Volgende week: Notulen FOMC en NFP domineren economische agenda

Hoewel de aandacht aan het begin van de week gericht zal zijn op de Chinese PMI’s, zal de VS de economische agenda de eerste dagen domineren. Zo staan onder meer de ISM Manufacturing PMI, de notulen van de FOMS en cijfers over de salarisstroken van niet-agrarische bedrijven op de planning.

Chinese PMI’s 

Het is weer tijd voor de Chinese PMI’s: aangezien het de eerste PMI-gegevens van de maand zijn, zullen de markten de cijfers met interesse volgen om te zien hoe het economisch herstel verloopt.

De Chinese wederopstanding kan in gevaar zijn gekomen door nieuwe uitbraken van COVID-19, maar de PMI’s blijven desondanks een soort blauwdruk voor hoe het andere landen zal vergaan nu de ogen wereldwijd voorzichtig weer op economisch herstel worden gericht.

Inflatie Duitsland, eurozone 

De consumentenprijzen zijn in mei in de hele eurozone met -0,1% gedaald, hoewel dit nauwelijks een verrassing mag zijn. De inflatiecijfers zouden deze week verdere dalingen kunnen laten zien, wat te verwachten valt gezien de ineenstorting van de vraag, de stijgende werkloosheid en de enorme bedragen die door de Europese Centrale Bank in de markt worden gepompt. Vorige week voorspelde Fitch dat de kerninflatie in de eurozone de komende 18 maanden zal vertragen en eind 2021 onder 0,5% zal uitkomen.

Een aanhoudende periode van deflatie zal de economie geen goed doen, maar op korte termijn vallen deze cijfers binnen de verwachtingen. De markteffecten van de CPI-gegevens zijn de laatste tijd dan ook minder sterk dan verwacht.

Detailhandelsverkoop Duitsland 

In de VS en het Verenigd Koninkrijk is de consumentenactiviteit sterk toegenomen sinds de lockdowns zijn versoepeld. Kan Duitsland dit voorbeeld volgen? De omzet van de Amerikaanse detailhandel steeg in mei met 17,7% en versloeg daarmee de marktverwachtingen van 8%, terwijl de omzet in het Verenigd Koninkrijk met 12% steeg ten opzichte van de prognose van 5,7%.

De Duitse detailhandelsverkopen daalden in april met -5,3%, al was dit veel beter dan de daling van -12% die analisten verwachtten. Een stijging van de online verkopen hielp het tempo van de ineenstorting te verzachten. De detailhandelsverkoop zal naar verwachting in mei met 2,5% zijn gestegen omdat fysieke winkels weer open zijn gegaan, maar net als in de VS en het VK kunnen we misschien wel een veel grotere stijging gaan zien.

Amerikaanse productiecijfers 

De Amerikaanse industrie heeft nog altijd moeite om te herstellen van de schokken van de pandemie. De ISM PMI steeg in mei, nadat in april de laagste cijfers in meer dan een decennium werden genoteerd. Desondanks werden de marktverwachtingen met een half procentpunt gemist. Voor juni wordt een scherpere opleving voorspeld, maar de PMI die vorige week door IHS Markit werd gepubliceerd stelde teleur omdat er nog altijd sprake was van krimp – zelfs nu de eurozone en het VK weer lichte groei laten zien.

Notulen FOMC-vergadering 

Het FOMC gaf de markten een flinke tik na de laatste vergadering, waarbij er slechter dan verwachte economische voorspellingen werden vrijgegeven die de hoop dat de VS een V-vormig herstel zou laten zien in de grond boorde. De beleidsmakers merkten op dat de rentetarieven tot minstens 2022 in de buurt van nul zouden blijven en dat het tempo van het aankoopprogramma de komende maanden zou stijgen.

De notulen van de vergadering zullen meer details geven, waarbij de markten met name geïnteresseerd zullen zijn in eventuele verwijzingen naar controle van de rentecurve (YCC). Waarschijnlijk zal dit het volgende beleidsinstrument zijn dat de Fed zal gebruiken om de rentetarieven laat te houden. Het tijdstip hiervan is nog onzeker, maar mogelijk zullen de notulen hier meer duidelijkheid over bieden.

Salarisstroken niet-agrarische bedrijven VS 

Vrijdag is het vakantie in de VS vanwege de viering van de Amerikaanse onafhankelijkheid, aangezien 4 juli dit jaar op een zaterdag valt. Dit betekent dat de cijfers over salarisstroken van niet-agrarische bedrijven voor juni al op donderdag zullen verschijnen.

De cijfers waren afgelopen maand verbijsterend: de werkgelegenheid nam toe met 2,5 miljoen banen, terwijl er een daling van -8 miljoen was voorspeld. Het kan erop duiden dat de Amerikaanse economie zich wellicht sneller herstelt dan eerder werd gedacht.

De laatste tijd zijn de wekelijkse werkloosheidscijfers echter teleurstellend. Hoewel er nog altijd sprake van dalingen is, neemt het tempo van de dalingen wel af. Wijst dit op meer permanente schaarste op de arbeidsmarkt en zo ja, moeten we er dan van uitgaan dat het NFP zulke sterke cijfers kan blijven leveren?

Hoogtepunten op XRay deze week

Bekijk de volledige agenda van financiële marktanalyses en trainingen.

