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The main data events Wednesday include the release of final German Q4 GDP figures at 0700GMT, followed by the French business climate indicator at 0745GMT. In the US the publication of new home sales at 1500GMT will be a focus.
German economy stagnates in Q4
Final German GDP is seen in line with the flash result showing a small uptick by 0.1% in Q4 on a quarterly basis, while annual growth was down 3.9%. Economic growth slowed markedly in the fourth quarter after Q3's strong rebound. The second wave of Covid-19 led to a tightening of restrictions including the closure of non-essential shops and hence to a decline in business activity. As a result, private consumption took the largest hit in Q4, while exports and construction investments helped to prevent a decline. Looking ahead, the first quarter of 2021 is likely to see another dip of economic growth as the lockdown has been prolonged until early March which weighs on business activity.
Source: Destatis
French business climate seen unchanged
February French business climate is expected to remain unchanged at January's level of 92, which is still far below the long-term average and the pre-pandemic level. While business climate in the manufacturing sector has improved in recent months, service and retail trade business climate indicators are fluctuating, reflecting the difficult environment with tight restrictions. Business climate in the manufacturing sector increased to 98 in January and markets expect the indicator to rise further to 99 in February, remaining just a touch below the long-term average (100). Other survey evidence suggests a downside risk with the IHS flash composite PMI falling to a three-month low in February.
US new home sales expected to edge higher
Sales of new single-family houses increased by 1.6% to 842,000 in December, up from 829,000 seen in November. On an annual basis, new home sales increased by 15.2%. Markets are looking for another increase of sales in January by 2.0% to 859,000 units of single-family houses. Sales of new houses rose significantly during the pandemic.
The events calendar throws up a busy schedule on Wednesday. The main speakers to follow include BOE's Andy Haldane, ECB's Elizabeth McCaul, Fed's Jerome Powell, Lael Brainard and Richard Clarida.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.