Traders’ Diary: Everything you need to get ready for the week ahead
Comparatively, it was a meek week for global financial markets. It’s quite nice when everybody pulls their heads in a bit.
Issues around the state of the Disunited States banking sector might’ve been allowed to simmer, but they’re still on the stove. How’s that for a way of saying this ain’t at all resolved yet?
Not yet cooked also is the US debt ceiling. Negotiations are progressing. The former President Trump weighed in during his godawful CNBC Town Hall thingy. He lied and obfuscated as per, but managed to throw a spanner in the works for House boss of the Republicans K. McCarthy by saying the Dems deserve to lead the nation into a default.
Actual US President Biden hosted a White House meeting with the House Speaker and other, more acutely insane Republican officials.
Talks between the policymakers are expected to keep going later this week which is something slightly positive.
The next few weeks will be painful, to be sure.
US shares were virtually flat (-0.1%) over the week, Australian shares were up slightly (+0.3%), Eurozone shares were down 0.7%. Japanese shares continued to track higher (+0.7%), back to its pre-Covid high.
Chinese stocks were 0.9% lower over the week. Bond yields were slightly lower over the week with the US 10-year at 3.89%.
The US dollar was up and the $A was down slightly to 0.67 US dollars. Most commodity prices fell over the week and the oil price is down to $74/barrel.
The Brits’ GDP numbers dropped as well. The UK economy grew by a stonking 0.1% in Q1, but to ease the pain, the Bank of England on Thursday decided it no longer expected London to walk into a recession this year.
The problem for the Poms is that services and retail action is slow, household incomes are tight and everyone still wants to strike about it.
Gold prices fell to below US$2,010 per ounce late last week, extending a decline from the not quite record of US$2,050 which began around May 6 on a stronger USD.
Still, a batch of new economic data underscored current trends of lower inflation and a slower labor market in the US, strengthening expectations that the Federal Reserve will pause its tightening cycle in its next meeting.
Producer inflation fell more than expected in April, backing hopes of subdued prices after a cooler-than-forecasted CPI print for the period. At the same time, weekly unemployment claims rose the most since October 2021, suggesting that higher borrowing costs are doing their bit.
The week ahead sees a packed economic calendar with key releases due from the US to mainland China, notably for both including industrial production and retail sales figures. The eurozone also updates Q1 GDP alongside inflation and industrial production figures, while the labor market report is out from the UK.
Central bankers in both the US and Europe will be gawked at relentlessly for comments on the economic and monetary policy outlook.
Attention is on US inflation data, and the US debt-ceiling discussions/hate fest.
According to the latest S&P Global Investment Manager Index, politics has emerged as a top concern for money managers in May, outweighing jitterbugs over monetary policy and the heinous macroeconomic implications for US equity markets
That said, while concerns over the US debt-ceiling linger into the coming week, there’s a series of economic data that will be worth watching, especially given the widening divergence between manufacturing output and services activity globally.
US and mainland China retail sales and industrial production provide official updates at the start of Q2.
The EU and Canada inflation data will tell a tale of services-led inflation, important as central bankers around the world mull the trajectory for monetary policy. The data follow softer consumer price index (CPI) and core CPI for April in the US.
April’s UK labor market report will be released next Tuesday, showing that the labor market had cooled, especially in London. Official numbers will be watched for implications following the Bank of England meeting this week, notably in relation to wage pressures.
Closere to home, China’s industrial production, retail sales, fixed investment, housing prices, and jobless rates for April will offer new updates on the health of Chinese economy.
Also, the PBoC will decide on its 1-year Medium Term Facility Rate.
In Japan, all eyes are on the first quarter GDP, which is set to show a slight expansion, while April inflation and trade data drops.
In Sydney, we’ve got the minutes of the RBA’s latest gathering, where they can just please explain that unwelcome 25bps rate hike.
Other key reports for us include jobs numbers.
Sources: S&P Global, Commsec, Trading Economics
RBA meeting minutes
Westpac Consumer Confidence Index
ABS Wage Price Index
Australia employment data: unemployment rate to hold at 3.5%.
US Empire state mfg index (May)
China industrial production (April)
UK employment data
German ZEW index (May)
Canada CPI (April)
US retail sales (April)
Japan GDP (Q1, preliminary)
US EIA crude oil inventories (w/e 12 May) WTI
US initial jobless claims (w/e 13 May)
US existing home sales (April)
US Fed talk Williams Speech
Japan CPI (April)