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Macroeconomic & Geopolitical

EU Outlook Brighter, but Watch the News in Rome

4 February 2021 - 3 min read

Expect answers next week on whether Italy can form a new government. Elsewhere, U.S. earnings are on track to show Q4 growth, illustrating that the recovery remained intact, and risks to China’s outlook have emerged with the resurgence in COVID cases.


Arrows indicate consensus forecast compared to the previous period. Local dates of release.


  • While consumer sentiment has remained near pandemic lows, preliminary data will give a sense of whether government support and vaccines are easing consumer worries.
  • The January consumer price index is expected to remain tame. While we could see a temporary rise in the coming months due to base effects, underlying inflation pressures should remain at bay, which will give the FOMC room to remain accommodative this year.


  • The European Commission’s forecasts will provide insight into Europe’s future, as the Commission has reviewed governments’ recovery spending and reform plans.
  • Next week should reveal if ex-ECB President Mario Draghi will lead the next Italian government. Risks loom large for EU markets. Success means peripheral bonds and stock markets will likely rally. Failure—a low probability—would bring shock and doubt over Italy’s use of the EU Recovery Fund to reform and accelerate growth.

Asia Pacific

  • China aggregate financing for January will be released next week. We expect credit growth will continue to ease and be calibrated to grow in line with nominal GDP growth. While the PBOC is committed to financial de-risking, the latest COVID resurgence could alter the pace of policy normalization.
  • Preliminary Japan machine tool orders for January will be released on Wednesday. As its economy continues to lag behind, we watch to see if external demand remains a source of strength.

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