07.15 UTC Daily European Morning Call
From 15.30 UTC 30-Jun Weekly Gold, Silver, and Oil Forecasts
17.00 UTC 01-Jul Blonde Markets
19.00 UTC 01-Jul Introduction to Currency Trading: Is it For Me?
12.25 UTC 02-Jul

US Nonfarm Payrolls: Live Market Analysis

 

Belangrijke economische agendapunten

Kijk uit naar de belangrijkste economische agendapunten deze week:

12.00 UTC 29-Jun German Preliminary Inflation
23.30 UTC 29-Jun Japan Unemployment / Industrial Production
After-Market 29-Jun Micron Technology – Q3 2020
01.00 UTC 30-Jun China Manufacturing, Non-Manufacturing PMIs
06.00 UTC 30-Jun UK Finalised Quarterly GDP
30-Jun easyJet – Q2 2020
09.00 UTC 30-Jun Eurozone Flash CPI
12.30 UTC 30-Jun Canada Monthly GDP
14.00 UTC 30-Jun US CB Consumer Confidence
After-Market 30-Jun FedEx Corp – Q4 2020
01.45 UTC 01-Jul Caixin Manufacturing PMI
06.00 UTC 01-Jul Germany Retail Sales
Pre-Market 01-Jul General Mills – Q4 2020
Pre-Market 01-Jul Constellation Brands – Q1 2021
12.15 UTC 01-Jul US ADP Nonfarm Payrolls Report
14.00 UTC 01-Jul ISM Manufacturing PMI
14.30 UTC 01-Jul US EIA Crude Oil Inventories
18.00 UTC 01-Jul FOMC Meeting Minutes
01.30 UTC 02-Jul Australia Trade Balance
12.30 UTC 02-Jul US Nonfarm Payrolls (Friday is US Bank Holiday)
01.30 UTC 03-Jul Australia Retail Sales
All Day 03-Jul US Bank Holiday – Markets Closed

Fed braces for long haul, second wave worries hit equities

Time to dig in for the fight. Usually, at least for the last decade, a dovish Federal Reserve would help boost risk sentiment. But we are in different times and however accommodative monetary policy remains, the market needs a lot more, like a patient hooked on painkillers. Whilst the Fed last night committed to keeping rates at zero all the way through 2022, stocks (excluding the Covid-immune tech sector) are selling off.

The Fed’s extremely downbeat assessment of the US economy and jobs market, combined with expectations for a slow recovery, left risk assets looking very exposed after a big run up last week. Stocks in Europe slipped up ahead of the meeting and have extended losses today with the major bourses down more than 2% again.

Asian shares fell and Wall Street closed in the red, although the Nasdaq managed to secure another record closing high above 10,000. US Treasury yields sank partly on the commitment on keeping rates down but also because investors see a slower recovery taking place and lasting damage to the economy. Gold rallied to $1740.

FOMC economic projections dash hopes of V-shaped recovery

Assessments for the economy are grim. The Fed forecast the US economy to contract by 6.5% this year and for the unemployment rate to be above 9% by the end of the year. This would be an improvement from the current rate of 13.3%, but it points towards a very slow recovery.

Indeed, unemployment is still seen at 6.5% through 2021. Faced with this, Jay Powell, the Fed chairman, said he is “not even thinking about thinking about raising rates”. And as many have warned, some of the damage will be permanent, meaning significant lost productivity. Powell said: “My assumption is there will be a significant chunk…millions…who don’t go back to their old jobs.” The V-shaped recovery theory died last night with the Fed.

Gloomy forecasts from the Fed chime with the OECD’s downbeat outlook. It said the UK economy will contract 11.5% this year even without a second wave. And second wave worries are another factor dragging down on stocks, particularly as we see rising numbers of Covid cases in several US states like Texas, Florida and California, where hospitalisations are at their highest since May 13th after rising for nine of the last ten days.

Really the market got too far ahead of itself and is reacting to the Fed’s gloomy outlook and fears of a second wave of infections. We will get more indications about the pace of hiring vs firing today with the US initial and continuing jobless claims number.

European equities slump on the back of FOMC meeting

Today’s market moves show the reopening trade unwinding in the wake of the Fed. Carnival and IAG led the losers on the FTSE 100 whilst only Polymetal, Fresnillo and Unilever were higher. European travel & leisure shares fell 5%, with automakers and banks down 4%.

The S&P 500 is likely to open weaker after sliding 0.5% yesterday to close under 3200 at 3190. Ocado shares fell 6% after announcing a £657m share placing and that it would raise a further £350m by way of a convertible bond. Whilst shares are lower, this is about raising cash to grow, possibly transformational growth. This is what Amazon would do.

Tesla led the tech sector and Nasdaq higher, as shares rose 9% yesterday to close above $1,025. The leg up came after Elon Musk said the company would ramp production of the Tesla Semi, its electric freight truck.

In FX, the dollar is finding bid as risk sentiment sours. GBPUSD has moved back to test 1.2650, having spiked as high as 1.28 yesterday. The pound is now very much a RoRo currency – risk-on, risk-off.

Copper prices fell having rallied for the last few sessions on fears of a slow economic recovery. Oil was holding losses as it hit around $38 for WTI after a surprise rise in US crude stocks combined with the hit to risk sentiment.  EIA figures showed crude oil inventories rose 5.7m barrels vs expectations for a 1.45m drawdown.

Sellers return: S&P 500 in retreat, next leg lower to 2975? 

Candlestick price chart of the S&P 500 index

FOMC meeting preview: what to watch out for

The FOMC meeting concludes today and markets are waiting for tonight’s announcement of the decisions taken. BlondeMoney CEO Helen Thomas talks us through what to expect later.

BlondeMoney FOMC meeting preview

 

The FOMC aren’t expected to make significant changes to monetary policy, having already acted swiftly to dramatically ease policy to combat the economic fallout of the Covid-19 pandemic.

Instead of looking for changes to interest rates or quantitative easing, markets will instead be focussing on key issues like yield curve control and negative rates, to see whether these got a mention during the FOMC meeting.

