Tuesday Focus: Consumer Watch in Europe, Banks eyed in U.S.

UK Inflation is data on deck and the outlook is for declines.

UK Inflation is data on deck and the outlook is for declines. If weaker than the 3% rate expeced, this can be expected to pressure the pound, overstretched at 18 month highs. Elsewhere on the consumer front, the stream of retail updates continues. JD Sports' trading release brings better news than other major high street names, upgrading forecasts of full year profit.

Stock market fatigue
In global equities, the robust start to the year is showing signs of fatigue, though in Asia, top indices managed to erase intraday losses and stage yet another run to fresh records. MSCI Asia Pacific Index, which excludes Japan, rose another 0.5% but other important stock market contributors in the region hung back. Aussie shares slid, 0.5% as miners retreated. The latter sector move was down to iron ore prices in China showing renewed weakness. This also accounted for the UK's FTSE 100 underperforming Europe, whilst Germany's DAX ticked up 0.3%. In Japan the Nikkei 225 jumped 1%, touching its highest since 1991 on some relief that the yen's sudden acceleration last week petered out fast. Strong corporate earnings expected in the region were another reason.

Currencies: watch cable
In currencies, the euro budged up to $1.227, close to Monday's near one-month high at $1.2296. The single currency was reacting to Eurozone trade data surplus at the highest in 8 months, backing the view that a strong currency was having no negative pass through effects to business, yet. Naturally though, the long-running dollar-weakness story is also playing a part, though it took a breather vs. the yen, despite the Dollar Index looking stuck near three year lows. Japan Finance Minister may have played a part in the yen softening. He said he did not see problems with the dollar weakening to around 110.80 yen, but that big swings in currencies would be problematic.
The dollar's travails are also evident in sterling - the main watch for this morning, with inflation data due at 930. 3% print is forecast, down from a 3.1% rise year-on-year in November. Any lower will accelerate the pound's easing against the dollar. It was last at at $1.3783 from the early $1.38s on Monday.

Citigroup faces tax hit
On the earnings front, the next set of major U.S. banks are in the spotlight, with Citigroup releasing a fourth quarter report in the early afternoon and the impact of the new tax regime in strongest focus. Investors are expected to look past the negative short impact from revaluations following the tax changes so long as the group confirms it expects long-term advantages from lower taxes and also provided that there are no major upsets in other important businesses, particularly lending and trading.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.