Written Commentary
Written by Marc Ostwald, ADMISI’s Global Strategist & Chief Economist
Digesting German Consumer & French Business Confidence, Thai Trade; awaiting Eurozone M3, UK CBI Retailing, US Initial Claims, final Q4 GDP & KC Fed Manufacturing; SNB, BSP, SARB & Banxico rate decisions; USDA Livestock reports; EU Summit, plethora of central bank speakers; Italy, Canada and US bond auctions
Oil proving a good proxy for fickle and fluid overall market sentiment
US jobless claims: initial claims seen edging back down, too many distortions to be good proxy for labour demand trends
WTI Oil future; US IG vs HY Average OAS Credit spreads; JPM EMBI average spread; Barclays Asia USD denominated HY spreads
EVENTS PREVIEW
A busy day is in prospect on all fronts. Statistically there are German GfK Consumer (sharp rebound but still below February levels) & French Business Confidence (big recovery in Services confidence) surveys, Thai and Hong Kong Trade to digest ahead of Eurozone M3, UK CBI Retailing survey, US weekly jobless claims, final Q4 GDP and the KC Fed Manufacturing survey. The SNB heads the run of central bank policy meetings with unchanged decisions also seen in Philippines, South Africa and Mexico, while another plethora of central speakers has Fed vice chair Clarida as its focal point. On the corporate earnings front China Mobile, CNOOC and En+ top the schedule, while the various USDA livestock related monthly and quarterly reports feature in commodity markets. Government bond supply has Italy selling a new 2023 CTZ and 9-yr I-L BTP, Canadian 9-yr and US 7-yr. Last but not least, EU leaders hold a summit to discuss (shambolic) efforts to combat the pandemic and support economies, and serves as a reminder that 9 months after agreeing the Recovery Fund, it still has not been properly ratified, let alone implemented. As observed at the time, without rapid implementation it was always going to be deficient, and so it is proving to be, with numerous ECB speakers bemoaning the lack of implementation, and latterly calling for an increase (Schnabel). The SNB is unsurprisingly expected to hold its policy rate, and should express some relief over a somewhat weaker CHF, though still affirming that it remains ‘highly valued’, and it stands ready to continue to intervene. Otherwise, oil market volatility remains elevated, and serves as a proxy for very fickle and fluid financial market sentiment in broader terms.
U.S.A. – Weekly Jobless Claims
Initial Claims continue to be highly erratic and per se a rather unreliable ‘real time’ proxy for labour demand, with suspensions of or changes to registration processes, public holidays and weather effects all distorting outcomes in recent weeks, with fraudulent claims also being thrown into the mix. Last week’s un expected jump to 770K is expected to be largely reversed with a fall to 730K, but still above that prior GFC record high of 665K. Logically easing of activity restrictions in many states should at some point drive a sharp drop to at least 500K, but this may well have to wait until late in April or May. Continued Claims are also expected to continue their rather snail’s pace like fall, with a drop to 4.0 Mln from 4.124 Mln. Q4 final GDP is as usual seen unrevised at 4.1%, though recent data revisions imply some risk of a small upward revision; but markets are focussed on Q1 and beyond, current NowCast estimates: NY Fed Q1 6.3%, Q2 1.2%, Atlanta Fed Q1 5.4%, St Louis Fed Q1 11.55%.
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