FOMC to consider yield curve control?

Yield curve control involves a central bank buying bonds of a set maturity in order to keep the yield at below its target level. This is done to keep borrowing costs under control, and is already being used by the Bank of Japan and the Reserve Bank of Australia.

What will the FOMC say about negative rates?

The FOMC has so far resisted calls for interest rates to go negative. However, it wants to make sure the market is confident that it will do whatever it takes to support the economy should things worsen. We can expect Federal Reserve chair Jay Powell to be asked about negative rates during the press conference held after the FOMC meeting.

Stocks tread ranges ahead of FOMC, pound at 3-month high

Some of the biggest share price gains registered this week have been among companies that have filed for Chapter 11 bankruptcy protection – the likes of Hertz, JC Penney, Pier 1, Whiting Petroleum, as well as firms like Chesapeake Energy and California Resources which are about to file for bankruptcy. This is downright speculation, gambling by any other way of it looking at it.

Retail investors – many trading for free with Robinhood accounts – are snapping up penny stocks and driving up the shares of companies whose stock is essentially worthless. Most of these investors probably don’t realise that common stock comes precisely bottom of the pecking order in bankruptcy proceedings. Even if they don’t go bankrupt and restructure, shareholders get wiped out. It’s a sign of a frothy market – just make sure you are not the greater fool holding the stock when the music stops.

Europe opens higher, stock markets await clarity on recovery and policy support

Stocks took a breather yesterday with a decent pullback, though European bourses opened a little higher this morning ahead of the Federal Reserve statement this evening. Asian shares were mixed, with Tokyo a tad higher and Chinese shares a little weaker.

Chinese inflation figures were soft, with producer prices down 3.7%, the worst drop in 4 years, and consumer prices rising by 2.4%, down from 3.3% in April. Meanwhile data crossing this morning showed French industrial production declined 34% in April – but the market long ago chose to ignore any backward-looking data.

European stocks opened higher after yesterday’s selloff, now bouncing around ranges before there is more clarity on economic recovery and any further policy support.  On the former, there are concerns about two-consecutive days of record numbers of hospitalisations in Texas as lockdown restrictions lift, but broadly optimism about reopening is trumping doubts about second waves and a slow, lacklustre recovery.

It turns out pubs won’t reopen by Jun 22nd, but the bigger worry is how you get children back to school – that should be a priority. Meanwhile, I have grave doubts about the state of the UK employment market come the autumn as furlough schemes end and businesses have reopened to a big fall in demand. Such circumstance don’t bode well for civil order, which is already looking strained in places.

Markets await FOMC statement, Nasdaq above 10,000

On the latter, the FOMC statement is due later today (see yesterday’s note). There has been chatter about yield curve control and more dovish forward guidance, but the Fed may prefer to wait until September before it strikes. The recent recovery should give it time to think, albeit it will be keeping a close watch on longer-dated yields moving up, which may be a worry.

However, I think its focus is keeping a lid on the front end and allowing some steepening should not be a concern. I think I said a year ago that we should no longer pay any attention to the dots – they’re meaningless guesses. But there could be some optimists on the FOMC seeking to pencil in a hike in 2022. More broadly, I think the Fed will signal it accepts there will be no V-shaped recovery even if the recent data has been encouraging.

US stocks were weaker as the rally paused for breath with the S&P 500 down 0.78% at 3207. The Dow snapped a 6-day winning streak with a 1% fall. The Nasdaq was of course still higher and broke 10,000 for the first time ever. Boeing shares have been on a tear lately but tripped up with a 6% drop as it revealed it delivered just four jets in May and saw another 18 orders cancelled.  IATA says 2020 will be the worst year in the history of the aviation industry. Vroom went zoom with a 117% gain on the first day of trading to $47.90. Apple shares rose another 3% to a fresh all-time high on reports it would use its own chips in its devices, helping to drag the Nasdaq into record territory.

Dollar offered, cable hits fresh 3-month high

In FX the dollar is offered across the board with both risk proxies and the yen making gains. The pound has broken out to fresh 3-month highs with GBPUSD clearing 1.2760. EURUSD was higher around 1.1350, trying to take out the Jun 5th peak at 1.1382. The ECB’s Muller said PEPP needs to be temporary and should not be increased if at all possible. He also said low inflation expectations are a short term risk, so take what he says with a pinch of salt.

Expectations for a dovish Fed may be a factor but we are seeing this as part of an unwinding of the strong dollar pandemic trade that was built on USD liquidity squeeze. Nevertheless, the dollar index continues to make new lows and may well take 95 handle before long having broken down through the last Fib support. Key support is seen around the 94.50/60 area.

Oil steadies ahead of EIA inventories data after surprise API build

Crude oil (Aug) was steady a little above $38, about $2 off Monday’s highs, after API data yesterday showed a surprise build in US crude inventories that has reignited oversupply fears. US crude stocks climbed 8.4m barrels in the week to Jun 5th, vs expectations for a draw of 1.7m barrels. The EIA data today is forecast to show a draw of 1.8m barrels. But the forecasts have been way out for weeks, with an average consensus miss of about 5m barrels, so I wouldn’t be putting too much faith in the expectations.

Natural gas prices spiked aggressively lower overnight and though paring losses are still trading down by around 2% today after the IEA said 2020 would see the largest demand shock in the history of the market.

European shares soft ahead of FOMC meeting, Wall Street erases 2020 losses

Shares on Wall Street wiped out all of 2020’s losses even as the US was officially declared in recession. The S&P 500 is now up 0.05% for the year, after rising 1.2% on Monday on what looks like a mad fear-of-missing-out trade. The broad index finished at 3,232.39 on the cash close having gained another 38 pts and is now just 160 points away from its all-time high at 3,393.52 and trades with a forward PE multiple of 23.4.

