Week Ahead – All eyes on China’s GDP, UK CPI, Flash PMIs, and Earnings

US

The first few banks are delivering a strong start to earnings season, reigniting soft landing calls, while large parts of Wall Street remain confident that the economy is recession bound as expectations remain that banking turmoil will persist.  Fed rate cut bets for later in the year have steadily increased and that has kept the dollar under pressure.

Investors will pay close attention to see if the regional Fed survey’s show minor improvements, if a few key housing readings show signs of stabilizing, and if the flash PMIs show the manufacturing activity remains stuck in contraction territory and as the service sector continues to soften.

In addition to a plethora of Fed speak, investors will closely pay attention to the Fed’s Beige Book.  The Beige Book will be released on Wednesday, the last time it highlighted a resilient economy. Fed’s Bowman will talk about central bank digital currencies on Tuesday. On Wednesday, Fed’s Goolsbee and Williams speak. On Thursday, Fed’s Waller talks about financial innovation, Mester discusses the economic and policy outlook, Bowman attends a Fed Listens event and Bostics talks about economic conditions.  On Friday, Fed’s Cook will talk about economic research.

Earnings season heats up as we hear from the rest of the banks and larger parts of the economy.  Key earnings for the week include results from Abbott Laboratories, American Express, ASML Holding, AT&T, Bank of America, Bank of New York Mellon, Blackstone, Charles Schwab, China Telecom, CSX, Discover Financial Services, DR Horton, Heineken, IBM, J&J, Lockheed Martin, Morgan Stanley, Nasdaq, Netflix, Philip Morris International, Procter & Gamble, SAP, Schlumberger, Taiwan Semiconductor Manufacturing, Tesla, Travelers, Union Pacific, US Bancorp, and Volvo.

Eurozone

Next week has a few standout economic releases, several central bank speeches, and a handful of big earnings. The eurozone outlook has improved even as Germany still appears to be headed for a shallow recession.

The euro has been rallying against the dollar on expectations the ECB will deliver a lot more tightening than the Fed going forward.  Investors will pay close attention to ECB President Lagarde’s comments on Monday. Tuesday’s release of the German ZEW survey is expected to show expectations modestly improve while the current situation remains deeply in negative territory and nowhere near the 10-year average of about 5.  ECB’s Elderson speaks on Tuesday in New York. On Wednesday, we get the second reading of euro area inflation and hear from ECB’s Schnabel, ECB’s Lane  and ECB’s de Cos.  On Thursday, traders will dissect the ECB March meeting account for any hints about future rate hikes and look to see if Eurozone consumer confidence contains anything larger than a minor improvement. On Friday, the April flash PMI readings for the eurozone will closely be watched as they reflect some of the banking turmoil that has hit the region; they are expected to show manufacturing activity improved, while service sector activity softened.

Key earnings to watch include ASML, Heineken, Nokia, and SAP.

UK

The upcoming jobs and inflation report will most likely impact bets on how much more tightening the BOE will deliver. The jobs report might look mixed as it could show the unemployment rate holding steady at 3.7%, while wages start to come down.  The main event for the UK is the inflation report.  Last month had a rather shocking hot headline print of 10.4%, but that is expected to ease towards 9.8%.  Inflation is widely expected to ease going forward, but any hot readings could keep the pressure on the BOE remaining aggressive. The March retail sales reading is expected to disappoint given the pressure on incomes and the wettest March in over 40 years. The flash PMIs are also expected to show manufacturing activity improved, while service sector activity was mostly steady.

Russia

Western sanctions are having little impact on Russian oil exports as they rise above pre-Ukraine war levels.  Pressure from the West will likely intensify.  Economic data is limited to a PPI release and the weekly gold and forex reserve totals.

South Africa

Following a larger-than-expected rate rise at the end of last month, traders will pay close attention to see if inflation remains elevated.  The headline YoY reading is expected to tick lower from 7.0% to 6.9%, still well above the 3-6% inflation target range.  Retail sales will also be released.

Turkey

Turkey will hold an important election on May 14th. Voters will decide if they want to keep President Erdogan, who has been in power for over two decades, or vote for a change.  Traders might start paying closer attention to polling which some are showing an edge to the main opposition.

Switzerland

Another very quiet week which contains only Money Supply data on Friday.

China

China is in the spotlight this week.  It starts with the one-year policy rate, which should remain unchanged on Monday, paving the way for commercial banks to keep their prime lending rates steady later in the week.  The biggest release of the week is first quarter GDP as it should see a major recovery as the economy reopened from its COVID lockdowns.  China Q1 GDP is expected to accelerate from 2.9% to 4.5%.  In addition to GDP, traders will dissect industrial output, investment and retail sales data releases, all of which are expected to show improvements.

India

Wholesale prices in March are expected to decline from 3.85% to 1.60%, further adding support to disinflation trends and supporting the RBI’s case to keep rates on hold.

Australia

Australia will have multiple economic releases along with the release of the RBA minutes of the April policy meeting.  Household spending, Westpac leading index, and the preliminary PMI readings will be released.

New Zealand

New Zealand’s key release of the week will be first quarter inflation.  The Q1 release is expected to show quarterly pricing pressures eased from 1.4% to 1.3%, while prices from a year ago softened from 7.2% to 6.7%.

