Igor Kutyaev/iStock via Getty Images
By EdMoya
The sell-off in the bond market has not eased into the long bank holiday weekend and traders will soon have to decide whether to sell and walk away in May. The upcoming The week is filled with another round of earnings, major economic data from China, a French debate and angry comment from finance ministers and central bankers at the IMF and World Bank spring meetings.
US
After a long weekend, Wall Street is ready to dive back into earnings season. The second week of earnings will provide a better picture of which companies are quick to pass on their higher costs. This week we’ll learn more about how confident airlines are about travel demand and how supply chain issues are impacting IBM, Tesla and Procter & Gamble.
Economic data releases for the week will focus on manufacturing activity, housing data and flash April PMI reads. The US economy remains on solid foundations, so expectations for a variety of economic data are likely to weaken.
Fed Speaks for the Week features appearances from Bullard, Evans, Daly and Chair Powell. With the Fed firmly committed to an aggressive start to tightening policy, traders will be looking for clues to see which members are becoming increasingly concerned about economic growth and whether this leads to less aggressive bets on Fed tightening later in the year could lead.
EU
A shortened week next week due to the long bank holiday weekend. The data consists primarily of Tier 2 and Tier 3 releases, with the exception of Friday’s flash PMIs. The final CPI data will be of interest on Thursday, but shock and awe are likely to come from the flash readings. And with the ECB taking its time to complete asset purchases and raise interest rates, it would take something big to rock the boat. We’ll be hearing from Christine Lagarde next Friday, but judging by the press conference it’s not one to look forward to.
However, the war in Ukraine remains the focus, with progress in negotiations appearing to have stalled. Commodity prices remain high as West considers more sanctions. Pressure to ban oil and gas will continue to mount as Russia commits more atrocities, but it will continue to face resistance, particularly from Germany, due to the domestic economic ramifications of such a move.
United Kingdom
Another shortened week for the UK with retail sales and PMIs to be the highlights next Friday. BoE Governor Bailey is due to speak on Thursday which will be interesting given the latest inflation data. Cooling down the hawkish rhetoric could be dropped shortly after its adoption.
Fines on Johnson and Sunak may have caused political instability a few months ago, but that doesn’t look like it now.
Russia
The invasion of Ukraine remains a focus for Russia, and the West continues to impose sanctions in response to the atrocities it is committing.
Central Bank President Elvira Nabiulina speaks in the Duma on Thursday. They have recently started scaling back their rate hikes as the currency stabilized.
South Africa
CPI inflation data on Wednesday is the only notable release next week. It remains at the top end of its 3-6% range as the SARB continues to hike rates to drag it lower.
Turkey
The CBRT kept interest rates on hold at 14% on Thursday while blaming everything but policy decisions for the rise in inflation to 61%. Monetary policy review continues. No major events or dates next week.
China
China is releasing a barrage of data in the coming week, but markets will be watching the evolving China’s Covid-19 situation as lockdowns in Shanghai drag on. That has held stocks back this week and an escalation will be a major headwind next week if it worsens.
With the economy slowing, markets are also expecting stimulus measures to finally appear. An RRR cut could happen as early as Friday or anytime next week. The next MLF is due tomorrow and we may see the 1 year rate trimmed. Otherwise, China announces its 1-year and 5-year interest rate decisions on Wednesday, and a 1-year cut could be a possibility. All of this will boost local equity markets in the short term.
China releases GDP, industrial production, retail sales and industrial capacity on Monday. All of this data carries downside risks and weak data will weigh on local stocks and potentially weaken the yuan. USD/CNY and USD/CNH are nearing medium-term resistance levels, a move higher above 6.4000 will signal more upcoming yuan losses.
India
The Reserve Bank of India laid the groundwork for monetary tightening this week, but buoyant global equity markets and a weaker US dollar late in the week protected equities and the INR from the downside. India is on vacation today and Friday this week.
India releases WPI on food, fuel and manufacturing on Monday. All have upside risks that could lead markets to price RBI’s tightening policy earlier. Expect headwinds for local stocks as the INR remains at the mercy of the US Dollar’s direction in international markets.
Instability in Pakistan following a change of government could negatively impact Indian asset markets.
Australia
Australia is on holiday on Monday and shares have been content to follow Wall Street’s direction while the AUD has remained steady on commodity prices and a slightly aggressive change in RBA language.
Australia releases retail sales on Thursday and PMIs on Friday. Both have downside risks that could weigh on local markets. Conversely, higher numbers would increase tightening pressure on the RBA.