In other words, unless earnings bounce back significantly faster than consensus estimates, then it’s very richly priced. It’s remarkable that equity markets can be this stretched on such a catastrophic economic contraction – but that is what unlimited Fed liquidity does.

European equities soft as markets await FOMC

Equity markets in Europe were lower again with investors looking ahead to the Federal Reserve two-day meeting, which starts today. Some big names in France – Airbus, Safran, Thales, and Dassault turned sharply lower despite opening in the green this morning even as the French finance minister unveiled a €15bn support plan for the aerospace industry. BP shares fell 1% as investors further digest the restructuring and job cuts.

With its dividend yield running at 9% it will have to cut pay-outs to shareholders sooner or later. The FTSE 100 may test the 6400 support level today after dropping under the 50-hour simple moving average support, whilst the DAX is hovering around the 12,700 level, with a possible support zone found at the big 78.6% Fib level around 12,565.

Candlestick price comparison chart for the FTSE 100 and DAX stock market indices

European markets still seem a bit unsure whether they should follow the US with another leg higher or show some more restraint given the economic uncertainty – and the fact Europe just doesn’t have the same amount of big tech – the S&P 500 technology sector is up 11% YTD, in line with the Nasdaq 100. German trade data was weak as exports in April suffered the biggest decline in 30 years. Exports –24%, imports –16.5%.

Asian markets were mixed with the ASX 200 rallying 2.44% and Chinese shares higher, whilst the Nikkei lost 0.38% as Japanese machine tool orders – an important leading indicator of manufacturing activity – fell 52.8% year-on-year last month.

FOMC meeting – Covid-19 necessitates caution

So far through this equity rally we’ve seen lack of harmony between interest rates and equities. Bonds didn’t really budge even as stocks started to ramp. As we flagged last week, the bond market has started to move, albeit 10yr Treasury yields retreated off their highs yesterday ahead of the FOMC meeting.

The combination of strong jobs, mortgage approvals and car sales numbers last week started to show in longer-date yields picking up. But this will not make the Fed see any reason to change its stance for now. The economic contraction in Q2 is still going to be severe, and unemployment remains exceptionally high by historic standards. The need for monetary policy to remain accommodative has not altered. And for all that the US is reopening, the WHO says the pandemic is getting worse globally.

The Fed is likely to leave rates and forward guidance unchanged. It will also stick to unlimited QE commitment, albeit it is tapering purchases. Although there have been signs that the US economy is bouncing back quicker than expected, unemployment is expected to remain elevated through the rest of the year and beyond.

Moreover, there are signs of Covid cases increasing in states which have reopened, and there is always the potential for a second wave this winter. This means the Fed will remain cautious, but it may want to signal that the next move on rates will be up and not down to quell talk of negative rates. The move in longer-dated Treasuries of late supports this view is now the market’s view.

Vroom prices IPO above target range

Meanwhile, keeping an eye on capital market health, another IPO in the US got away well. Vroom, an online used car seller, raised close to $500m in its initial public offering yesterday, pricing at $22, above the previous $18-$20 range, and implying a market cap of around $2.5bn. The company will start trading on the Nasdaq today with the ticker VRM. IPO activity is down this year for very obvious reasons, but there are signs the market in the US at least is coming back to life.

ZoomInfo stock has more than doubled since its IPO last week. We will be watching closely to see whether it encourages some of the larger names and ‘unicorns’ such as Airbnb, Robinhood, Instacart or Palantir to come back to the IPO table this year in spite of the pandemic.

GBPUSD gains in risk-on trade

In FX, the pound is coming off its highs to test the trend support around the 50-period moving average on the 1-hr time frame. Still sterling continues to make gains versus the dollar as the risk-on mood in markets supports cable. Having failed to secure 1.2750 bulls will need to retake this level soon to continue the thrust to 1.28 and open the road to 1.30. Immediate horizontal support at 1.2630.

Candlestick price chart and technical indicators for GBP/USD FX pair on June 9th

Volgende week: Hoge verwachtingen voor vergaderingen FOMC

Zoals inmiddels de norm is geworden, kunnen we volgende week weer veel teleurstellende economische gegevens verwachten. We zullen kijken naar de cijfers voor aanwijzingen over hoe lang het economisch herstel zou kunnen duren en ook of de prognoses voor de verwachte ineenstorting van het tweede kwartaal kloppen.

De grondstoffenmarkt zal de OPEC-vergadering nauwgezet volgen, hoewel het laatste nieuws suggereert dat beleggers voorbereid moeten zijn op nieuwe teleurstellingen. De FOMC zal de economische verwachtingen weer op de agenda zetten en meer duidelijkheid verschaffen over beleidsvooruitzichten, waarbij naar verwachting weer voorzichtig vooruit gekeken zal worden.

Wat kunnen vertrouwenscijfers ons vertellen over het economisch herstel na Corona? 

Beleggers, economen, bedrijven en beleidsmakers over de hele wereld zijn nog steeds onzeker over hoe het economisch herstel er na de lockdowns zal uitzien. Velen hopen nog steeds op een scherpe opleving, maar dit lijkt onwaarschijnlijk.

Gegeven alle onzekerheid is het sentiment van het bedrijfsleven en consumenten een nuttige indicator van hoe men zich voelt over wat er in het vooruitzicht ligt. Niet geheel verrassend zijn de rapporten tot nu toe erg pessimistisch.

