Written Commentary
ADM Corporate Sustainability Report 2023
May 16, 2024
- Fed aftermath, Manufacturing PMIs, OECD forecast update Korean CPI, Australia Trade to digest ahead of US Challenger Job Cuts, Q1 Non-farm Productivity, weekly jobless claims and Factory Orders; UK local elections; Apple the headliner on busy run of corporate earnings, France to auction longer dated debt
- Fed confirms pushback on rate cut timeline, but puts very high bar on rate hike; easier labour market and slower growth as important as resumption of lower inflation to rate cut timing
- Manufacturing PMIs: India aside, likely to offer little sign of substantive recovery, despite patchy improvement
EVENTS PREVIEW
As the dust settles after the FOMC meeting, and many countries re-eopen after the May Day holiday, there is a busy run of data, headlined by Manufacturing PMIs, and a rash of corporate earnings, with UK local elections and the updated OECD Economic Outlook the highlights of the events calendar. Outside of those Manufacturing PMIs, there are South Korean and Swiss CPI & Australian Trade to digest, with Challenger Job Cuts, US Non-farm Productivity, weekly Jobless Claims and Factory Orders accompanied by US and Canadian Trade ahead. Apple heads the run of corporate earnings, which will also likely have the following among the headline makers: Sumitomo Corp, AP Moeller-Maersk, CNH Industrial, ING, Novo Nordisk, Orsted, Shell, and across the pond Cigna, Conoco Phillips, Linde, Pioneer Natural Resources, US Steel and Canada Natural Resources. France will also be auctioning EUR 12.0 Bln of multi maturity longer-dated debt.
** U.S.A. – FOMC post mortem **
– The Fed did not make as hawkish a pivot as some had feared and was very careful not to leave itself hostage to fortune via its ‘guidance’, tweaking its language on risks to achieving its dual mandate on inflation and employment, saying they “have moved toward better balance over the past year” as against ” “moving into better balance” previously. While Powell put an extremely high bar to a further rate hike saying it was ‘unlikely’, he dropped the prior reference to rates being cut “at some point this year”, and noted 2Readings on inflation have come in above expectations. It is likely that gaining such greater confidence will take longer than previously expected.” As such, there was an element of ‘cold comfort’ to the messaging, even if the reduction in the pace of its US Treasury QT to $25 bln from $60 bln as of June does take away some pressure. But with the statement again noting ‘that economic activity has continued to expand at a solid pace. Job gains have remained strong, and the unemployment rate has remained low’ and that ‘In recent months, there has been a lack of further progress toward the Committee’s 2 percent inflation objective’, it will be a case of inflation not only needing to resume its downtrend, but also some easing of labour market conditions, and a slowdown in Final Domestic Demand GDP to green light an initial rate cut. As we have been at pains to suggest, the US economy simply does not need a rate cut at the current juncture.
** World – April Manufacturing PMIs **
– With the flash G7, China NBS and final UK and US Manufacturing PMIs proving to be at best tepid, the focus turns to the rest of the world, which outside of India’s powerhouse, will likely echo what has already been seen, i.e. some improvement in the most beleaguered manufacturing sectors such as France and Germany, but little sign of a meaningful upturn.
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