Written Commentary
- US debt ceiling negotiations still front and centre; digesting Japan Q1 GDP, China New Home Prices, Australia Wages and French Unemployment, awaiting Eurozone final CPI and US Housing Starts; BoE and ECB speakers, more US retailer earnings, busy run of govt debt auctions
- Even dovish Fed speakers pushing back on market rate expectations, and advocating caution about overstating fall in inflation
- US Housing Starts seen edging down, but remaining around long-term average, as shortage of Existing Home inventories bolsters demand for New Homes
EVENTS PREVIEW
The US debt ceiling negotiations continue to be front and centre, with today’s schedule of data and events quite heavily front loaded, via way of the better than expected Japan Q1 GDP, Australia’s Q1 Wages, Singapore Exports, French Unemployment, and China Home Prices (recovery losing momentum and thus reinforcing concerns about the growth outlook after yesterday’s serial downside misses on monthly activity data) to digest, while final Eurozone CPI and US Housing Starts lie ahead. Fed speakers are notable by their absence today, though yesterday’s run of Fed speakers were clearly at pains to push back against market rate cut pricing, most notably Chicago Fed’s Goolsbee effectively saying that a tightening bias remains in place given the inflation battle is still not won, even if he advocated pausing to take stock of the cumulative impact of rate hikes to date. BoE’s Bailey speech at the BCC annual conference will be closely watched, and there are a number of ECB speakers. Govt bond supply is plentiful as France brings forward its monthly medium dated conventional and I-L auctions a day given tomorrow’s Ascension day holiday in many parts of Europe, and there are also UK 4-yr, German 10-yr, Canadian 3-yr and US 20-yr sales. Commerzbank, Munich Re and Siemens top the earnings run in Europe, while the US looks to more retailer reports with Target and TJX the headliners. Yesterday’s run of US data served as a reminder that despite the obvious risk from the debt ceiling impasse and regional bank woes, the US economy is currently in rather better health than all of the recession talk would have us believe, and by contrast with the lacklustre performance in China and Germany, and the rather ominous and sharp rises in UK HMRC Payrolls and Claimant Count data for April. While there was a more optimistic tone to the progress on US Debt Ceiling negotiations yesterday, the fact that Biden has curtailed his G7 leaders meeting related trip to Asia, underlines that there remains a substantial gap to close.
** U.S.A. – April Housing Starts **
Following on from the unexpected further recovery in the US NAHB Housing Market Index, today’s Housing Starts are seen slipping 1.4% m/m to a still respectable 1.40 Mln SAAR pace, while Building Permits are seen unchanged at 1.43 Mln SAAR. Demand as the NAHB noted is being paced by a lack of Existing Home Sales inventory, as many households with mortgages on much lower fixed rates opt to stay put, and per se points to continued divergence between New and Existing sales.
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