Written Commentary
- Focus on US CPI and Retail Sales; digesting Australia Q1 Wages, China MTLF and latest property sector plan; Eurozone/CEE GDP and CPI; US NY Fed and NAHB surveys, LatAm GDP, EC forecast update, IEA Oil Market Report, Xi-Putin meeting, numerous central bank speakers; UK 9-yr & German 30-yr auctions
- US CPI seen remaining elevated, energy and food to pressure headline; core helped by used cars, easing housing pressures, Medical services and Insurance may offset on upside; PPI revision farcical
- US Retail Sales seen easing after March surge, autos and gas prices to boost headline, core measures likely very soft
- Latest China property sector plan a step in the right direction, but no magic wand
EVENTS PREVIEW
The US dominates a busy schedule of data via way of CPI and Retail Sales, with the NY Fed Manufacturing and NAHB Housing Surveys also on tap. Ahead of that there are the as expected unchanged at 2.50% China PBOC 1-yr MTLF operation & Australia’s Q1 Wages (slightly better than expected) to digest, with a raft of provisional, revised or final April and CPI Q1 GDP readings in the Eurozone and CEE, while the afternoon also brings monthly and/or quarterly LatAm GDP data (Brazil, Colombia & Peru). There are numerous ECB & Fed speakers to accompany the EU Commission’s Spring Economic Forecasts update and the final monthly Oil Market Report from the IEA, while the Antaike Copper conference gets under way in China, and France’s Agriculture Ministry updates 2024 field-crop estimates. The UK with 9-yr and Germany with 30-yr top the bond auction schedule, while another busy day for Asian and European earnings features financials: Japan Post, Mizuho, Sumitomo Mitsui, ABN Amro, Alllianz and BCP, which are accompanied by E.on, Hapag-Lloyd, RWE and Thyssenkupp, while the Americas look to Cisco, Marfrig Global Foods, Republic First and SNC-Lavalin (aka AtkinsRealis). China’s mooted plan to have local governments buy up stocks of unsold homes should help to alleviate some of the deep seated property sector malaise, but also suggests that the ‘white list’ programme introduced last year has not had the impact that had been hoped for in terms of resolving the sector’s woes, though it should start to alleviate pressure on developer balance sheets from the vast overhang of non-performing assets, as well as injecting some much needed cash.
** U.S.A. – April CPI and Retail Sales **
After the much larger than expected 0.5% m/m increase in yesterday’s PPI, which was above all eye raising not for beating expectations, but for the credibility free downward revision to March from +0.2% on headline and core to -0.1%, which frankly beggars belief in how this series is compiled, even if it did mean y/y rates were close to forecasts, the focus now turns to consumer prices. CPI will again be uncomfortably high for the Fed according to the consensus, with food (above all eating out) and energy pushing up headline a further 0.4% m/m taking the 3-mth annualized rate to 4.8%, though base effects will edge the y/y rate down to 3.4%, while core is seen up 0.3% m/m , with the y/y expected to drop to 3.6% from 3.8%. The latter will be subject to conflicting forces as Housing costs and Used Car Prices ease somewhat, but Insurance and Medical Services will exercise upward pressure though there were drops in outpatient and physician care in PPI, along with a sharp drop (-3.8% m/m) in airfares. Retail Sales are expected to cool to 0.4% m/m headline, with a modest boost from Autos and gaoline, and 0.1%/0.2% m/m on core metrics after surging 0.7% and 1.0%/1.1% respectively in March, a close eye will need to be kept on the balance of consumer spending between essentials and discretionary & big-ticket items, as markets attempt to gauge how much downside to Q2 Private Consumption is emerging. The highly erratic NY Fed Manufacturing is best ignored, given the violent swings from month to month over the pt year, while the NAHB Housing Market Index is again expected to be unchanged at 51.
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