Nikkei extends rally

Indices overview

It was a mixed session in Asia-Pacific. The Nikkei 225 was once again the best performer as it posted an eighth straight session of gains and hit 36,000 points.

US stock and bond markets will be closed on Monday as the country celebrates Martin Luther King day.

China's central bank left the medium-term policy rate unchanged at 2.50%, as it wants to avoid further depreciation of the yuan. This means that Loan Prime Rates are unlikely to change next Monday. So far this year, the yuan has lost about 1% against the dollar.

German GDP

Later on Monday Germany will publish its full-year GDP growth. The world's fourth largest economy is expected to have shrunk 0.3% in 2023. Since the financial crisis 15 years ago, which saw the German economy shrink by 5.7% in 2008, the only contraction was in 2020, down 3.8% due Covid-19 pandemic.

The British pound will be under watch this week, as the market awaits economic indicators that could give further clues on the what the Bank of England (BoE) will do next. On Tuesday, the unemployment rate is forecast to rise to 4.3% in November. It will the first rise in five months. The index had remained at 4.2% since last August. It will be the highest rate since September 2021.

On Wednesday, CPI growth expected to slow to 3.8% in December year-on-year (YoY), from 3.9% the previous month. The index has been almost constantly declining since its 11.1% peak in October 2022. Core CPI growth is also forecast to fall to 4.9% YoY, the lowest level since January 2022.

And on Friday, retail sales are expected to fall by 0.5% in December month-on-month (MoM). This set of data will be closely watch by Andrew Bailey and his team who will decide on rates on Thursday 1 February.

US rate cuts

Potential US rate cuts to come remain the main driver of market sentiment. On Wednesday, retail sales, industrial production and to some extent housing data will provide further clues. Retail sales are forecast to rise by 0.3% in December MoM, at the same pace as the prior month.

Last month data suggested a relatively strong start of the holiday shopping season, with the biggest increase recorded in food services and drinking establishments, up 1.6%, and non-store retailers, up 1%. Industrial production is forecast to fall by 0.1% compared to the previous month.

As for the NAHB housing market index, it is expected to marginally rise to 38 for the month of January, from 37 in December. December which was the first month the index rose in five months.

Like Hays last week, PageGroup did see a deterioration in job flow through the fourth quarter. It said on Monday it saw its earner headcount decline by 17.3% since its peak in Q3 2022. PageGroup shares dropped last Tuesday in the wake of Hays' profit warning.

US earnings

This week is surprisingly a quiet one in terms of US earnings, even though JPMorgan, Bank of America and others kicked things off on Friday. A few big names are still scheduled to report this week, starting with Goldman Sachs tomorrow at lunch time. The investment bank is forecast to report earnings of $4.50 per share, which would be down on the $5.47 posted three months ago but substantially higher than the $3.32 from the same quarter a year ago.

Then on Wednesday, Alcoa will report after the US closing bell. The Street anticipates a loss of 81 cents per share, on revenue of $2.61 billion. 2023 was a tough year for the group, which only managed to publish one quarterly profit out of four. Sales haven't improved either, range-bound all year between $2.6Bln and $2.7Bln. Despite a slight rebound in the last three weeks of 2023, aluminium prices remained weak most of last year, mainly driven by concerns about the real estate market in China, which led to a slower demand from the construction sector.

Finally on Friday, SLB, formerly known as Schlumberger, reports. The market expects EPS of 84 cents, to be compared with 71 cents a year ago, and revenue just short of $9Bln, $1Bln higher than Q4 last year. One strength of the company is its international presence. The vast majority of its sales come from international contracts. In Q3 for example, its revenue outside the US amounted to $6.61Bln, up 12% YoY, compared to US revenue of $1.64Bln, up only 6%.