The State of Markets
A brief review of all key upcoming events across the major regions of the globe & an overview of key recent market trends.
The State of Markets:
This past week has been eventful in markets with various quarterly earnings updates by major companies, several releases of macro data, and some key Fed commentary. All of which has generated mixed messages about the US growth and inflation outlook (and, with that, large daily price swings in US equities). In particular, equities sold off sharply ahead of Wednesday’s Fed press conference. They then rallied later in the week, most notably on Friday’s nonfarm payrolls. Elsewhere rates and bond yields fell post Fed meeting and then again on Friday, while the dollar was also lower.
With US equities therefore struggling to find direction this past week, the key question has become: Is this pullback ongoing? Or are equities starting to stabilise, with the uptrend about to resume? The move lower in rates/bond yields, in that respect, is encouraging for the bulls (e.g. see 10 year yields in the chart below, which are down ~20bps from their 25th April high). Equally, as we’ve noted in recent research, a number of positioning, liquidity, and macro factors create a potentially challenging set up for equities in the next few months.
Key macro data and events this coming week, as well as certain speeches by Fed presidents, all bear watching closely in that respect. In particular, US data includes the SLOOS credit conditions survey (Monday); consumer credit (Tuesday); and the Michigan sentiment survey (Friday). There are also speeches by several key Fed Presidents this week, including Barkin, Williams, and Goolsbee, among others, while several key companies are due to report their earnings. Please see below for a full list of key macro data, earnings, and events for the week ahead.
Fig A: US 10-year Treasury yield (%), shown with 50, 90, & 200 day moving averages
(All in London time BST)
Events: Market holidays in the UK & Japan.
Data: Chinese Caixin service sector PMI (Apr, 2:45am); US Senior Loan Officer Opinion Survey (7pm).
Earnings: Berkshire Hathaway.
Events: RBA policy decision (5:30am).
Data: Eurozone retail sales (Mar, 10am); US consumer credit (Mar, 8pm).
Earnings: Disney, UBS, BP.
Events: N/A
Data: N/A
Earnings: Uber, Shopify.
Events: Bank of England policy decision (12pm).
Data: UK RICS house price balance (Apr, 12:01am).
Earnings: N/A
Events: N/A
Data: UK GDP (Q1 first estimate, 7am); US Michigan sentiment (May first estimate, 3pm).
Earnings: N/A
Tactical Equity Asset Allocation No. 244, 2nd May 2024:
“Equities: Further Near Term Downside Expected”
On 23rd April, we moved ‘Tactically’ NEUTRAL equities (having been overweight since October 2023). In that publication we outlined the five different types of pullbacks in bull markets, and argued that this current one is most likely to be either: i) a “healthy 5 – 10% correction”; or ii) a “correction driven by a mid-cycle slowdown”. As such, we advised “near term caution” and removed our OW equities position.
Since that time, US equities are broadly unchanged with the S&P500 having rallied up to its 50 day moving average (at 5,160) before pulling back (over the past two days – fig 1). Our views from April 23rd remain unchanged. In particular, there are 4 reasons why we expect continued further downside in US (& global) equity markets over coming weeks (potentially months).
Events: Speech by the Fed’s Barkin on the economic outlook (5:50pm).
Data: US Senior Loan Officer Opinion survey (7pm).
Earnings: Berkshire Hathaway, Vertex, Simon Property, Palantir, Microchip, Realty Income, The Williams Companies, Fidelity National Information Services.
Events: Speech by the Fed’s Kashkari in Fireside Chat (4:30pm).
Data: US consumer credit (Mar, 8pm).
Earnings: Disney, Arista Networks, Duke Energy, Transdigm, McKesson, Suncor Energy, Occidental Petroleum, Sempra, Datadog, Intact Financial, Kenvue, EA, Rockwell Automation.
Events: Speeches by the Fed’s Jefferson on careers in economics (4pm), Collins to MIT students (4:45pm) & Cook on financial stability (6:30pm).
Data: US wholesale inventories (March final estimate, 3pm).
Earnings: Uber, Shopify, Anheuser-Busch, Airbnb, Emerson, Manulife Financial, Energy Transfer, Nutrien, HubSpot.
Events: Bank of Canada releases financial system review (3pm).
Data: N/A
Earnings: Constellation Energy, Sun Life Financial, Telus, Wheaton Precious Metals.
Events: Speeches by the Fed’s Bowman on financial stability risks (2pm), Goolsbee in moderated Q&A (5:45pm) & Barr gives commencement speech (6:30pm).
