FUTURE ACTIVITIES:
Monday: European markets are closed for Easter Monday.
Tuesday: NFIB Small Business Index.
Wednesday: US CPI, BoC Policy Decision, FOMC Minutes.
Thursday: US PPI, US Unemployment Claims.
Friday: US Retail Sales, UMich Consumer Sentiment.
Last week, we had a series of significant losses in top economic indicators. The ISM PMIs showed big drops from previous readings and Jobless claims missed estimates with a large upward revision for the previous report. At this time, the market needs to look at the nature of the financial crisis between March in the country’s economy and the indicators mentioned above to capture that time. So, we may have had the first signs that the economy is holding up and that it is better to go forward as the Fed intends to tighten policy.
This brings me to the market response to last Friday’s NFP report. The data is good, no doubt, but as I said in last week’s review, the report captures data up to 12th o March. Therefore, it does not indicate the end of the banking crisis. For this reason, I would say that this week’s Jobless Claims report is important, and I wouldn’t be surprised to see last week’s result end if Jobless Claims shows another deficit. .
Tuesday: The NFIB Small Business Optimism Index is not a regular market driver, but there are times when markets start to think more about something because the context says it. The current story in the market is that the financial crisis of the middle of March will cause a loan and the first companies that will be affected by it are the small ones.
Small businesses in the US employ half of the US workforce, so they are a very large part of the economy. The index is at levels that have been compared to previous recessions, but the one the market is most interested in is the Hiring Plans Index. Below you will find the relationship between the Hiring Plans Index and the Unemployment Rate.
Photo courtesy of @francesdonald on Twitter
Wednesday: US headline CPI expected at 5.2% vs. 6.0% in advance for the Y / Y ratio and 0.3% vs. 0.4% ahead for the M/M reading. Core Y/Y is expected at 5.6% vs. 5.5% before and for M / M at 0.4% vs. 0.5% in advance. This report should determine the next FOMC rate hike. After the NFP report the market was overbought 70% of the time for a 25 bps move. In today’s context, I think a pass will have more impact than a punch.
The Bank of Canada is expected to change rates when they retire at the last meeting. The latest inflation data missed estimates, so the BoC may be on hold for now. I don’t think the market will care much about it because it will be more focused on the US CPI report.
The FOMC Minutes should not be a market mover because it is three weeks away and we already know everything in it. The Fed relies on data, so future data will influence their decisions.
Thursday: US PPI is expected at 3.1% vs. 4.6% ahead for the Y/Y ratio and 0.1% vs. -0.1% ahead for M/M reading. Core Y/Y measure is expected at 3.3% vs. 4.4% before and M / M reading at 0.2% vs. 0.0% in advance. I don’t think it will be a market mover unless we see a pass.
Last week’s US Jobless Claims missed expectations and preliminary numbers were revised higher pointing to the first cracks in the labor market. I think this week’s report is a big market mover and if they show another failure, then the market may start to position for recession trading. Initial claims are estimated at 205K vs. 228K earlier. Trading exposure includes long-term stocks, gold and yen, and short-term stocks, commodities and currencies.
Friday: US Retail Sales are very volatile, however, the market can move. The market should respond more to the past than to a given strike in the current context. The headline M/M reading is expected at -0.4% vs -0.4% previously and the Core gauge at -0.3% vs. -0.1% earlier. The Power Group is estimated at -0.4% vs. 0.5% in advance.
The University of Michigan Consumer Sentiment Index is expected at 62.7 vs. 62.0 earlier. I think the market will focus more on a pass than a hit, focusing more on inflationary numbers.
This article was written by Giuseppe Dellamotta.