Macroeconomics: The Day Ahead for 2 May

As much of the world returns from the long May Day holiday weekend (though China is closed until Wednesday), there are the unexpected RBA 25 bps rate hike to digest, along with the run of Manufacturing PMIs, UK BRC Shop and Nationwide House Prices, German Retail Sales, South Korea and Indonesia CPI. Ahead lie Eurozone provisional CPI, US JOLTS Job Openings and Auto Sales. A further busy run of US corporate earnings features AMD, Cheniere Energy, Chesapeake Energy, Du Pont, Illinois Tool Works, Molson Coors and Starbucks amongst others. There is a sense of paralysis gripping markets given the focus on the Fed and ECB meetings, the unexpected RBA rate hike and the JPM acquisition of First Republic Bank, and the array of political tensions and a very foggy global economic outlook.

** Eurozone – April prov. CPI **

The consensus looks for a 0.7% m/m headline rise that would see the y/y rate unchanged at a lofty 6.9%, with the already published readings from Germany, France and Spain suggesting some downside risks relative to the consensus, with core CPI seen edging down to 5.6% from March’s cyclical high of 5.7%, which would be the first drop since June 2022. Overall it would confirm that while the pace of inflation has peaked, the path back to the ECB’s target of 2.0% (above all on core) is going to be slow and protracted, leaving the ECB with no choice other than to hike on Thursday, and again in June and July.

** World – Manufacturing PMIs **

China NBS PMIs at the weekend saw a sharp fall in Manufacturing (49.2 vs. March 51.9) and an even sharper one for Steel (45.0 vs. March 48.4); Services also lost momentum but still expanding robustly (56.4 vs. March 58.2), but only serving to add to disappointment at the pace of the post-Zero Covid re-opening. Asia’s PMIs were very mixed, with Japan, South Korea, Malaysia and Taiwan still contracting, by contrast Indonesia and the Philippines expanded at a modest pace, while Thailand saw a very sharp acceleration (60.4. vs. March 53.1). Euro area and UK PMIs are expected to echo yesterday’s US Manufacturing ISM (47.1 vs. expected 46.8 and March 46.3) and remain firmly entrenched in contraction, and per se only reinforcing recession concerns.

** U.S.A. – March JOLTS Job Openings, April Auto Sales **

A further fall in JOLTS Job Openings to 9.736 Mln, after a steep 632k decline to 9.931 Mln in February is expected. While this signals a clear easing in labour demand, it remains very high by any historical standards, and other anecdotal evidence suggests that the drop may find a trough near term, as skills shortages remain high in a number of sectors. As with so much in the post-Covid world, companies remain more concerned about staff retention and security of supply chains, even if they continue to contend with the cumulative impact of input costs increases. Auto Sales are expected to recover modestly to a 15.1 Mln pace from 14.82 Mln in March, with sector specialist reports in line with the consensus, and suggesting that while rising auto loan rates are a headwind, there remains a still strong level of pent-up demand after a protracted period of production being impaired by supply chain issues.

Week Ahead highlights: Fed and ECB meetings are the focal points, both seen hiking 25 bps, but signals on further moves in focus, no official forecast updates at either meetings. Financial conditions will obviously be a hot topic after JPM acquired failed First Republic Bank at the weekend. Brazil’s BCB and Malaysia’s BNM are seen holding rates at 13.75% and 2.75% respectively

Data: PMIs, US Auto Sales and Labour data (JOLTS, ADP, Jobless Claims, Payrolls), and German Orders and Trade.

Politics: US Debt Ceiling, UK local elections, UK and French strikes; Ukraine: a) major Russian spring offensive expected, b) Eastern EU countries blocking Ukraine exports highlighting fracturing of support earnings: 162 S&P 500 companies are expected to report quarterly earnings, and there are a raft of major companies reporting elsewhere: Anheuser-Busch InBev, AP Moller-Maersk, Apple, BMW, BNP Paribas, BP, Enel, Equinor, Ford, Kraft Heinz, Orsted, Shell, Uber Technologies, UniCredit & Volkswagen will be among the headline makers. Key emergent factor in Q1 earnings is companies differing emphasis in earnings reports between focus on mentions of input cost pressures, and pricing power. The latter is obviously a key factor in inflation outlook.

Earnings highlights for the week worldwide according to Bloomberg News: Adidas, AMD, Airbus, Allstate, Alnylam Pharmaceuticals, Ambev, American Electric Power, American International Group, AmerisourceBergen, Ametek, Anheuser-Busch InBev, Ansys, ANZ Group, AP Moller-Maersk, Apple, Aptiv, Arista Networks, Asian Paints, Atlassian, Banco Bradesco, Barrick Gold, BMW, BCE, Becton Dickinson, Block, BNP Paribas, Booking, BP, CaixaBank, Cheniere Energy, Cigna Group, Cognizant Technology Solutions, ConocoPhillips, Corteva, Cummins, CVS Health, DBS Group, Deutsche Post, Diamondback Energy, Dominion Energy, DuPont de Nemours, Eaton, Ecolab, Edison International, Emerson Electric, Emirates Telecommunications Group, Enbridge, Enel, Energy Transfer, Enterprise Products Partners, EOG Resources, Equinix, Equinor, Estee Lauder, Eversource Energy, Exelon, Ferrari, Ford Motor, Fortinet, Franco-Nevada, Global Payments, Henkel, Horizon Therapeutics, HSBC Holdings, Idexx Laboratories, Illinois Tool Works, Infineon Technologies, Intercontinental Exchange, Intesa Sanpaolo, Japan Tobacco, Johnson Controls International, Kotak Mahindra Bank, Kraft Heinz, Lloyds Banking Group, Loblaw, Macquarie Group, Marathon Petroleum, Marriott International, MetLife, Mettler-Toledo International, Microchip Technology, Mitsui, Moderna, Motorola Solutions, MPLX, National Australia Bank, Novo Nordisk, NXP Semiconductors, On Semiconductor, Oneok, Orsted, Pfizer, PG&E, Phillips 66, Porsche, Prudential Financial, Public Service Enterprise Group, Public Storage, Qualcomm, Realty Income, Regeneron Pharmaceuticals, Restaurant Brands International, SBA Communications, Sempra Energy, Shell, Shopify, Simon Property Group, Starbucks, Stryker, Swiss Re, Swisscom, Sysco, T. Rowe Price Group, Thomson Reuters, Titan, Trane Technologies, Uber Technologies, UniCredit, Uniper, Verisk Analytics, Vertex Pharmaceuticals, Vici Properties, Volkswagen, Warner Bros Discovery, WEC Energy Group, Welltower, Williams, Yum China, Yum! Brands, Zimmer Biomet, Zoetis.