Macroeconomics: The Week Ahead: 24 to 28 April

The Week Ahead – Preview:

The new week’s schedule has a lot of major data, including advance Q1 GDP readings for the US, South Korea, Taiwan and many EU countries, which also have provisional April CPI readings for April, as well as a raft of surveys including Germany’s Ifo and GfK. The US will also look to Personal Income/PCE, Durable Goods Orders, Consumer Confidence, House Prices, Goods Trade Balance, Pending Home Sales and more regional Fed surveys, with Australia looking to monthly and quarterly CPI, and Canada to monthly GDP. While Japan has its usual end of month Tokyo CPI, Industrial Production and Retail Sales, all eyes will be on the BoJ policy meeting which concludes on Friday. The Fed is in ‘purdah’ ahead of next week’s FOMC meeting, but there will be plenty of ECB and BoE speakers, while the Bank of Canada publishes its April policy meeting minutes. A veritable deluge of corporate earnings awaits, with 178 S&P 500 companies reporting, and many major companies reporting in Europe, China, India, Japan and South Korea.

In the commodity space, there are a raft of earnings in the energy and mining sectors, and to a lesser extent Agri-Food, along with a host of major conferences: Commodity Trading Week in London (see you there if you are going!), Maritime Week and Argus Biofuels in Singapore, SMM International Copper Summit in China, and the Bloomberg BNEF and Green Summit in the US. StatsCan publishes its seeded area report for grains, the EU its MARS crop conditions report, and Brazil’s CONAB and Unica issue monthly sugar and ethanol production data. Govt bond issuance is plentiful with the US, Germany, Italy, Belgium, Canada and Japan all holding auctions, and the EU scheduled to hold a syndicated sale. Politically, the UK government is starting to look very fragile and mired in sleaze, while the US debt ceiling continues to play on investors’ minds, and tensions between US/EU and China/Russia remain extraordinarily high, and only add to the high degree of uncertainty about the economic outlook.

The US headlines the run of advance Q1 GDP reports this week, which will likely underline the point that while the previously much feared recessionary forces have not materialized, growth has nevertheless been sluggish. US GDP is seen up a solid 2.0% SAAR (or 0.5% q/q), with Private Consumption (exp. 4.0% SAAR) the primary driver. However the latter was primarily a function of unseasonably warm weather and associated seasonal adjustment problems, with Net Exports and Govt spending also likely to give a boost, while business investment, inventories and housing are likely to drag (though housing will be a much smaller one than in 2022). Eurozone GDP and many national GDP readings, including France and Germany, are seen up 0.2% q/q, though Sweden’s economy is expected to have flatlined, while South Korea is expected to have skirted recession with a 0.3% q/q rebound after contracting -0.4% in Q4 2022. The data is in any case quite historical, with markets much focussed on more real-time and high frequency indicators to try and get a less foggy picture on outlooks for major economies, and by extension the proximity of respective peaks in central bank policy rates.

Per se, this week’s provisional CPI data from Germany, France and Spain, along with the US March PCE deflators, Japan Tokyo CPI and Australian monthly CPI may have rather more influence on market sentiment. As ever, energy price base effects and changes to utility and gasoline subsidies will again result in quite sharp differences in m/m rates in Germany (exp. 0.8%), France (exp. 0.4%) and Spain (exp. 0.4%) HICP, but y/y rates in Germany (7.8%) and France (6.7%) are seen unchanged, and Spain is expected to rebound from 3.1% to 3.9%. Given that services will remain very sticky and Food Prices continue to see upward pressure from input costs, the data will likely reinforce expectations of a further 50 bps hike at the May ECB council meeting. Over in the US, PCE deflators are expected to echo CPI with a 0.1% m/m on headline expected to result in a further sharp y/y drop to 4.1% from February’s 5.0%, but core is seen up 0.3% m/m, with headline only edging down 0.1 ppt to 4.5%, still uncomfortably high for the Fed, above all the fact that it is only easing at a very modest pace. Coming literally hours ahead of the BoJ rate decision, Tokyo CPI is seen unchanged at 3.3% y/y headline and 3.2% y/y ex-Fresh Food, but core is forecast to edge up to a new high of 3.5%, making uncomfortable reading for Ueda & Co, with Industrial Production and Retail Sales both forecast to post moderate m/m gains after strong readings in February. Australian March CPI is forecast to have dipped modestly in y/y terms to 6.6% from 6.8%, and Q1 headline and core q/q readings to ease, though remaining very elevated at 1.3%/1.4%.

Outside of those major statistical items, US Consumer Confidence is seen little changed, though some loosening in labour market conditions suggest some downside risks, even if the PMIs showed some resilience. Aircraft Orders are expected to boost headline Durable Goods (exp. 0.7%), but core Non-Defence Capital Goods ex-Aircraft are seen falling marginally for a second month, while House Prices are expected to drop again m/m, taking the CoreLogic measure just into negative territory. After very divergent NY and Philly Fed readings, there will be perhaps more interest in the Dallas, Richmond and KC Fed surveys, and the Chicago PMI to try and get a better picture of national trends.

On the central bank front, new BoJ governor Ueda has been at pains to signal that there will be no change in policy at this week’s meeting, but markets remain understandably very wary about any signals on a potential future shift from its ultra-accommodative policy stance, even more so after the March core CPI was higher than expected at 3.8%, and at its highest yr/yr level since 1981. Sweden’s Riksbank is expected to hike rates a further 50 bps, above all due to very high core inflation, and doubtless with a good deal of concern about the weakness of the SEK, with most commentators expecting a further 25 bps hike in June, with the focus on what guidance is offered in terms of the rate outlook. Elsewhere Turkey’s TCMB is expected to hold rates at 8.50%, above all with the TRY making fresh all-time lows, and head of the May elections. Rates are also seen on hold in Russia and Ukraine.

