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:
Equity market pullbacks usually consist of three waves. There’s an initial wave of selling (wave 1), which is then followed by a wave 2 relief rally. Typically, although not always, there’s then a third wave of selling (down to the initial lows from ‘wave 1’, if not lower). An example of that ‘three wave’ pattern is shown below.
Having trended down for most of April, a ‘wave 2’ relief rally in US equities has been underway this past week. That’s been supported by better than expected US earnings, with S&P500 companies, so far, beating estimates by ~10%, compared to the average earnings season surprise of ~4%.
The key question, therefore, is: How long will this ‘wave 2’ rally last? How much of the losses from ‘wave 1’ will be retraced? And, how much more downside should we expect in ‘wave 3’, if there is one?
Next week’s Fed policy decision and press conference (Wednesday) will be watched closely in that respect. Markets will also be focussed on several key US macro data points, including ADP employment and ISM manufacturing (Wednesday); as well as nonfarm payrolls and ISM Services (Friday). Outside of the US, German headline inflation is out on Monday with Q1 GDP estimates for Europe on Tuesday. Key earnings this week will also be watched closely, most notably with Amazon reporting on Tuesday and Apple on Thursday. Please see below for a full list of key events/macro data this week.
Fig A: Example of three wave pullback in S&P500 futures (September 2020)
(All in London time BST)
Events: N/A
Data: German headline CPI (April first estimate, 1pm).
Earnings: N/A
Events: N/A
Data: Chinese manufacturing (NBS & Caixin) & service (NBS) sector PMIs (Apr, NBS at 2:30am & Caixin at 2:45am); Eurozone Q1 GDP (first estimate, 10am).
Earnings: Amazon, Eli Lilly, Coca-Cola, AMD
Events: Fed policy decision (7pm) followed by Powell press conference (7:30pm).
Data: US ADP employment change (Apr, 1:15pm); US JOLTS job openings (Mar, 3pm); US ISM manufacturing (Apr, 3pm).
Earnings: Mastercard, Qualcomm
Events: N/A
Data: US Challenger job cuts (Apr, 12:30pm).
Earnings: Apple, Shell
Events: N/A
Data: US nonfarm payrolls, hourly earnings & unemployment rate (Apr, 1:30pm); US ISM services (Apr, 3pm).
Earnings: N/A
Monthly Global AA No. 37, 25th April 2024:
“Start re-BUILDing US Treasury OW Positions in Strategic Portfolios”
“Traders Add Bets That Fed Will Skip Interest-Rate Cuts This Year”
Source: Bloomberg article, 23rd April 2024, available HERE
Having sold off sharply since late December, the consensus view on US Treasuries is poor. In particular, inflation is proving to be ‘sticky’ and is viewed as the biggest ‘tail risk’ in markets (on the BAML survey, fig 9); Fed commentary has been hawkish; rate cuts for this year have been largely priced out; while the US economy has performed well/surprised to the upside in 2023 (e.g. with strength in certain headline job data). Some, therefore, are calling for a ‘no landing’ and looking for ‘no Fed cuts’ this year (e.g. see quote above).
Other widespread concerns about long duration Treasuries include (i) America’s large fiscal deficit, high levels of Treasury issuance expected this year/next, and ongoing QT (i.e. sales of Treasuries by the Fed), at a time when the RRP is close to empty. All of which, the bears argue, has the potential to generate a liquidity squeeze in the Treasury market (akin to October last year).
Events: N/A
Data: US Dallas Fed manufacturing activity (Apr, 3:30pm).
Earnings: N/A
Events: N/A
Data: US employment cost index (Q1, 1:30pm); Canadian GDP (Feb, 1:30pm); US FHFA house price index (Feb, 1:30pm); US S&P/Case-Shiller 20-city & national house prices (Feb, 2pm); US Chicago PMI (Apr, 2:45pm); US Conference Board consumer confidence (Apr, 3pm); US Dallas Fed services activity (Apr, 3:30pm).
Earnings: Amazon, Eli Lilly, Coca-Cola, AMD, McDonald’s
Events: Fed policy decision (7pm) followed by Powell press conference (7:30pm).
Data: US ADP employment (Apr, 1:15pm); Canadian S&P manufacturing sector PMI (Apr, 2:30pm); US S&P manufacturing sector PMI (April final estimate, 2:45pm); US JOLTS job openings (Mar, 3pm); US ISM manufacturing (Apr, 3pm).