Economieën gaan echter weer open, lockdowns worden steeds verder afgezwakt en voor veel mensen is het leven weer enigszins normaal geworden. Leidt dit tot een positievere outlook of maakt deze eerste stap slechts duidelijk hoe veel werk er nog verzet moet worden voordat er sprake is van economisch herstel?

Zal de OPEC vasthouden aan de ongekende productiebeperkingen? 

De oliemarkten bleven vorige week teleurgesteld achter toen de OPEC-leden besloten om hun vergadering niet te vervroegen, maar vast te houden aan 9 juni. Geruchten aan het begin van de week leken erop te duiden dat het oliekartel nog enkele maanden vast wil houden aan de productiebeperkingen, zo niet tot het einde van het jaar.

Het hoopgevende nieuws gaf steun aan de olieprijs, maar aan het einde van de week hadden ruwe olie en Brent-olie moeite om richting te vinden als gevolg van de veranderende outlook. Uiteindelijk lijkt het waarschijnlijker dat Saudi-Arabië en Rusland nog een maand vast zullen houden aan de productiebeperkingen, in plaats van de productie vanaf juli geleidelijk weer op te schroeven. Spanningen over het gebrek aan naleving bij sommige kartelleden zorgen echter voor twijfel over de waarschijnlijkheid dat er een overeenkomst wordt gesloten.

Inflatiecijfers VS: moeten we voorbereid zijn op aanhoudende deflatie? 

Deze week staan ook de Amerikaanse inflatiecijfers weer op de agenda. Het nieuws was de afgelopen tijd indrukwekkend: in april werd de grootste daling van de prijsgroei sinds december 2008 genoteerd en de kerninflatie is gedaald tot het laagste punt sinds in 1957 werd begonnen met het publiceren van inflatiedata.

Over een scherpe prijsdaling in één maand zullen beleidsmakers zich weinig zorgen maken, maar men is bang voor een langdurige periode van aanhoudende deflatie. De rentetarieven zijn praktisch overal al nul, maar bij nieuwe negatieve prijsgroei zal de markt zich afvragen hoe lang de FOMC nog door kan gaan voordat de rentes negatief moeten worden.

FOMC: markten wachten op economische voorspellingen en voorwaartse richting 

Het Federal Open Market Committee zal donderdag de nieuwste beleidsbeslissingen aankondigen.

De markt hoopt over het algemeen op meer richtinggevend nieuws van de FOMC. De vergadering van april en de daaropvolgende notulen boden geen duidelijkheid over hoe het monetaire beleid zich in de toekomst kan ontwikkelen als antwoord op de verslechterende economische situatie. FOCM-leden bespraken het vaststellen van doelen voor werkloosheid en inflatie, evenals het bepalen van een datum waarvoor de rentetarieven niet verhoogd zouden worden.

Waarschijnlijk zullen we de Summary of Economic Projections (samenvatting van economische verwachtingen) weer zien: dit rapport werd niet gepubliceerd in maart, omdat er toen te veel onzekerheid was over de economische outlook. Dit, en het bekendmaken van impliciete toekomstvoorspellingen, zal de markten een nauwkeuriger beeld geven van het toekomstige beleid van de Fed.

Britse groei- en productiedata geven vorm aan de verwachtingen voor Q2 

Meerdere rapporten uit het Verenigd Koninkrijk over april zullen ons een glimp geven van de gevreesde impact van de pandemie op het tweede kwartaal. Aangenomen wordt dat dit kwartaal diep teleurstellend zal zijn, maar de maandelijkse BBP- en industriële productiecijfers zullen laten zien of zelfs de slechtste scenario’s somber genoeg zijn geweest.

Het BBP-gemiddelde voor de periode van drie maanden die eindigt in april zal naar verwachting -12% bedragen, een daling ten opzichte van -2% in april. Op maandbasis wordt een daling van de groei van -24% voorspeld, terwijl de daling op jaarbasis ongeveer -29% zal bedragen. De industriële productie is waarschijnlijk met bijna -30% gedaald. We zouden middenin het dieptepunt moeten zitten, maar er zijn nog steeds vragen over hoe erg de economie daadwerkelijk is getroffen.

Vrij baan voor Adobe’s cloud-gebaseerde producten? 

Nu het cijferseizoen voorbij is, ziet de bedrijfskalender er mager uit. Adobe zou echter een interessant lichtpunt kunnen zijn.

De software van Adobe draait bijna volledig in de cloud, tot opluchting van de bedrijven die daar nu afhankelijk van zijn nu hun werknemers vanuit huis moeten werken. Het feit dat de producten van het bedrijf op abonnementsbasis worden verkocht, kan zorgen voor stabiliteit van de omzet. Desondanks zal Adobe, net als de meeste bedrijven, het kwartaal ook niet ongeschonden door zijn gekomen.

Hoogtepunten op XRay deze week

Bekijk de volledige agenda van financiële marktanalyses en trainingen.

07.15 UTC Daily European Morning Call
17.00 UTC 08-June Blonde Markets
From 15.30 UTC 09-June Gold, Silver, and Oil Weekly Forecasts
17.00 UTC 10-June FOMC Preview with chief market analyst Neil Wilson
14.45 UTC 11-June Master the Markets with Andrew Barnett

Belangrijke economische agendapunten

Kijk uit naar de belangrijkste economische agendapunten deze week:

