Citi Wealth Insights

USD: US Markit PMIs show continued strength and rising prices - US Markit Manufacturing PMI declines modestly to 58.5 in the preliminary February release from 59.2 in January but shows input and output prices running at multi-year highs while the Markit Services PMI rises to 58.9.

EUR: ECB minutes concerned about EUR strength and the outlook - Minutes of the ECB’s monetary policy meeting on January 20-21 released overnight confirm there have been discussions about the importance of monitoring the recent increase in nominal risk-free rates and developments in the exchange rate.

USD: US retail sales strongly recover after seasonal weakness - after two months of declines, US retail sales roar back in January up 5.3%MoM (well-above consensus for 1.1%MoM and Citi's above-consensus 1.8%MoM) with the control-group up 6.0%MoM. On a year-on-year basis, total sales are up 7.4%YoY – the strongest since 2011 and the control-group is up a historically high 11.8%YoY.

AUD: RBA minutes from the February 2 meeting are largely optimistic with the Australian unemployment rate expected to decline to around 6% by the end of 2021 before reaching around 5.25% by mid-2023 but with inflation only approaching 2% by the end of the forecast period (mid 2023).

EUR: Euro area Covid underperformance worsening: German border controls raise growth risks –

Citi analysts adjusted their asset allocation to reflect the greatest potential beneficiaries of the ongoing recovery, while also managing risks to some of the best performing markets so far.