Wall Street will remain focused on debt ceiling drama, a plethora of Fed speak, retail earnings, and bank stress. It will be a busy week filled with economic releases, with most of the attention falling the Empire manufacturing survey, a retail sales report that is expected to show a rebound in spending, weekly jobless claims, and existing home sales.
Debt ceiling talks were delayed and are expected to resume this week. Default risks are going up and that would be catastrophic for the economy.
Given the weakness that is emerging within in the labor market and disinflation trends, the Fed might be persuaded to keep rates on hold a little longer than most were assuming. This week contains nine Fed appearances, with the highlights coming from Bostic on Monday, Goolsbee on Tuesday, while Fed Chair Powell participates on a panel with Former Fed Chair Bernanke on Friday.
There are a lot of economic releases over the next week but I’m not sure any really fall into the tier one category, despite having some potential to do so. HICP is obviously a huge release but revisions are generally marginal at best. It’s unlikely to be a game changer but never say never. Flash GDP data will also be of interest, with growth having basically flatlined over the last year. Could a recession be on the cards? That aside, it’s all about the ECB speak, most notably President Lagarde on Tuesday and Friday.
The Bank of England remains confident that inflation will return to target over the forecast horizon and yet the new staff projections highlighted how challenging it will be. Inflation and growth were both revised significantly higher for this year and labour market figures on Tuesday could help explain why that is. Unemployment is expected to remain at 3.8% and wage growth ex-bonuses at 6.8%.
Neither are consistent with inflation falling to 2% but at the same time, they aren’t likely to stay there for long. Inflation is expected to start falling sharply in April and interest rates will keep the pressure on. We’ll hear from a variety of BoE policymakers next week including Governor Bailey but I don’t expect to hear anything different from the press conference after the rate decision on Thursday.
GDP data in focus next week alongside an appearance from central bank Governor Elvira Nabiullina, with traders looking for clues on when the next policy move could happen and in which direction.
The calendar is looking a little thin once again next week, with unemployment and retail sales the only releases. The former was 32.7% in Q4 2022 and is expected higher at 33.2% in Q1, while retail sales slipped 0.5% in February but are expected to have bounced back 2.8% in March.
The election this weekend has been talked about for many months and could have big ramifications for Turkish markets. The monetary policy experiment of the last couple of years has arguably been conducted with an eye on this weekend’s election, with President Erdogan hoping that a successful gamble could help extend his two-decade rule.
The race for the Presidency will require one candidate – Erdogan or Kilicdaroglu – to get more than 50% of the vote or it will go to a run-off on 28 May. Voting on Sunday opens at 8 am local time and polls close at 5 pm. By the time markets open next week, we may know who has won the Presidential election.
PPI data is the only notable event next week but traders will be paying close attention for signs of lower price pressures, with the SNB showing zero tolerance so far for above-target inflation.
The recent spate of disappointing economic data that covers both external and internal demand have increased the expectations of a policy interest rate cut from China’s central bank, the PBoC, to address current sluggishness. The tentative date for the upcoming decision on the one-year medium-term lending facility (MLF) rate is set for Monday, 15 May.
Next up, a busy schedule ahead with another set of key data releases; on Tuesday, 16 May, we will have industrial production, retail sales, unemployment rate and year-to-date fixed asset investments for April. Attention will be paid to retail sales as policymakers have flagged concerns about the recent softness in domestic demand. The consensus is for a further pickup in retail sales growth to 20.1% year-on-year from 10.6% in March.
Housing data will be the focus on Wednesday, with a further improvement being forecasted for the deceleration of the House Price Index to -0.2% year-on-year in April from -0.8% in March. If it turns out as forecasted, it will be the 3rd consecutive month of improvement in the China property market.
On the earnings front, a slew of releases from China’s Big Tech; Baidu on Tuesday, 16 May, Tencent Holdings on Wednesday, 17 May, and Alibaba Group on Thursday, 18 May.
The balance of trade deficit for April is forecasted to widen further slightly to US$21.5 billion from US$19.7 billion in March amid a lackluster global demand environment.
On Wednesday, wholesale inflation is expected to decelerate further into a negative growth of -0.2% year-on-year in April from 1.34% printed in March. If it turns out as expected, it will mark the 11th consecutive month of contraction.
A busy week. First up we will have the Westpac consumer confidence data for May on Monday where the consensus is expecting a decline of -1.7% month-on-month due to the surprise interest rate hike from RBA.
On Tuesday, market participants will have a chance to scrutinise the meeting minutes of the recent RBA monetary policy decision for further clues on the reasons behind the surprise rate hike and anticipate the RBA’s thought processes and future actions.
On Thursday, employment data for April will be out and the expectation is a slowdown in hiring with 25K new additions from 53K added in March. Meanwhile, the unemployment rate is expected to hold steady at 3.5% in April, close to a 50-year low.
The key data to focus on will be April’s balance of trade release on Friday where the forecast is expecting a surplus of NZ$0.2 billion for April from a deficit of NZ$1.273 billion recorded in March. If it turns out as forecasted, it will be the first monthly surplus since May 2022.