06.00 UTC 08-Jun German Industrial Production
08.30 UTC 08-Jun Eurozone Sentix Investor Confidence
01.30 UTC 09-Jun AU NAB Business Confidence
09.00 UTC 09-Jun Eurozone Final Employment Change / Revised GDP (Q/Q)
00.30 UTC 10-Jun Westpac Consumer Sentiment
01.30 UTC 10-Jun China CPI
12.30 UTC 10-Jun US CPI
14.30 UTC 10-Jun US EIA Crude Oil Inventories
18.00 UTC 10-Jun FOMC Rate Decision
18.30 UTC 10-Jun FOMC Press Conference
Pre-Market 10-Jun Dollarama – Q1 2021
12.30 UTC 11-Jun US Unemployment Claims
14.30 UTC 11-Jun US EIA Natural Gas Storage
After-Market 11-Jun Adobe – Q2 2020
06.00 UTC 12-Jun UK GDP (M/M), Manufacturing/Industrial Production (M/M), Construction Output (M/M)
14.00 UTC 12-Jun Preliminary University of Michigan Sentiment Index

Week Ahead: Walmart and Home Depot Earnings, UK April Jobless Claims, May PMIs

We may be reaching the tail end of earnings season, but there are still some eagerly awaited releases lined up this week. Highlights will be reports from Walmart and Home Depot; stock in these companies has seen strong bid even as the wider market has tanked. 

We also have the FOMC minutes, a host of PMIs, and jobless claims data from the UK for April. Here’s your full breakdown of the coming events you need to know about. 

Japan Q1 GDP estimate 

Preliminary Q1 GDP data for Japan is due early on Monday, but as with all Q1 growth data it will serve as the prelude to something much worse. The economy is expected to have contracted -1.2% on the quarter, after a -1.8% decline in the final three months of 2019. Annualised growth is expected to print at -4.6%, again a slowdown from the -7.1% drop recorded in 2019 Q4. 

Forecasts for Q2 expect a 22% decline, the worst since the end of the Second World War. Will the Q1 figures give us any indication of how accurate those estimates might be, or will markets ignore the data and wait for more clarity? 

How many UK jobs have been lost in lockdown? 

The UK reports jobless claims data for April, when the workforce suffered an entire month of lockdown. The number of people filing jobless claims grew by over 12,000 in March: April’s figure is likely to print around 650,000. Unemployment rate figures are also scheduled, but these cover March and so are extremely backwards-looking by this point. A little later on Tuesday morning, the Labour Productivity Index for the first quarter is expected to print at -2.6%. 

UK inflation set to collapse 

April UK inflation data will feel the impact of collapsing retail sales, shuttered businesses, climbing unemployment and furloughed workers. Annualised price growth is expected to slump from 1.5% in May to 0.2% last month, with prices predicted to shrink -0.7% on the month after stagnating in April. The core inflation rate is predicted to drop to 1% on an annualised basis and -0.3% on the month. The contraction in producer prices is predicted to have accelerated to -3.9% on the year, and to have doubled to -0.4% on the month. 

High hopes for Walmart, Home Depot earnings 

Markets think Walmart and Home Depot are well-positioned to weather the coronavirus pandemic. Both stocks are over 4% higher year-to-date at the time of writing, compared to a -13% drop for the S&P 500. Walmart actually hit record highs at the end of April. 

The Wall Street Journal recently reported that Walmart saw a 20% increase in sales during March alone. Markets clearly expect a lot from the leading retailers, but can Walmart and Home Depot deliver? 

Both Walmart and Home Depot have “Strong Buy” ratings according to our Analyst Recommendations tool. Walmart has an average price target of $132.79 which represents a 7% upside on prices at the time of writing. Home Depot has a target price of $238.15, a 4% upside. 

Lowe’s, Target, and Best Buy are amongst the other companies reporting this week. 

FOMC meeting minutes 

We already know a lot more about the current thinking of the Federal Reserve thanks to last week’s speech from chair Jerome Powell. The minutes of the meeting at the end of April could be moot: Powell’s speech gave away what would likely have been the headlines from the minutes, namely that it was likely more stimulus would be necessary, but negative interest rates are not something being considered at this time. 

Eurozone economic sentiment set to go negative again 

April’s ZEW Economic Sentiment surveys for the Eurozone and Germany unexpectedly leapt back into positive territory. Assessment of current conditions remained dire, but investors began to focus on recovery. 

But the reality of the recession that lies between where we are now and where we’re trying to get back to is expected to hit sentiment hard again this month, with the German reading forecast to plummet back to -14 and the Eurozone wide reading dropping to -10. 

UK PMIs headed lower, Eurozone set to bounce off lows 

This week we get the flash PMI readings for May. UK manufacturing is expected to drop to 26.6, while the services index will slip to 9. The overall composite PMI is expected to drop from 13.8 to 9.2. 

Manufacturing and services in the Eurozone and its member states, however, are expected to rebound from their lows as economies began relaxing lockdown measures. Germany’s manufacturing index is predicted to jump around 10 points to 45, while services is forecast to more than double to 37 points. Overall the composite index is expected to climb from 17.4 to 40. The Eurozone composite is expected to rise from 13.6 to 34. 

It’s worth remembering that these figures still represent a huge rate of contraction across all areas of the economy. The Eurozone economy may have bounced back from the initial shock of COVID-19, but there is still a long road ahead – and expectations for how long are getting bigger all the time.

