Macroeconomics: The Day Ahead for 8 April

It is day 43 of the war in Ukraine, with no prospect of an easing of tensions or any diplomatic progress, let alone peace, with an intensification of the conflict in the Donbas and Kharkiv regions sadlt seemingly inevitable. There is also little sign that the latest lockdown measures are bringing down the infection rate in China, but markets have as ever decided that once the word ‘stimulus’ is in the house, then whatever disruption there is and will be to the local economy and international trade can be ridden over roughshod. The question that should arise whenever stimulus is mentioned is: but will it be effective and what will it achieve? Sadly it is generally drowned out by the screaming ‘buy the dip’, TINA and FOMO banshees, underlining the ugly truth about the financialization of so much of the global economy.

The day’s schedule of data and events covers a very broad church, though the agricultural commodity sector can probably claim top billing via way of the USDA’s World Agricultural Supply and Demand (WASDE) report, and its equivalent CASDE report from China’s Agriculture Ministry and the UN FAO World Food Price Index. There are some ECB speakers, but the central bank event schedule’s focal points are likely to the overnight RBA semi-annual Financial Stability Review, the expected 50 bps rate hike in Peru which continues to see a lot of social unrest and protests about inflation, and the expected no change in policy rates from India’s RBI, with Poland’s NBP set to publish the minutes of this week’s meeting that saw an unexpectedly aggressive 100 bps rate hike; Czechia’s CNB also releases minutes of its end March meeting. Talking of rate hikes, do take a looks at the attached Hedgeye/Bloomberg chart, highlighting the fact that for the first time in 40 years, the prior rate cycle peak for Fed Funds (2.50%) has not capped the upmove in US 10-yr yields (currently 2.66%). Statistically there are Japans’ Economy Watchers (services) survey and Norway’s monthly GDP to digested ahead of Taiwan CPI, Italian Retail Sales, Brazil inflation and Canada labour data, with CPI also due in Chile and Russia.

The weekend brings the first round of the French presidential election, where Macron’s narrower lead in the latest opinion polls, if realized, may yet galvanize the ‘anyone but Le Pen’ vote in the second round, though it would also sustain the wider 10-yr spread premium of OATs over Bunds for the next couple of weeks. A good many people are also highlighting that it has been more than 20 years since an incumbent French president has been re-elected, which perhaps speaks rather more to the inordinately poor leadership in that period rather than anything else, given that Hollande holds the record for being the most unpopular French president ever, and Sarkozy has since been convicted as a criminal.

  Next week’s Easter holiday shortened week has plenty packed into it, with the Bank of Canada expected to ratchet up its tightening cycle with a 50 bps hike to 1.0%, and the RBNZ to hike 25 bps to 1.25%. Meanwhile the ECB is expected to hold rates, but there is clearly going to have to be an admission that inflation is going to be much higher than they forecast even as recently as March, the question is whether there is as much emphasis on downside risk to growth and labour demand. Statistically, the US, China and the UK all publish March CPI and PPI data; the US also has Retail Sales and Industrial Production, China has Trade and Credit Aggregates, the UK has GDP, monthly activity indicators, labour data and BRC Retail Sales.