We think that it’s still too early to say whether Friday’s price action was simply profit-taking ahead of the weekend, or the resumption of overall negative market sentiment.  We think the global backdrop remains conducive for risk, at least near-term.  China concerns are on the back burner, while markets are still skeptical about the prospects for Fed tightening.  Commodity prices are the potential spoilers to a resume risk rally, as oil ended last week on a sour note.

Country-specific risk remains alive and well, however.  Turkey in particular may be in focus, with markets likely to react badly to lack of central bank tightening this week.  Add in heightened political risk after the Ankara bombing.  Brazil offers the usual smorgasbord of horrible fundamentals and political risk, with inflation and fiscal data this week likely to remind markets of ongoing downgrade risk.  China might be a non-factor this week, with no data reports on the horizon.  As long as China’s FX and equity markets behave, global market sentiment should hold up. (from my colleague Dr. Win Thin)

Israeli central bank meets Monday and is expected to keep policy steady.  Deflation is persistent, but the bank so far has been reluctant to take unconventional measures.  At -0.6% y/y in January, CPI inflation is running well below the 1-3% target range.  Some analysts are starting to predict negative rates this year (at 0.10% since February 2015), but we think the central bank would first step up its FX intervention.  

Mexico reports December INEGI retail sales Monday, which are expected to rise 6.1% y/y vs. 5.7% in November.  It then reports mid-February CPI Wednesday, which is expected to rise 2.86% y/y vs. 2.48% in mid-January.  Q4 current account data will be reported Thursday.  Mexico reports January trade Friday.  The external accounts are in decent shape, but the recent fall-off in non-petroleum exports is worrisome and bears watching.