Heads-Up on Earnings 

The following companies are set to publish their quarterly earnings reports this week: 

18-May Ryanair – FY 2020
Pre-Market 19-May Walmart – Q1 2021
Pre-Market 19-May Home Depot – Q1 2020
19-May Imperial Brands – Q2 2020
Pre-Market 20-May Lowe’s – Q1 2020
Pre-Market 20-May Target Corp – Q1 2020
Pre-Market 20-May Analog Devices – Q2 2020
20-May Experian – FY 2020
Pre-Market 21-May Medtronic – Q4 2020
Pre-Market 21-May Best Buy – Q1 2021
After-Market 21-May Intuit – Q3 2020
After-Market 21-May Ross Stores – Q1 2020
After-Market 21-May Agilent Technologies – Q2 2020
After-Market 21-May Hewlett Packard Enterprise – Q2 2020
After-Market 21-May NVIDIA – Q1 2021
22-May Deere & Co – Q2 2020

Highlights on XRay this Week 

17.00 UTC   18-May  Blonde Markets
18.00 UTC  18-May   The Ten Rules of Trading
 15.30 UTC 19-May   Weekly Gold Forecast
 18.00 UTC 19-May Reading Candlestick Charts: Trading Patterns and Trends
11.00 UTC  20-May Midweek Lunch Wrap

Key Economic Events

Watch out for the biggest events on the economic calendar this week:

23.50 UTC 17-May Japan Preliminary Quarterly GDP
01.30 UTC 19-May RBA Monetary Policy Meeting Minutes
06.00 UTC 19-May UK Claimant Count Change / Unemployment Rate
09.00 UTC 19-May Germany / Eurozone ZEW Economic Sentiment
06.00 UTC 20-May UK Inflation
12.30 UTC 20-May Canada Inflation
14.30 UTC 20-May US EIA Crude Oil Inventories
18.00 UTC 20-May FOMC Meeting Minutes
07.15 – 08.00 UTC 21-May FR, DE, Eurozone Flash Services and Manufacturing PMIs
08.30 UTC 21-May UK Flash Manufacturing and Services PMIs
12.30 UTC 21-May US Jobless Claims
13.45 UTC 21-May US Flash Manufacturing and Services PMIs
22.45 UTC 21-May New Zealand Quarterly Retail Sales
06.00 UTC 22-May UK Retail Sales
12.30 UTC 22-May Canada Core Retail Sales

Fed and ECB previews

First up, the Federal Reserve kicks off its two-day meeting today (Apr 28th) and whilst there is always scope for a surprise, we would not anticipate any change to the policy outlook, chiefly because the Fed is no longer waiting for scheduled policy meetings but is operating in ‘real-time’.  

 

There is virtually zero chance the Fed will remove any accommodation until the threat of Covid-19 has passed. But if anyone thinks the FOMC will go negative they are in for a shock – there is no appetite to cut rates any lower and go below the zero lower bound. Europe and Japan are hardly shining examples of that policy working. Jay Powel has already ruled it out, though that in itself is not a reason it won’t happen.

 

The Fed has already thrown the kitchen sink at the market and the economy, announcing unlimited bond buying  – QE4ever – and expansion of corporate debt buying to include junk. There is not a huge amount left for the Fed could realistically do, save buying stocks outright and taking rates negative, neither or which are palatable or likely in the near term, partly because the efforts so far have calmed market stress and prevented further dislocation.  

 

Markets will be looking for any signal from Jay Powell about how the Fed views the rebound – is he still confident of a bounce back in the second half? Formal projections are not due until June. 

 

It’s a fairly similar story for the European Central Bank (ECB). We think they will not commit to any further policy moves right now but will likely signal they are ready to do so by June. The Pandemic Emergency Purchase Programme (PEPP) QE lift has been initiated with an overall envelope of €750bn, and it appears likely to be expanded by an additional €500bn in the next month or three. 

 

Two key things will be the focus. First the communication needs to be crystal clear – we don’t want a repeat of the spreads widening fiasco from Christine Lagarde. Since then the ECB has been absolutely on-point. The ECB must be continue to show to the market that it stands four-square behind the functioning of markets, the single currency and supporting the EZ economy. And on this, I would anticipate a lot of the focus in the press conference to be on the European Council efforts on a bailout package. Watch the BTPs-Bund spreads for how the market views the ECB performance. 

 

EURUSD – as noted on Monday, speculators are dialling up their net long bets on the euro. The Commitment of Traders (COT) from the US Commodity Futures Trading Commission showed euro net longs rose to 87.2k contracts in the week to Apr 21st, the most since May 2017. Traders turned long at the end of March and have been adding to positions since then. We saw a shift like this in speculative EUR positioning in 2017 it preceded a 15% rally in EURUSD.

Week Ahead: Bumper week with FOMC, ECB, FAANGS & GDP

Welcome to your guide to the week ahead in the markets. Remember you can now find all the key events affecting the markets in our new Events Calendar in the platform.

European Central Bank rate decision

Last week ECB president Christine Lagarde allegedly told EU leaders during a private video summit that the bloc could be facing a drop in GDP of up to 15%, and that their efforts to contain the outbreak have been both too little and too late. Monetary policy can only go so far, but the ECB does still have room to manoeuvre. Expansion of QE will likely be the first port of call if policymakers decide more needs to be done, but minutes from the March 18th meeting show that cutting rates was floated, too.

FOMC decision – has the Fed got any ammunition left?

What’s left for the Federal Reserve to do? Rates have been slashed to zero, and that’s where futures markets see them staying well into 2021 at least. And it’s hard to announce more QE when you’ve already committed to unlimited asset purchases. The key question is what the FOMC has left in reserve in case its vast stimulus measures aren’t enough. Will policymakers set negative rates? Will they buy corporate stocks? Will they explicitly target yields on government bonds? Markets will be looking for reassurance that policymakers still have plenty of ammunition left. 

Bumper week of earnings with Apple, Alphabet, Facebook reporting 

Netflix has already reported earnings, but this week sees the rest of the FAANG group offering up their quarterly figures. Tesla and Microsoft are also amongst the heavy hitters providing updates this week. 