A busy week packed with key inflationary data that may offer clues on the speed of Bank of Japan’s ultra-easy monetary policy normalization that is expected to take shape in the second half of 2023.
On Monday, growth in producer prices is forecasted to dip to 6.5% year-on-year in April from 7.2% in March. Next up, Q1 GDP will be released on Wednesday where the consensus is expecting an annualized improvement in growth to 0.7% from 0.1% recorded in the previous quarter.
The balance of trade for April will be out on Thursday where the surplus is forecasted to narrow to JPY 690 billion from JPY 754.5 billion.
The all-important consumer inflation rate for April will be released on Friday, core inflation is forecasted to increase to 3.2% year-on-year from 3.1% in March and the core-core rate (excluding fresh food and energy) is forecasted to accelerate to 3.9% year-on-year from 3.8% in March, close to a 30-year high.
The key data to watch will be April’s non-oil domestic exports release on Wednesday. Consensus is expected further deterioration in growth to -9.7% year-on-year from -8.3% in March. If it turns out as expected, it will be the 7th month of contraction in non-oil domestic exports amid a weak external environment.
Saturday, May 13
- Results of local polls in India
- Fed’s Cook delivers the commencement address at Tuskegee University in Alabama
- EU Indo-Pacific Ministerial Forum in Stockholm
Sunday, May 14
- Turkish Presidential Election: President Recep Tayyip Erdogan’s re-election is in doubt
- Thailand holds a general election
Monday, May 15
- US cross-border investment, New York Fed Empire Manufacturing
- Canada existing home sales, housing starts
- Colombia GDP
- Eurozone industrial production
- India trade, wholesale prices
- Indonesia trade
- Japan PPI
- Poland CPI
- Saudi Arabia CPI
- Thailand GDP
- BOC issues financial system survey, based on “expert opinions on the risks to and resilience” of the country’s financial system
- Fed’s Bostic delivers welcoming remarks at his bank’s annual financial markets conference
- German Chancellor Scholz speaks at the Global Solutions Forum in Berlin
- Arab League summit runs through Friday
- BOE chief economist Pill speaks about the bank’s monetary policy report
- European Commission releases spring economic forecasts
Tuesday, May 16
- US retail sales, industrial production, business inventories
- Canada CPI
- China retail sales, industrial production
- Eurozone GDP
- Germany ZEW survey expectations
- Hungary GDP
- Italy CPI
- Mexico international reserves
- South Africa unemployment
- UK jobless claims, unemployment
- RBA releases minutes of May policy meeting
- Fed’s Mester speaks on the economic and policy outlook at an event hosted by the Central Bank of Ireland in Dublin
- Fed’s Williams discusses the economy and monetary policy at an event hosted by the University of the Virgin Islands
- Fed’s Bostic and Goolsbee speak on the economic outlook during Atlanta Fed’s annual financial markets conference
- Economic and Financial Affairs Council (ECOFIN) meeting in Brussels
- Council of Europe Summit in Reykjavik
Wednesday, May 17
- US housing starts
- China property prices
- Eurozone CPI, new car registrations
- France unemployment
- Italy trade
- Japan industrial production, GDP
- Russia GDP
- Singapore trade
- South Africa retail sales
- ECB’s de Guindos delivers the closing speech at the 18th IESE banking industry meeting
- Riksbank’s Floden speaks at a research seminar
- Earnings from Target Corp and Cisco Systems Inc
- BOE Governor Andrew Bailey delivers a keynote speech at the British Chamber of Commerce annual conference
Thursday, May 18
- US initial jobless claims, Conference Board leading index, existing home sales
- Australia unemployment
- Chile GDP
- Japan trade
- Mexico rate decision: Expected to keep the overnight rate steady at 11.25%
- Philippines balance of payments, rate decision
- Spain trade
- BOC news conference on financial system Review, billed as “a detailed analysis of developments in the financial system.”
- Northern Ireland holds local elections
- Most of Europe observes Ascension Day holiday
- Bitcoin 2023 conference in Miami
- BOE’s chief economist Pill delivers opening remarks at the CCBS Macro-finance workshop 2023
Friday, May 19
- Fed Chair Powell and former chair Ben Bernanke to take part in a panel discussion at conference
- Canada retail sales
- Japan CPI, tertiary index
- Malaysia trade
- New Zealand trade
- G7 leaders meet in Hiroshima
- ECB’s Schnabel gives speech at Conference on Financial Stability and Monetary Policy in London
- ECB’s President Lagarde and Hernandez participate in a panel at Brazil’s central bank conference on post-pandemic challenges
- Fed’s Williams delivers the keynote address at monetary policy research conference in Washington
- BOE’s Haskel delivers a speech at the Economic Statistics Centre of Excellence Conference
Sovereign Rating Updates
- Ireland (S&P)
- South Africa (S&P)
- Italy (Moody’s)
- Portugal (Moody’s)
- Denmark (DBRS)