Earnings: Mastercard, Qualcomm, Pfizer, ADP, CVS
Events: N/A
Data: US Challenger job cuts (Apr, 12:30pm); US trade balance (Mar, 1:30pm); US nonfarm productivity & unit labour costs (Q1 first estimate, 1:30pm); US total vehicle sales (3pm).
Earnings: Apple, ConocoPhillips
Events: N/A
Data: US nonfarm payrolls, hourly earnings & unemployment rate (Apr, 1:30pm); Canadian S&P service sector PMI (Apr, 2:30pm); US S&P service sector PMI (April final estimate, 2:45pm); US ISM services (Apr, 3pm).
Earnings: N/A
Events: N/A
Data: Eurozone consumer confidence (April final estimate, 10am); German headline CPI (April first estimate, 1pm).
Earnings: Telenor
Events: N/A
Data: French GDP & consumer spending (Q1 first estimate, 6:30am); German retail sales (Mar, 7am); French headline CPI (April first estimate) & PPI (Mar) – both 7:45am; German unemployment change (Apr, 8:55am); Italian & German GDP (Q1 first estimate, 9am); Eurozone & Italian headline & core CPI (April first estimate, 10am); Eurozone GDP (Q1 first estimate, 10am); Italian wages (Mar, 11am).
Earnings: Mercedes Benz, Santander, Volkswagen, Adidas
Events: Market holiday in Eurozone on account of Labour Day
Data: N/A
Earnings: N/A
Events: N/A
Data: HCOB manufacturing sector PMIs for Italy (8:45am), France (8:50am), Germany (8:55am) & Eurozone (9am) – all April final estimate apart from Italy; Italian PPI (Mar, 9am).
Earnings: Shell, AXA
Events: N/A
Data: French industrial & manufacturing production (Mar, 7:45am); Italian & Eurozone unemployment rate (Mar, 9am & 10am).
Earnings: Societe Generale
Events: N/A
Data: N/A
Earnings: N/A
Events: Bank of England’s releases APF quarterly report (12pm).
Data: Lloyds business barometer (Apr, 12:01am); BRC shop price index (Apr, 12:01am); net consumer credit, mortgage approvals & M4 money supply (Mar, 9:30am).
Earnings: HSBC, Glencore
Events: N/A
Data: S&P manufacturing sector PMI (April final estimate, 9:30am).
Earnings: GSK
Events: N/A
Data: Nationwide house prices (Apr, 7am).
Earnings: Standard Chartered
Events: N/A
Data: S&P service sector PMI (April final estimate, 9:30am).
Earnings: N/A
Events: Market holiday in Japan on account of Showa Day
Data: N/A
Earnings: Sony, PetroChina, ICBC, China Construction Bank, Agricultural Bank of China, Bank of China
Events: N/A
Data: Japanese jobless rate (Mar, 12:30am); Japanese retail sales & industrial production (Mar, 12:50am); Chinese manufacturing & service sector PMIs (Apr, 2:30am); Australian retail sales (Mar, 2:30am); Caixin manufacturing sector PMI (Apr, 2:45am); Japanese housing starts (Mar, 6am); Australian CoreLogic house prices (Apr, 3:01pm).
Earnings: Samsung Electronics
Events: Market holiday in China on account of Labour Day
Data: Australian Judo Bank manufacturing sector PMI (April final estimate, 12am); Japanese Jibun Bank manufacturing PMI (April final estimate, 1:30am).
Earnings: Mitsui
Events: Market holiday in China on account of Labour Day; BOJ minutes of March meeting (12:50am).
Data: Japanese money supply (Apr, 12:50am); Japanese ESRI consumer confidence (Apr, 6am).
Earnings: LG Chemicals, Mitsubishi
Events: Market holiday in China on account of Labour Day
Data: Australian Judo Bank service sector PMI (April final estimate, 12am); Australian home loans value & household spending (Mar, 2:30am).
Earnings: N/A
Longview on Friday, 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)"
Longview on Friday, 19th April 2024:
“Is America Exceptional? Who Cuts First?”
Commodity Fundamentals Report No. 180, 18th April 2024:
“Copper: A False Start?"
Monthly Global AA No. 36, 17th April 2024:
“Eurozone Services Inflation: How Worried Should We Be?"
Longview Letter No. 144, 16th April 2024:
"UK: Not Enough Houses (or Too Much Debt)?"