Investors look to China and U.S. after ECB fights deflation risk

Sun Jun 8, 2014 6:52am EDT
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By Martin Santa

BRUSSELS (Reuters) - This week's light calendar gives investors room to digest the European Central Bank's radical moves to avert deflation and look beyond U.S. data which, in more normal times, might imply higher interest rates.

Global markets will keep an eye on China's investment activity and industrial production, U.S. retail sales, the euro zone's Sentix sentiment index and industrial production as well as UK unemployment figures.

"After all the excitement of last week, the coming week will be much calmer," said Frederic Neum, co-head of Asian Economic Research at HSBC, referring to the ECB's radical plans to fend off deflation and U.S. data showing employment bouncing back to its pre-recession peak in May.

Despite the confirmation that the world's largest economy has bounced back from a winter chill, analysts do not expect the Federal Reserve to switch from pumping billions of dollars into the economy to raising interest rates until well into next year.

A major focus will be U.S. May retail sales on Thursday, expected to rise 0.6 percent on the month after slowing sharply to 0.1 percent in April from strong gains in the prior two months.

Friday's producer prices data for May, a proxy for consumer inflation, will shed some light on whether a second quarter acceleration in the U.S. economy is feeding inflation.

Analysts are looking to China's May industrial output measure, due on Friday, for some reassurance that the world's second largest economy is regaining momentum. The consensus forecast is for 8.8 percent growth on the year, up from 8.7 percent.

"China, after all, has been the engine of global growth for the past decade, and its recent sputtering has caused jitters among investors. Soothing data from China is just what investors need at the moment," Neum said.   Continued...

Investors look at computer screens showing stock information at a brokerage house in Shanghai, April 14, 2014. REUTERS/Aly Song