Written Commentary
- Digesting UK labour data and Japan PPI, awaiting Germany ZEW and US NFIB surveys, US PPI, OPEC Oil Market report, US China tariff announcement, slew of China & Europe earnings, UK 50-yr I=L, German 2-yr
- U.K.: sticky wages contrast with perhaps more timely signal of looser labour demand from Payrolls, LFS Employment; focus shifts to Pill and CPI
- U.S.A: very average m/m PPI increase likely paced by Food and Energy, manufacturing surveys hint at upside risks on core, financial and trade services also key
- U.S.A.: NFIB seen little changed at weak level, echoing Employment indicators, Optimism sub-index as ever a wild card
EVENTS PREVIEW
A busier day awaits with Japan’s PPI and UK labour data to digest ahead of Germany’s ZEW and US NFIB surveys and probably most significantly US PPI. BoE’s Pill heads a busy run of central bank speakers, while the OPEC monthly Oil Market Report tops the run of commodity market events, with a raft of conferences getting under way, including Platinum Week, CRU World Aluminium Conference and GrainCom. The Biden administration is due to announce the details of new tariffs on Chinese imports, including electric vehicles, batteries and solar equipment. Meanwhile China’s tech behemoths Alibaba and Tencent headline the run of corporate earnings, which also sees results from Bayer, Italgas, Porsche Automobil and Rheinmetall. Germany’s ZEW survey is seen edging up again to 44.9 from April’s 42.9 on the Expectations measure, as well as on the Current Situation, though still very depressed at -76.3 from -79.2.
** U.K. – March / April labour market indicators **
– Keeping a broader perspective is always critical, and the key aspect of today’s UK labour data is that while wages were higher than expected, though unchanged, they are very much a lagging indicator, and the weakening in labour demand as signalled by HMRC Payrolls (-85K), the LFS Employment measure (-177.3K), Claimant Count (+8.9K) and Vacancies (-15K) is loosening quite rapidly. Eminently markets will look at this through the very narrow and blinkered lens of ‘worse than forecast’ and push back on June rate cut expectations, but there is still a good deal of proverbial water to flow under the statistical bridge between now and the June 20 MPC meeting, but for now the immediate attention turns to today’s speech by BoE’s Pill, and then to next week’s CPI.
** U.S.A. – April PPI, NFIB Small Business Optimism ***
– Unusually PPI precedes CPI, with headline seen up a
relatively well contained 0.2% m/m to edge the y/y up 0.1 ppt to 2.2%, while
core is seen up 0.3% m/m, and the y/y rate slipping to 2.3$ from 2.4%; headline
will be boosted primarily by energy (gasoline) prices, with some upside risks
to core given rises in Manufacturing survey price indices, and a close eye kept
on Financial Services which has been pressuring the core PCE deflator. NFIB
Small Business Optimism is expected to remain very subdued at 88.2 (March
88.5), echoing the already published Employment components, which saw Hiring
Intentions little changed at 12, after falling to a 4-yr low of 11 in March,
with the Economic Optimism Index as ever a key wild card.
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