Written Commentary
Busier day for statistics; digesting German and Singapore Q1 GDP revisions, UK PSNB, Thai Trade; awaiting German Ifo and US Consumer Confidence surveys, US House Prices and Richmond Fed; raft of central bank speakers, modest run of corporate earnings, Netherlands, UK and US to sell debt
Germany Q1 GDP: details highlight strength of CapEx, lockdown related slide in Private Consumption as inventory build offsets Trade drag
Germany Ifo expected to echo PMIs with further pick-up, expectations riding 3-yr high, but Current Situation still well off Feb 2020 level
US Consumer Confidence forecast to dip after seismic two-month surge; Labour differential and inflation expectations in focus
US House Prices seen jumping again, underlining increasing affordability headwind
EVENTS PREVIEW
A much busier day for statistics and events awaits, with the focus on the US via way of Consumer Confidence, House Prices and Richmond Fed surveys, there are final Q1 GDP readings from Singapore and Germany, UK PSNB & CBI Retailing survey and Thai Customs Trade data to digest. Ahead lie German Ifo Business Climate and Brazil’s IPAC-15 inflation. Central bankers will again be out in force with the focus on ECB’s Lane and Villeroy de Galhau, while benchmark policy rates are seen unchanged in Hungary (though it may signal a rate hike in June), Indonesia and Nigeria. The EU MARS monthly Crop Bulletin is also due. A modest run of corporate earnings will likely see Agilent Technologies, Nordstrom and Stellantis among the headline makers, while there are govt bond sales in Netherlands (16-yr), UK (18-yr I-L syndication) and US (2-yr). It is in passing worth bearing in mind that while month end is next Monday, the fact that this will be a holiday in the UK and US will likely bring related activity forward, yesterday’s flood of USD IG corporate bond issuance ($12.95 Bln) certainly appears to have been a consequence. But overall markets appear to be going through a period of indecision, on the one hand still very much dominated by financial repression and the ‘buy the dip’ mantra, on the other hand buffeted by politics and above all regulatory interventions, with China again threatening to lean against commodity price fluctuations overnight, resulting in bouts of sharp volatility that for the time being are proving to be transitory.
** German – Ifo Business Climate / Q1 GDP **
– Following on from the very robust Manufacturing PMI and a sharper than expected rise in the Services PMI, today’s Ifo Business Climate is seen posting another rise to 98.0 from 96.8, though the contrast between Expectations and Current Situation requires scrutiny. Expectations are seen rising to a 3-yr high of 101.0 from 99.5, while Current Situation is forecast at 95.5 from 94.1, leaving it still well below last February’s 98.7, and per se hinting that official data may prove to be less impressive, even if business optimism is clearly buoyant. The Q1 GDP revisions were rather more radical in the detail than the downward revision to the headline from -1.7% q/q to -1.8% q/q, above all a much stronger profile to CapEx at 0.3% q/q vs. expected -1.1% and the upward revision to Q4 to 2.5% q/q from 1.0%. However this was not enough to offset much weaker than expected Private Consumption -5.4% q/q vs. forecast -3.5% (Q4 revised to -2.3% from -3.3%), and a slight miss on Govt Spending at 0.2% q/q vs. forecast 0.4%.
** U.S.A. – Consumer Confidence and House Prices **
– After jumping a whopping 31.3 pts in 2 months to 121.40, led by a 50.0 pts rise in the Current Situation index, Consumer Confidence is expected to ease modestly to 118.9, with the Labour Differential (last 24.7 vs. prior 8.0) and 1-yr Inflation Expectations (last unchanged at 6.7) very much in focus. House Prices are on a steep uptrend in many countries, with low levels of inventories and headwinds from raw materials prices and labour costs as well as pandemic related shifts away from big cities all contributing factors in the US. A further sharp 1.3% m/m rise is expected for both the FHFA and Case Shiller measures, and underlining that affordability is increasingly a further headwind as was highlight by the 19.1% y/y rise in the Existing Home Sales price measure.
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ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
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