normalise policy. Another ex-official Sakurai has said the BoJ is ready to end negative rates by April. 



With the BoJ decision coming in the early hours, the market will keep focus on the yen. Elsewhere, investors will pay attention to the Richmond Fed manufacturing index and some New Zealand CPI inflation data. The major focus in the US session is earnings, particularly with a chunk of Dow components on tap: 3M, Johnson & Johnson, Verizon, Procter & Gamble and Visa. Netflix is also due to report its earnings after a strong recovery saw it deliver better-than-forecast profits in the prior quarter and 9m new subscribers – the strongest rise since 2020 when Covid hit – as its password crackdown bore fruit.  

Earnings: 3M (MMM), General Electric (GE), Johnson & Johnson (JNJ), Procter & Gamble (PG), Verizon Communications (VZ), Netflix (NFLX), Visa (V) 



Economic data comes thick and fast through the day with the latest round of flash PMI surveys. The outlook does not appear too encouraging. Germany’s economy shrank by 0.3% over the full-year 2023 and manufacturing activity has been notably weak – expect this to continue with the latest PMI report. In the UK, the manufacturing downturn deepened in December, whilst there was an uptick in services activity – more of the same could be on the cards. In the US, the recent New York Fed Empire State manufacturing index did not paint a terribly encouraging picture. Whether this translates to the wider national PMI is unclear, but the headline index fell twenty-nine points to -43.7, its lowest reading since May 2020. New orders and shipments also posted sharp declines. Unfilled orders continued to shrink significantly, and delivery times continued to shorten. Tesla reports earnings, whilst the Bank of Canada meets after inflation reaccelerated in December. 

Earnings: AT&T (T), Tesla (TSLA) 



The European Central Bank is the highlight and it’s all about the guidance for cuts this year. Last week several monetary policy ECB hawks delivered a clear message in concert. Nagel said "It's too early to talk about cuts, inflation is too high,” whilst Holzmann told CNBC: “I cannot imagine that we’ll talk about cuts yet, because we should not talk about it. Everything we have seen in recent weeks points in the opposite direction, so I may even foresee no cut at all this year.” However, president Lagarde followed this up by saying the ECB is likely to cut by the summer – though that’s still later than the spring pencilled in by markets. Late is the Tokyo core CPI inflation report, which should help further shape expectations in the wake of the BoJ. 

Earnings: Blackstone (BX), Intel Corp (INTC) 



US inflation is the big-ticket item, perhaps the last piece of evidence for the Federal Reserve ahead of its first meeting of 2024. The core PCE index is the Fed’s preferred gauge and has been trending lower recently. The core reading rose 3.2% in November and was up just 1.9% on a six-month basis. The headline reading fell 0.1% on the month to 2.6% annually. But CPI has risen, with this inflation gauge rising to 3.4% in December, whilst the core rate declined a touch to 3.9%, from 4.0% in November. So, inflation is coming down a little, but is it happening fast enough to justify the Fed cutting rates in March? 

Earnings: American Express (AXP) 

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