US, Eurozone GDP 

We’ve seen piecemeal evidence of the impact COVID-19 has had on the US and Eurozone economies thanks to industrial data, PMIs, and business sentiment figures. But now it’s time to get the full picture, as the US and Eurozone will both publish estimates of Q1 growth. It was initially believed that moderate growth in January and February would have softened the blow from social distancing and widespread lockdowns that went into effect in March. Now the consensus is that the recession expected in Q2 arrived much earlier. Estimates vary wildly, but no matter how dire the results, the figures for Q2 are likely to be way worse.

Heads-Up on Earnings

After-Market   28-Apr   Alphabet – Q1 2020  
After-Market   29-Apr   Microsoft – Q3 2020  
After-Market   29-Apr   Facebook – Q1 2020  
After-Market   29-Apr   Tesla – Q1 2020  
After-Market   30-Apr   Apple – Q2 2020  
After-Market   30-Apr   Amazon – Q1 2020 

Key Events

03.00 UTC   28-Apr   BOJ Rate Decision & Outlook Report  
07.00 UTC  28-Apr  Spanish Unemployment Rate Q1 
14.00 UTC   28-Apr   US CB Consumer Confidence  
01.30 UTC   29-Apr   Australia Quarterly CPI  
12.00 UTC   29-Apr   Germany Preliminary CPI  
12.30 UTC   29-Apr   US Advance GDP QoQ  
14.30 UTC   29-Apr   US EIA Crude Oil Inventories  
18.00 UTC   29-Apr   FOMC Rate Decision  
09.00 UTC   30-Apr   Eurozone Flash GDP  
11.45 UTC   30-Apr   ECB Rate Decision and Statement  
12.30 UTC   30-Apr   US Initial Jobless Claims  
14.30 UTC   30-Apr   US EIA Natural Gas Storage 

Week Ahead: FOMC’s symmetric minutes, German sentiment, UK inflation

FOMC Minutes

The last meeting of the Federal Reserve Committee saw policymakers reaffirming their commitment to letting inflation run hot in order to make up for years of lacklustre price growth. Jerome Powell told reporters after the meeting that “we wanted to underscore our commitment to 2% not being a ceiling, to inflation running symmetrically around 2% and we’re not satisfied with inflation running below 2%”. Expect more underscoring in the minutes, and perhaps more softening of the economic assessment – the post-meeting statement revised its view of consumer spending to “moderate” from “strong” in December.

Germany ZEW sentiment

Industrial production data last week raised further questions over the outlook for the Eurozone. Production fell 4.1% during 2019, and now there’s the added threat of disrupted supply chains thanks to the coronavirus outbreak. Last month’s ZEW sentiment index surged to 26.7 from 10.7 in December, but recent developments suggest that optimism may have been premature.

UK CPI

A soft inflation reading in December had seen markets divided over whether or not the Bank of England was finally about to cut interest rates, having been on hold so long due to Brexit uncertainty. In the end Governor Mark Carney left things unchanged before passing the baton to Andrew Bailey. Another round of soft inflation data this week might not be enough on its own to persuade the Monetary Policy Committee that a rate cut is necessary, but if Friday’s preliminary Markit PMIs also show weakness markets are likely to raise bets on easing soon.

Eyes on OPEC

Oil markets had been hoping that OPEC would ride to the rescue this month, bringing forward its March meeting as the coronavirus outbreak hammers global oil demand. It now seems that this is unlikely, but any rumours to the contrary will still have a strong impact on oil. A change in diagnostic methods last week saw the number of coronavirus cases and deaths race higher, but equities largely shrugged this off. It’s commodities that are bearing the brunt of the economic impact, so key risks remain for oil on virus and OPEC-related headlines.

Heads-Up On Earnings

The following companies are set to publish their quarterly earnings reports this week:

17th Feb – 21.30 GMTBHP Billiton Q2 2020
18th Feb – 00.30 GMTReserve Bank of Australia Meeting Minutes
18th Feb – 04.00 GMTHSBC Holdings Q4 2019
18th Feb – 09.30 GMTUK Unemployment Rate, Average Earnings
18th Feb – 10.00 GMTEurozone/Germany ZEW Survey Results
18th Feb – Pre-MarketWalmartQ4 2020
18th Feb – Pre-MarketMedtronicQ3 2020
18th Feb – Pre-MarketGlencoreQ4 2019
19th Feb – 09.30 GMTUK Consumer Price Index
19th Feb – 13.30 GMTCanada Consumer Price Index
19th Feb – 19.00 GMTFOMC Meeting Minutes
20th Feb – 00.30 GMTAustralia Employment Change/Unemployment Rate
20th Feb – 01.30 GMTPeople’s Bank of China Interest Rate Decision
20th Feb – 07.00 GMTGermany GfK Consumer Confidence
20th Feb – 09.30 GMTUK Retail Sales
20th Feb – 12.30 GMTECB Monetary Policy Meeting Accounts
20th Feb – 15.30 GMTUS EIA Natural Gas Storage
20th Feb – 16.00 GMTUS EIA Crude Oil Inventories
20th FebBAE SystemsQ4 2019
21st Feb – 06.00 GMTAllianzQ4 2019
21st Feb – 09.30 GMTUK Market Flash Composite (Inc Flash Manufacturing/Services PMIs)
21st Feb – 10.00 GMTEurozone Consumer Price Index
21st Feb – Pre-MarketDeere & CoQ1 20202

Watch the Week Ahead on XRay

Highlights on XRay this week:

Daily08.15 GMTEuropean Morning CallFreeRegister
18th Feb14.15 GMTLive Trading Room with TrendsignalFreeRegister
18th Feb16.30-17.10 GMTAsset in Focus: Oil Gold and SilverFreeRegister
19th Feb 12.00 GMT Midweek Lunch Wrap FreeRegister
21st Feb13.00 GMTLive Trade Setups with Mark LeighFreeRegister

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