Economic consequences likely to be moderate

Economics
This week we expect US retail sales growth in December to recover following a weak November. Industrial production growth for December should also have picked up. German ZEW business sentiment should improve in January in line with lower oil prices.

The ECB will meet on Thursday and is expected to keep interest rates unchanged. Japanese machinery orders should have picked up in November and the current account surplus should have widened in line with the lower cost of oil imports.

Foreign exchange technical Euro/Dollar: The euro found support at 1.3150 and may now show an upward correction with 1.3300/1.3320 as first, and 1.3400 as next resistance levels. Dollar/Yen: Expect a further consolidation between 105.20 & 102.50. It would take a break above 105.20 to make the outlook more bullish to 107.20.

Fixed Income
This week's developments support our short stance on bonds and duration. The FOMC minutes were more hawkish than expected, with emphasis on inflation risks, asset prices and excessive risk taking. Economic momentum is also up in the US and Europe, as witnessed by leading indicators.

Including revisions, US employment figures were as expected. Fears of rising US rates and some profit taking triggered a widening of the EMBI+ spread, especially on LATAM spreads.

Equities
As expected, markets pulled back after the strong run we saw during the last few weeks of the year. Investors turned nervous due to the publication of the minutes of the 14 December FOMC meeting. Towards the end of the week, markets started to speculate on the upcoming US payroll figures that turned out to be roughly in line with expectations.

The reaction was very subdued, while European markets benefited slightly from a further rise of the dollar. We stick to our pull-back scenario, meaning that we are in a wait-and-see mode in order to start buying equities if the upward trend remains intact.