Japan

Japan inflation is expected to continue to come down, softening from 3.3% to 3.2%.  The BOJ anticipates core inflation to fall over the next 12 months towards the 1.6% level, which is below the 2.0% target.

Singapore

The April policy decision by the Monetary Authority of Singapore did not go as expected as policymakers kept monetary policy settings unchanged. The upcoming week contains the March non-oil domestic export Y/Y reading which is expected to weaken from -15.6% to -18.2%.

Markets

Energy (Oil and Gas)

Oil’s fourth weekly advance has been mostly relentless as the OPEC+ output cut has sent global oil markets to a very deep supply deficit. The risk of a couple million barrel deficit in the second half of the year should keep prices supported.

Over the weekend, the G7 climate ministers gather in Japan to discuss climate change and investments in natural gas supplies. Energy giants, Baker Hughes and Schlumberger will post earnings.  Energy traders will pay special attention to China’s major economic releases that include first quarter GDP, industrial production, fixed-asset investment, and retail sales.

Natural gas is still looking oversupplied and with summer cooling demand a few weeks away, prices could remain heavy a little while longer.

Gold

Gold’s attempt at record territory failed after both core retail sales readings declined less than expected and hawkish Fed comments raised the risk that the Fed could do more tightening beyond May and that rates might need to stay higher for longer.

Over the short-term, gold could remain very volatile in both directions here. The start of earnings season has been relatively upbeat for the outlook for and that has boosted soft landing calls. For inflation to be conquered, we will need to see economic pain and that should support the bullish case for gold.

Crypto

Bitcoin and Ethereum are breaking out here.  Bitcoin has recaptured the $30,000 level, a pivotal level that was an entry level for many institutional investors in 2021. Ethereum is above $2,100 after a successful Shanghai upgrade.  Ethereum is now fully Proof-of-Stake and this milestone did not trigger a sell the news type reaction.  The next driver for crypto will likely stem from a return of banking turmoil that emerges from bank earnings and whether we see any updates on regulation or actions by authorities.

Saturday, April 15

Economic Data/Events:

• China property prices
• First day of Group of Seven energy, climate and environment ministers meeting in Japan

Sunday, April 16

Economic Events:

• China was expected to impose a no-fly zone north of Taiwan. They have denied these reports.
• Orthodox Easter is celebrated in Ukraine, Russia, and Greece

Monday, April 17

Economic Data/Events:

• India wholesale prices
• Italy CPI
• New Zealand food prices
• Singapore trade
• BOE’s Cunliffe delivers keynote speech at Innovate Finance Global Summit
• Fed’s Barkin speaks before the Richmond Association for Business Economics.

Tuesday, April 18

Economic Data/Events:

• US housing starts
• Canada CPI
• China Q1 GDP Q/Q: 2.1%e v 0.0% prior; Y/Y: 3.8%e v 2.9% prior, retail sales, industrial production
• Germany ZEW survey expectations
• Italy trade
• Mexico international reserves
• New Zealand home sales
• UK jobless claims, unemployment
• Big Bank Earnings from Goldman Sachs and Bank of America
• RBA minutes of April policy meeting
• Norges Bank Deputy Governor Pal Longva speaks on digital currency at an event organized by Polyteknisk Forening.

Wednesday, April 19

Economic Data/Events:

• Fed’s Beige Book
• Canada housing starts
• Eurozone Final CPI, new car registrations
• Japan industrial production
• South Africa CPI, retail sales
• UK CPI
• ECB’s Schnabel lectures at Leibniz-Zentrum für Europäische Wirtschaftsforschung in Germany
• SNB Maechler speaks at Fund Experts Forum in Rueschlikon
• SNB Schlegel speaks at event in Winterthur.
• BOE’s Mann speaks about “the economics of climate change” near Boston
• ECB’s de Cos speaks at Bloomberg’s New Economy Gateway Europe

Thursday, April 20

Economic Data/Events:

• US initial jobless claims, existing home sales, index of leading economic indicators
• China loan prime rates
• Eurozone consumer confidence
• Japan tertiary index, trade
• New Zealand CPI
• Spain trade
• Taiwan export orders
• ECB Minutes on March policy meeting
• ECB’s Visco speaks in London at the Official Monetary and Financial Institutions Forum event.
• ECB’s Holzmann makes opening remarks at Schumpeter lecture in Vienna.
• Fed’s Waller speaks at event hosted by Global Interdependence Center in Sarasota, Florida.
• Fed’s Harker speaks on “monetary policy and housing” a University of Pennsylvania/Wharton School event.
• Fed’s Mester discusses the economic and policy outlook at University of Akron in Ohio.
• Fed’s Bostic discusses regional and national economic conditions at Eastern Florida State College.
• Fed’s Bowman and Logan participate in a “Fed Listens” event on the Permian Basin at Odessa College in Texas.

Friday, April 21

Economic Data/Events:

• Canada Canada retail sales
• European Flash PMIs: Eurozone, Germany, France, and UK
• Hong Kong CPI
• Japan CPI

Sovereign Rating Updates:

– Greece (S&P)

– Italy (S&P)

– Netherlands (S&P)

– United Kingdom (S&P)

– France (Moody’s)

– Ireland (Moody’s)

– United Kingdom (Moody’s)

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