Macroeconomics: The Week Ahead: 29 April – 03 May

The Week Ahead – Preview:

The new week brings a good deal of event risk with the FOMC meeting front and centre, above all the messaging on the rate outlook, and in statistical terms in the US there are the usual gamut of labour market indicators (JOLTS, ADP, Payrolls and Average Hourly Earnings along with Q1 ECI), Consumer Confidence, Auto Sales, ISM surveys and House Prices. China awaits NBS PMIs, while the Eurozone focuses on provisional April CPI and advance Q1 GDP prints, German Unemployment and French Consumer Spending, and the UK has Consumer Credit, Mortgage lending and BRC Shop Prices. Japan looks to Industrial Production, Retail Sales and Unemployment, and Canada has monthly GDP and Trade. In the commodity space, the focus will largely be on the run of agricultural, energy and metals / mining companies reporting earnings, as well as the UN FAO Food Price Index. A busy week in Europe for govt debt auctions sees sales from UK, EU, Germany, France and Italy. Another bumper week for corporate earnings worldwide is headlined by Amazon, Apple & Volkswagen3. Geopolitics remains an ever-present threat, even if market concerns eased somewhat over the past week, and the UK will also be watching the outcome of the various local elections on Thursday, above all as a gauge of just how badly the ruling Conservative party performs, and the implications for the timing of the general election. The mid-week May Day bank holiday in many countries will disrupt trading volumes, and it will also see Chinese markets closed from Wednesday through Friday, and there are also the Golden Week holidays in Japan.

U.S.A. – the primary question for the FOMC meeting is just how much of a hawkish pivot will the Fed make, given that Fed speakers have talked of progress on inflation having ‘stalled’, and the need to ‘recalibrate’ policy, in the wake of modestly higher than expected CPI and PCE prints. This is not a ‘dot plot’ or forecast update meeting, but Powell may hint at some members of the FOMC having adjusted their expectations to ‘higher for longer’, and perhaps even suggest that some see no rate cuts this year. At the extreme, though this would potentially unleash the sort of market instability / volatility which few if any on the FOMC would want to entertain, he could even hint at a further rate hike, if inflation were to pick up. There should also be further details on how and when the Fed will start tapering its quantitative tightening. The run of labour market indicators is expected to see JOLTS Job Openings ease back to 8.70 Mln from 8.756 Mln, but still indicative of a sideways trend, with the quit rate (last 1.36) still above its pre-pandemic average of 1.2, while the ADP Employment measure is seen barely changed at 180K, somewhat weaker than the expected 198K seen for Private Payrolls, with headline expected to slow to a still very lofty 250K (vs. March 303K). The Unemployment Rate is expected to be unchanged at 3.8%, while Average Hourly Earnings are forecast to be unchanged at 0.3% m/m, implying a 0.1 ppt dip in the y/y rate to 4.0%, still too high for Fed comfort. The FOMC will however be more sensitive to Tuesday’s Q1 Employment Cost Index that is forecast to pick up to 1.0% from 0.9%, paced above all by minimum wage rises (average 5.8%, median 3.7%), which hint at some upside risk to the consensus. Tuesday also sees Consumer Confidence, with forecasters looking for a modest slip to 104.0 from 104.7 in March 104.8 in February, a slight rise in gasoline prices, slower labour demand (according to the Beige Book and some rather overcooked media reporting on inflation impart some downside risks. The Manufacturing ISM will garner extra intention after the unexpected setbacks in both PMIs, though the consensus sees only a slight dip to 50.1 from 50.3, while Friday’s Services ISM is expected to inch up to 52.0 from 5.14. Auto Sales are expected to pick up fractionally to 1.798 Mln from March’s 1.781 Mln. Corelogic and FHFA House Prices, various regional Fed surveys and the Chicago PMI round off a busy week for US statistics.

Eurozone: Rising energy prices are expected to be the primary driver of an anticipated 0.6% m/m rise in Eurozone CPI, which would still leave the y/y rate unchanged 2.4%, but a gradual easing in Services inflation, in part due to base effects, is expected to see core inflation drop quite sharply to 2.6% y/y from 2.9%, per se reinforcing already entrenched expectations of a June ECB rate cut. Q1 advance GDP will also be published on Tuesday, with a marginal 0.1% q/q increase expected (vs. Q4 -0.1%), with Spain expected to be a key driver at 0.6%, while France and Italy are seen in line with the Eurozone reading, while German trails with a flat q/q reading (and an unchanged -0.2% y/y), and overall underlining that the Euro area economy continues to stagnate. Monday’s EC Confidence surveys are seen edging slightly higher, in line with the flash PMIs and the already reported pick up in Consumer Confidence. elsewhere in the EU, Swedish GDP is expected to pick up slightly to 0.2% q/q, while Czechia GDP is expected to hold at 0.4% q/q, and Hungary to rebound to 0.5% q/q after a prior flat q/q reading. German Unemployment is expected to edge up 8K, leaving the Unemployment Rate unchanged at 5.9%, while the very erratic German Retail Sales are forecast to rebound 1.5% m/m after sliding 1.7% m/m in February.

