The financial markets open the week with positive sentiments. Asian indices were generally higher with Nikkei closed up 294.88 pts, or 1.74%, at 17233.75. European indices are also gaining in initial trading with DAX up more than 1.5% while FTSE and CAC are up 0.6%. WTI crude oil is paring some of last week's gain and would providing have a test on 38.00 handle. Gold is also trading mildly lower, around 1250. The economic calendar is rather light today but traders would be kept busy with four central bank meetings scheduled for this week, including BoJ, FOMC, BoE and SNB. Released from Japan today, machine orders rose 15.0% mom in January versus expectation of 2.0% mom. Eurozone will release industrial production later today.
Over the weekend, China released a set of disappointing data for January. Industrial production grew 5.4% yoy in the combined January-February period, worse than consensus of 5.6% and 5.9% a month ago. Both external and domestic demand for heavy industrial output weakened during the period. Retail sales expanded 10.2%, compared with 11.1% in December last year and 10.8% expected by the market. Fixed asset investment rose 10.2% in January and February, accelerating from 10% in the 12 months through December 2015. However, such growth is way below the 13.9% growth recorded in January-February last year. looking into the details of the latest report, investment expanded 29.2% in the primary sector, 8.3% in the secondary sector, and 4.6% in tertiary sector.
We have a busy week ahead with the focus on the BoJ (Tuesday), FOMC (Wednesday), BoE (Thursday) and SNB (Thursday) meetings. Main focus in the FOMC meeting on Wednesday. Fed is widely expected to keep interest rate at 0.50%. Fed might sound a bit less cautious on economic outlook due to stabilization in the financial markets. Futures markets are pricing in 43% chance of a hike in June, up from around 33% in the previous week. The new economic projections as well as Fed chair Janet Yellen's press conference could trigger some adjustments in the pricing. In particular, the "dot plot" might show a more gradual path of interest rate normalization.
While there were some speculations on BoJ easing, governor Haruhiko Kuroda has repeatedly indicated that the central bank is done on easing for now. Hence, we'll expect BoJ to keep policies unchanged on Tuesday. BoE is also expected to keep its powder dry. Indeed, we do not see high chance of any move ahead of the June 23 referendum on whether Britain should remain in the European Union. Following the broader than expected measures announced by ECB last week, the market is closely awaiting reaction from SNB. Chairman Thomas Jordan noted last month that the central bank might reduce the exemption from negative deposit rates in order to curb appreciation of Swiss franc. SNB might shift the range of its 3-month LIBOR rate to -0.5% and -1.5% from the current -0.25% and -1.25%. However, as EUR/CHF is kept well in range, SNB might opt for standing pat instead.