Macroeconomics: The Day Ahead for 19 April

A very quiet day in terms of data and events to start the week, with the better than expected overnight Japanese Trade data the only item of note, with Eurozone Current Account and Brazil’s monthly GDP also due, but both are rarely ever market movers. On the events schedule, the Boao Forum continues, while Canada has its annual Budget, with Coca Cola heading today’s modest run of US corporate earnings, and Brazil’s Vale kicking off this week’s of major mining companies’ Q1 production reports

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The new week is light on statistics from the US, China and Eurozone, though it does see the run of G7 flash PMIs, a busy run from the UK that includes CPI, labour data, Retail Sales and PSNB, while the US looks to Existing and New Home Sales, with Japan Trade, French Business Confidence, Canada & NZ CPI and Australia provisional Retail Sales also on tap. In central bank terms the Bank of Canada and ECB hold policy meetings, and in the EM space Russia’s Bank Rossi and Bank Indonesia, with a rather less onerous run of central bank speaker. Corporate earnings are plentiful above all in the US, where 79 S&P 500 companies will be reporting. On the political front China holds its annual Boao forum, while US president hosts a Climate Summit with some 40 world leaders, at which he will outline a more ambitious set of targets than those set in the Paris Climate Agreement. Tensions between NATO and SCO bloc countries are however escalating, most evident in the Ukraine, but more broadly by a seemingly endless of non-trade related (in causal terms) sanctions. The question of who will succeed Merkel as the CDU/CSU chancellor candidate at this year’s German Federal elections should also be resolved in the early part of the week, and send some initial signals about the post-Merkel political landscape, without resolving the question of whether an unprecedented three party coalition might be the only way to ensure a majority government after the election.

It will be something of a blockbuster week for the commodities space, beyond the Boao Forum and the Biden Climate summit, the IEA publishes its annual Energy Review, China holds its CASDE Agricultural Outlook and SMM Copper conferences and International Clean Energy Expo. There are also the Platts Agriculture week, a slew of USDA Livestock related reports, New Zealand’s Global Dairy Trade auction, Q1 production reports from Anglo American, BHP, Rio Tinto and Vale, while Baker Hughes, Haliburton and Schlumberger top the list of oil field services companies reporting earnings. It will also be a busy week for govt bond auctions in the Eurozone with supply from Germany, Finland, France and Spain, as the UK offers 3 & 14-yr and the US and Japan 20-yr.

In pandemic terms, the rapid pace of vaccinations in the UK and US, an accelerating pace in the EU after a badly botched start will likely be overshadowed by rising (most notably India) or still very high infection rates in many countries, as well as the concerns around the Astra Zeneca and Johnson & Johnson vaccines. Markets have seen a buoyant start to Q2, aided to some extent by the strength of the US economy, some more hopeful recovery signals in the UK and Eurozone, even if China’s recovery is clearly plateauing and the overall global growth is clearly very uneven; but the drop in volatility (likely to prove transient) and rising risk appetite has been above all paced by easing long-term bond yields, as some reflation trades have been wound back, or in some cases ‘stopped out’.

In terms of the run of statistics, the G7 flash PMIs will be the focal point, with Manufacturing expected to be buoyant across the board, though some of the strength is less of a positive, above all continued upward pressure on input prices, some accompanying spill over into output prices and above all lengthening supplier delivery times due to various bottlenecks. Services PMIs are forecast to remain very buoyant in the UK and US, but see a setback in the Eurozone as lockdown measures have been extended or tightened in a number of countries. The UK data are expected to see inflation rates pick up somewhat though some of this will be due to base effects, Retail Sales are also forecast to have been buoyant, but the focus is in how much of a boost will be evident in April and May as activity restrictions are lifted, while labour market indicators are seen little changed from prior month readings.

On the central bank front, the Bank of Canada is expected to announce that it will taper its govt bond purchases to a C$3.0 Bln weekly pace from C$4.0 Bln, while the ECB is seen holding policy rates and asset purchase volumes at unchanged levels, and doubtless continue to send a rather confused and bifurcated message on the policy outlook. Russia’s Bank Rossi is seen following up on last month’s larger than expected 50 bps rate hike with a further 25 bps hike to 4.75%, and emphasize rising inflation risks due to sanctions related weakness in the RUB, and the likelihood of further policy tightening. Bank Indonesia is seen holding rates at 3.50% with the economic recovery proving sluggish and inflation still very subdued.

On the earnings front, Bloomberg suggest that the following are likely to be among the highlights: Abbott Laboratories, Akzo Nobel, American Express, Anthem, Primark-owner Associated British Foods, Bank of Ningbo, chocolate maker Barry Callebaut, Biogen, Blackstone Group, Canadian Pacific Railway, China Shenhua Energy, China Tower, Chipotle, Coca-Cola, Credit Suisse, Daimler, Deutsche Boerse, Discover, Dow, homebuilder DR Horton, Great Wall Motor, Honeywell, Interactive Brokers, IBM, Intel, Kia, Kimberly-Clark, M3, Nasdaq, Netflix, NextEra Energy, Old Dominion Freight Line, Philip Morris, Ping An Bank, Prologis, elevator maker Schindler Holding, TAL Education, Travelers, Union Pacific, Valero Energy, Verizon and Volvo.