U.K.: BRC Shop Prices are forecast to be unchanged at 1.3%, while Mortgage Lending and Consumer Credit are seen up £1.5 Bln, holding the pace seen in February, with Mortgage Approvals expected to accelerate slightly to 61.5K, maintaining an improving trend as mortgage rates ease, but still well short of the longer term trend pace. The Lloyds Business Barometer and Nationwide House Prices are also due.

China: ahead of the three-day Labour Day holiday, China’s NBS PMIs are likely to reinforce views that the economy continues to struggle, with Manufacturing expected to drift back to 50.3 after a sharp than expected rebound in March to 50.8, and the Services PMI to ease to 52.2 after a similarly unexpected bounce to 52.0 from 51.4 in March.

Japan: After falls of -0.6% and -6.7% m/m, March Industrial Production is expected to bounce 3.5% m/m, but thanks to very adverse base effects, the y/y rate is set to decelerate sharply to -6.% vs. prior -3.9%. Retail Sales are by contrast expected to dip 0.2% m/m after jumping 1.7% m/m in February, the latter flattered by LNY tourist spending, and by contrast to continued weakness in domestic Household Spending. It remains to be seen whether the sharp rise in wage settlements provides a boost to the latter, which in turn may encourage the BoJ to be rather more hawkish than the very underwhelming signalling at last Friday’s policy meeting.

There are 175 S&P 500 companies reporting this week, worldwide highlights for the week as compiled by Bloomberg News are likely to include: 3M, Adidas, ADM, ADP, Aena SME, Aflac, Agricultural Bank of China, Air Products &Chemicals, Allstate, Amazon, American Electric Power, AIG, AMD, American Tower, Ametek, Amgen, Ansys, Apollo Global Management, Apple, Arch Capital Group, Ares Management, BBVA, Banco Bradesco, Banco Santander, Bank Mandiri Persero, Bank of China, Barrick Gold, BCE, Becton Dickinson, Beijing-Shanghai High Speed Railway, Block, Blue Owl Capital, Booking, BYD, CaixaBank, Cardinal Health, CBRE Group, CDW, Cencora, Cenovus Energy, CheniereEnergy, China Citic Bank, China Construction Bank, China Merchants Bank, China Petroleum & Chemical, China State Construction Engineering, China Yangtze Power, Church & Dwight, Cigna, Cloudflare, CMOC Group, Coal India, Coca-Cola, Cognizant Technology Solutions, Coinbase Global, ConocoPhillips, Consolidated Edison, Corning, Corteva, Credit Agricole, CRRC, Cummins, CVS Health, Daimler Truck Holding, DBS Group, Devon Energy, Diamondback Energy, Digital Realty Trust, Dominion Energy, DoorDash, DuPont de Nemours, Eaton, EBay, Ecolab, Edison International, Eli Lilly, Emirates Telecommunications, Enterprise Products Partners, EOG Resources, Estee Lauder, Exelon, Extra Space Storage, Fortinet, Foxconn Industrial Internet, Garmin, Gartner, GE HealthCare Technologies, Global Payments, Great-West Lifeco, Gree Electric Appliances Zhuhai, GSK, Haier Smart Home, Haleon, Hershey, Howmet Aerospace, HSBC, ICICI Bank, Idexx Laboratories, Illinois Tool Works, Indian Oil, Industrial & Commercial Bank of China (ICBC), ING Groep, Ingersoll Rand, ICE, Intesa Sanpaolo, Iqvia, Johnson Controls International, KKR, Kraft Heinz, Legrand, Linde, Loblaw, Macquarie Group, Marathon Petroleum, Marriott International, Martin Marietta Materials, Marubeni, Mastercard, McDonald’s, Mercedes-Benz, MetLife, Midea Group, Mitsubishi, Mitsui & Co, Moderna, Mondelez International, Monolithic Power Systems, Moody’s, Motorola Solutions, MPLX, National Australia Bank, Novo Nordisk, Novonesis (Novozymes), NXP Semiconductors, On Semiconductor, Oneok, Paccar, Parker-Hannifin, PayPal, People’s Insurance Group of China, PetroChina, Pfizer, PICC Property & Casualty, Pioneer Natural Resources, Postal Savings Bank of China, Prudential Financial, Public Service Enterprise Group, Public Storage, Qualcomm, Quanta Services, Regeneron Pharmaceuticals, Republic Services, Restaurant Brands International, Samsung Electronics, Shanghai Pudong Development Bank, Shell, Southern, Starbucks, Stryker, Sumitomo Corp, Super Micro Computer, Swisscom, Sysco, Targa Resources, TC Energy, Thomson Reuters, Trane Technologies, UltraTech Cement, Universal Music Group, Verisk Analytics, Vestas Wind Systems, Vici Properties, Volkswagen, Vulcan Materials, WEC Energy Group, WEG, Welltower, Wuliangye Yibin, Xylem, Yum! Brands, Zoetis.