Data: Canadian employment data (change in employment, unemployment rate & participation rate, Apr, 1:30pm); US Michigan sentiment (May first estimate, 3pm); US monthly budget statement (Apr, 7pm).
Earnings: Enbridge, Constellation Software.
Events: Speeches by the ECB’s Villeroy, Nagel & Panetta at BIS innovation summit (12:15pm-12:30pm).
Data: HCOB service sector PMIs for Italy (8:45am), France (8:50am), Germany (8:55am) & Eurozone (9am) – all April final estimates apart from Italy; Eurozone Sentix investor confidence (May, 9:30am); Eurozone PPI (Mar, 10am).
Earnings: N/A
Events: Speech by the ECB’s De Cos at BIS summit (2pm).
Data: German factory orders (Mar, 7am); German imports & exports (Mar, 7am); French wages (Q1 first estimate, 7:45am); Eurozone retail sales (Mar, 10am).
Earnings: UBS, Ferrari, UniCredit, Siemens, Deutsche Post, Infineon.
Events: Speech by the ECB’s Wunsch in Frankfurt (1pm).
Data: German industrial production (Mar, 7am); Italian retail sales (Mar, 9am).
Earnings: BMW, Munich Re, Henkel.
Events: Speeches by the ECB’s Cipollone on ‘the tokenisation of financial instruments – prospects for the Italian market’ (1:15pm) & Guindos in Madrid (1:15pm).
Data: N/A
Earnings: Enel.
Events: Speech by the ECB’s Cipollone on the digital euro (8am); ECB publishes account of April policy meeting (12:30pm); ISTAT releases note on the Italian economy (10am).
Data: Italian industrial production (Mar, 9am); Italian industrial sales (Feb, 11am).
Earnings: N/A
Events: Market holiday on account of ‘early May’ bank holiday.
Data: N/A
Earnings: N/A
Events: N/A
Data: BRC retail sales (Apr, 12:01am); new car sales (Apr, 9am).
Earnings: BP.
Events: N/A
Data: N/A
Earnings: N/A
Events: Bank of England policy decision (12pm) followed by press conference (12:30pm); speech by the Bank of England’s Huw Pill (5:15pm); Bank of England releases decision maker panel survey (2pm).
Data: RICS house price balance (Apr, 12:01am).
Earnings: N/A
Events: Speech by the Bank of England’s Huw Pill (12:15pm).
Data: GDP (Q1 first estimate, 7am), monthly GDP estimate, industrial & manufacturing production, goods trade balance & construction output (Mar, 7am).
Earnings: N/A
Events: Market holiday in Japan on account of Children’s Day.
Data: Australian headline CPI (Apr, 2am); Chinese Caixin service sector PMI (Apr, 2:45am).
Earnings: Westpac.
Events: RBA policy decision (5:30am) followed by statement on monetary policy (5:30am).
Data: Japanese Jibun Bank service sector PMI (April final estimate, 1:30am).
Earnings: Nintendo, Commonwealth Bank of Australia, ANZ Holdings.
Events: N/A
Data: Japanese cash earnings (Mar, 12:30am); Chinese imports, exports & trade balance (Apr, 4am); Japanese ESRI leading index (March first estimate, 6am).
Earnings: Itochu, Mitsubishi.
Events: BOJ releases summary of opinion for April policy meeting (12:50am).
Data: Japanese household spending (Mar, 12:30am); Japanese bank lending (Apr, 12:5am).
Earnings: SoftBank, Japan Tobacco, Takeda Pharmaceutical, Daikin Industries.
Events: N/A
Data: Chinese headline CPI & PPI (Apr, 2:30am); Chinese total social financing, new yuan loans, and M0, M1 & M2 money supply (Mar, time & date tentative).
Earnings: Tokyo Electron, Nippon Telegraph and Telephone, KDDI, Honda.
(Long)View from London, 3rd May 2024:
“Shifting From Loose to Tight US Fiscal Policy – Implication Thereof"
Tactical Equity Asset Allocation No. 244, 2nd May 2024:
“Equities: Further Near Term Downside Expected"
Commodity Fundamentals Report No. 182, 1st May 2024:
“Oil: How Much Downside?"
(Long)View from London, 26th April 2024:
“Bonds, Equities & Oil – Latest Thoughts"
Monthly Global AA No. 37, 25th April 2024:
“Start re-BUILDing US Treasury OW Positions in Strategic Portfolios"
Commodity Fundamentals Report No. 181, 24th April 2024:
“Iron Ore: How Much More Upside?"
Longview ‘Tactical’ Alert No. 80, 23rd April 2024:
"Move NEUTRAL Equities in Tactical Portfolios (from modestly OW)"