Week Ahead: Central Bank focus and US GDP
It's that time of the week again - we discuss what potential market moving events are due and what markets are the market expectations.
As usual, Covid 19 remains in the focus. This week a number of economies are going to start to gradually relax some of the measures which were taken earlier to stop the spread of the virus. Whether this would mean a new rise in infections and a potential second peak, or finally a road to normalization is yet to be seen. As of this moment we still don't have a medicine or a vaccine, so the advice is to still adhere to social distancing.
Oil markets are still on the watch list, as we had a rebound in the second part of last week. However the supply vs demand picture still hasn't changed in that market.
For the lovers of agricultural markets - Russia has hit it's export quota for grains 2 months ahead of schedule. How will this affect the price of wheat amid high demand? We will have a look at this market later during the week.
It will also be a busy week for central bankers - BoJ, Fed and ECB meetings. The busiest days in terms of calendar would be Wednesday and Thursday.
The highlight of the day is the Bank of Japan meeting. They expanded their stimulus for the economy buy lifting a limitation on the buying of government bonds and increased buying of corporate debt. It's essentially mirroring what the Fed and ECB did earlier.
Tuesday will give us an indication of consumer confidence in the US for April. The CB Consumer Confidence forecast is for 87.2. The previous reading was 120, so the expectation is for a much lower figure.
In terms of individual company news, we have BP and HSBC reporting quarterly earnings.
Wednesday kicks off with Australia CPI (YoY) for Q1. The forecast is for 2%, with the previous reading being 1.8%. Therefore the expectation is for higher inflation. However there are a lot of deflationary pressures including lower oil prices, so this expectation could turn out to be too high.
Then the CPI (YoY) (Q1) data continues with a preliminary reading from Germany. The expectation is for 0.7%. The previous reading is 1.4%, so we can see that lower inflation is expected in Germany.
We move to the US data and we have a big one this week - preliminary annualized GDP with a forecast of -4%. If this figure comes in negative, it would mean that the US economy has contracted significantly in the 1st Quarter. A decline in the next quarter would confirm that a recession is in place.
The day finishes with a Fed Interest Rate decision and Press conference, where further guidance on stimulus and forward guidance on policy will be the potential focus for traders. This comes amidst worries of a potential deflationary environment forming.
In terms of individual company news - Q1 Earnings for Facebook and Tesla are announced on this day.
On Thursday we have manufacturing data from China in the form of PMI for April. As we know the country has largely restarted it's economy following Covid 19. The question is whether the shutting down of other economies, would reflect in the number of orders for Chinese manufacturers.
German Unemployment Change for April follows with a forecast of 77k.
Then comes the preliminary Eurozone CPI (YoY) (Apr). The expectations for this are for a lower inflation, in line with what we discussed about German CPI earlier.
The ECB has an interest rate decision and press conference. Interest Rate Decision (Apr) and Press Conference. With EU leaders struggling to agree on fiscal measures, the focus will be on the Central Bank and how it continues it's stimulus. The ECB President warned last week that the euro-area could shrink as much as 15% this year.
The traditional weekly gauge of the US job market in the form of Initial Jobless Claims comes on Thursday. The expectation is for 3.5million Americans to have filled for initial claims.
Earnings season would have a big day with Q1 earnings coming from Apple and Amazon.
Friday, or the 1 May would be a holiday for a lot of people. It's Labour day. That being said, we have two events on the calendar - UK Manufacturing PMI for April. The expectation is for a reading of 32.8 which is lower than the previous reading of 32.9.
In the US we have the ISM Manufacturing PMI for April, with a forecast of 36.3. It would reflect the stricter Covid 19 measures in the US which started in March.