Tuesday Focus Consumer Watch Europe Banks eyed in US

UK CPI
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.

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