As noted 178 S&P 500 companies are expected to report quarterly earnings. Thus far EPS and revenue beats have been quite impressive, i.e. according to Factset 76% of S&P 500 companies have reported a positive EPS surprise and 63% of S&P 500 companies have reported a positive revenue surprise. The fact remains that Q1 2023 yr/yr earnings are expected to be -4.7%, and excluding the energy sector, the yr/yr earnings estimate is -6.1%, according to Refinitiv.

Highlights for the week worldwide according to Bloomberg News are likely to include the following: Earnings for the week: 3M, ABB, AbbVie, Aflac, Agnico Eagle Mines, Aier Eye Hospital Group, Align Technology, Alphabet, Altria, Amazon, America Movil, American Tower, American Water Works, Ameriprise Financial, Amgen, Amphenol, Aon, Arch Capital, ADM, Arthur J. Gallagher, Assa Abloy, Astellas Pharma, AstraZeneca, Atlas Copco, ADP, Axis Bank, Bajaj Finance, Bajaj Finserv, Banco Bilbao Vizcaya Argentaria, Banco Santander, Bank of Communications, Bank of Ningbo, Barclays, BASF, Beijing Kingsoft Office Software, Beijing-Shanghai High Speed Railway, Biogen, Boeing, Boston Scientific, Bristol-Myers Squibb, BYD, Cadence Design Systems, Canadian National Railway, Canadian Pacific Railway, Canon, Capital One Financial, Carrier Global, Caterpillar, Cellnex Telecom, Cenovus Energy, Centene, Charter Communications, Chevron, China Citic Bank, China Construction Bank, China Life Insurance, China Merchants Bank, China Overseas Land & Investment, China Pacific Insurance Group, China Petroleum & Chemical, China Shenhua Energy, China Tourism Group Duty Free, China Vanke, China Yangtze Power, Chipotle Mexican Grill, Chubb, Chugai Pharmaceutical, Citic Securities, CME Group, Coca-Cola, Colgate-Palmolive, Comcast, Corning, CoStar Group, CRRC, CSC Financial, Daiichi Sankyo, Danaher, Dassault Systemes, Delta Electronics, Denso, Deutsche Boerse, Dexcom, Digital Realty Trust, DNB Bank, Dow, DSV, Edwards Lifesciences, Eli Lilly, Eni, Enphase Energy, Evolution, Exxon Mobil, Fanuc, Fidelity National Information Services, Fiserv, Fomento Economico Mexicano, Foshan Haitian Flavouring & Food, Foxconn Industrial Internet, Fujitsu, GE HealthCare Technologies, General Dynamics, General Electric, General Motors, Gilead Sciences, Gree Electric Appliancesof Zhuhai, GSK, Haier Smart Home, Halliburton, Hershey, Hess, Hexagon, Hilton Worldwide, Hitachi, Honeywell International, Hong Kong Exchanges & Clearing, Humana, Iberdrola, ICICI Bank, Illumina, Imperial Oil, Industrial Bank, Inner Mongolia Yili Industrial Group, Intel, Iqvia Holdings, Jiangsu Yanghe Brewery, Keurig Dr Pepper, Keyence, Kimberly-Clark, KLA, Kone, Kuehne & Nagel International, Kweichow Moutai, L3Harris Technologies, LG Chem, Linde, LONGi Green Energy Technology, Luxshare Precision Industry, Luzhou Laojiao, LyondellBasell, Mastercard, McDonald’s, MediaTek, Mercedes-Benz Group, Merck, Meta Platforms, Microsoft, Midea Group, Mitsubishi Electric, Mobileye Global, Mondelez International, Moody’s, MSCI, Murata Manufacturing, Muyuan Foods, Nari Technology, NatWest Group, Neste, Newmont, NextEra Energy, Nidec, Nordea Bank, Norfolk Southern, Northrop Grumman, Novartis, O’Reilly Automotive, Old Dominion Freight Line, Orange, Oriental Land, Otis Worldwide, Paccar, People’s Insurance Group of China, PepsiCo, Ping An Bank, Ping An Insurance Group, Pioneer Natural Resources, Postal Savings Bank of China, Raytheon Technologies, Renesas Electronics, Republic Services, ResMed, Rockwell Automation, Rogers Communications, Roper Technologies, S&P Global, Samsung Biologics, Samsung SDI, Sanofi, Seagen, ServiceNow, SF Holding, Shaanxi Coal Industry, Shanxi Xinghuacun Fen Wine Factory, Shenzhen Inovance Technology, Shenzhen Mindray Bio-Medical Electronics, Sherwin-Williams, Shin-Etsu Chemical, SK Hynix, Sony, Southern, Spotify Technology, STMicroelectronics, TC Energy, TE Connectivity, Texas Instruments, Thermo Fisher Scientific, Tongwei, TotalEnergies, Tractor Supply, UBS Group, UltraTech Cement, United Overseas Bank, UPS, United Rentals, Universal Music, Vale, Valero Energy, Verizon Communications, Visa, Wal-Mart de Mexico, Waste Connections, Waste Management, WEG, West Pharmaceutical Services, Willis Towers Watson, Wuliangye Yibin, WuXi AppTec, WW Grainger, Xcel Energy, Yihai Kerry Arawana, Zijin Mining.