General elections have been announced for May this week, but the likely change of government is yet to be factored into local markets.
New Zealand
New Zealand is closed on Monday. The NZD ends the week under pressure as the RBNZ hiked rates by 0.50% but left its final guidance unchanged. Tuesday’s services PMI and Thursday’s inflation pose upside risks and could trigger further selling in NZD as RBNZ is perceived to be increasingly lagging the inflation curve.
A sluggish housing market and soaring cost of living are putting political pressure on the New Zealand government and limiting gains in equities and the NZD.
Japan
USD/JPY remains very close to recent highs as the US-Japan interest rate differential remains elevated. Further upside in US yields next week could push USD/JPY close to 128.00. Stocks are following the US markets for now.
The only data this week is Tuesday’s inflation, which should be free of upside shocks, similar to the past 25 years.
Singapore
The MAS tightened monetary policy by re-centering the NEER band and increasing the appreciation slope. That brought SGD to the end of the week. Singapore releases non-oil exports on Monday and weak numbers will raise fears that the MAS is moving into a slowing economy, negatively impacting local stock markets.
markets
energy
Oil prices are slightly higher on Thursday after staging a strong recovery over the previous two days. The flirtation below $100 did not last long as the slight lifting of restrictions in China partially removed a key downside risk to prices. With the release of IEA reserves priced in, risks remain sharply skewed to the upside as OPEC remains committed to its key ally and unable to meet committed quotas anyway.
This could put Brent prices in the $100-$120 range for now, while WTI is closer to $95-$115. There’s no shortage of risk, however, and this remains an incredibly headline-driven market. The prospect of Finland and Sweden joining the NATO alliance is unlikely to ease tensions between Russia and the West, which could spill further into the oil market.
gold
It seems Gold won’t extend its winning streak to seven days before the long weekend. It is trading slightly lower on Thursday after facing resistance around $1,980. The yellow metal continues to show momentum which could indicate a run to $2,000 is imminent. At a time of such aggressive tightening, it’s unclear whether it’s fear of inflation, the economy or risk driving the move, perhaps all of the above. But there is currently no lack of demand.
Bitcoin
An encouraging recovery in bitcoin on Wednesday was short-lived, and the cryptocurrency was back in the red on Thursday. It appears to have been struggling for the middle of Monday’s sell-off, which could be seen as a bearish signal. I’m not sure I’m going to read too much into it, but it’s certainly lost any breakout momentum over the past few weeks. It continues to trade more broadly in its recovery channel for 2022 and recent price action suggests it could be headed for further movement towards the lows. That’s about 10% of the current price, and a break below it could be a very bearish move.
Monday, April 18th
Economic Data/Events:
- China quarterly GDP and March industrial production, retail sales and other key indicators
- Easter Monday: UK and most European financial markets are closed
- Spring meeting of the IMF and World Bank begins
- Bullard of the Fed speaks
- Spain trade
- Sale of existing homes in Canada, start of construction
- India wholesale prices
Tuesday, April 19th
Economic Data/Events:
- US housing begins
- G-20 finance ministers and central bankers meet at IMF-World Bank spring meetings
- Evans of the Fed speaks
- IMF publishes world economic outlook
- Japanese industrial production
- Mexico International Reserves
Wednesday, April 20th
Economic Data/Events:
- Selling Existing Homes in the USA
- The Fed’s Beige Book is published
- The Fed’s Daly and Evans speak at separate events
- French Presidential Debate
- CPI Canada
- CPI South Africa
- Japan trade
- Italy trade
- Interest rates for Chinese loans
- New car registrations in the euro zone, industrial production
- EIA Crude Oil Inventory Report
Thursday, April 21st
Economic Data/Events:
- US Initial Jobless Claims, Leading Index
- Eurozone CPI
- New Zealand CPI
- Fed Chair Powell and ECB Lagarde speak at an IMF event
- Consumer Confidence in the Eurozone
Friday, April 22nd
Economic Data/Events:
- US flash PMI readings
- European Flash PMIs: Eurozone, France, Germany, UK
- British Prime Minister Johnson visits India
- BOE’s Bailey speaks at the IMF panel
- Japan CPI
- Retail Sales in Canada
Country rating updates:
– United Kingdom (S&P)
– United Kingdom (Moody’s)
Original post
Editor’s note: The summary points for this article were selected by Seeking Alpha editors.
