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:
US equity markets came under pressure this week, as concerns about sticky inflation returned. The tech area of the market was hardest hit with the Philly SOX (semiconductors) down 4.0% on the week and the NDX 100 1.1% lower. Small and mid-cap indices were also down 1 – 2%, while the broader S&P500 was essentially flat (-0.1%).
Triggering the weakness, Tuesday’s US CPI print was worse than expected with core CPI, for example, coming in at +0.4% M-o-M (vs. consensus of +0.3%). The headline reading was in line M-o-M, but higher than expected on an annual basis. That was followed by an upside surprise in PPI inflation on Thursday (with both headline and core worse than expected).
Reflecting that, bond yields moved higher last week (e.g. see chart below); certain ‘liquidity sensitive’ assets like gold and Bitcoin gave back some of their recent gains; and the rates market priced out some of the Fed cuts for this year and next. Within the equity market, and reflecting that move higher in yields/rates, there was some rotation out of long duration and defensive sectors.
All eyes this coming week will be on Wednesday’s Fed meeting, especially the tone of the press conference (and the ‘summary of economic projections’). Powell’s view on the stickiness of inflation, and the timing of the first rate cut, will be watched closely (along with any update on when QT might finish). Other central banks are also making policy decisions this coming week, including the BoJ and RBA (both on Tuesday); PBoC (Wednesday); and the BoE (Thursday). Elsewhere, in the UK, there’s an update on CPI inflation for February (Wednesday) as well as retail sales (Friday). Please see below for a full list of key data & events.
Fig A: US 10y bond yield (%), shown with key moving averages
(All in London time BST)
Events: N/A
Data: Chinese data (IP, retail sales, FAI & unemployment rate – all for Feb, 2am); US NAHB homebuilders index (Mar, 2pm).
Earnings: N/A
Events: RBA policy decision (3:30am); BOJ policy decision (TBA).
Data: German & Eurozone ZEW survey – expectations & current situation (Mar, 10am).
Earnings: N/A
Events: PBoC policy decision (1:15am); Fed policy decision & summary of economic projections (6pm) followed by Powell press conference (6:30pm).
Data: US building permits & housing starts (Feb, 12:30pm); UK headline & core CPI (Feb, 7am).
Earnings: Micron
Events: Bank of England policy decision (12pm).
Data: HCOB manufacturing & service sector PMIs for France (8:15am), Germany (8:30am) & Eurozone (9am) – all March first estimates; US S&P manufacturing & service sector PMIs (March first estimate, 1:45pm); US Conference Board leading index (Feb, 2pm).
Earnings: Nike, FedEx
Events: N/A
Data: UK retail sales (Feb, 7am); German IFO business expectations (Mar, 9am).
Earnings: N/A
Extract from Quarterly Asset Allocation No. 57, 12th March 2024:
“China: Economy Bouncing (but structurally impaired)”
Structurally, China is facing a number of major headwinds. In particular, the real estate bubble has burst, and the economy is likely to be in the early stages of a balance sheet recession.
In other words, as property and land prices fall, liabilities associated with the real estate bubble remain unchanged. The private sector is therefore under growing pressure to save/deleverage, in an attempt to repair its balance sheet. Of note, in that respect, house prices are sharply lower (unofficially); private sector indebtedness is high (225% of GDP); and there’s building evidence that households’ collective appetite to save/deleverage is growing.
Events: N/A
Data: US New York Fed services business activity (Mar, 12:30pm); Canadian existing home sales (Feb, 1pm) & producer price inflation (Feb, 12:30pm); US NAHB homebuilders index (Mar, 2pm).
Earnings: N/A
Events: Fed two-day meeting begins (2pm).
Data: US building permits & housing starts (Feb, 12:30pm); Canadian headline & core CPI (Feb, 12:30pm).
Earnings: N/A
Events: Bank of Canada releases summary of deliberations (5:30pm); Fed two-day meeting ends (6pm); Fed policy decision & summary of economic projections (Wed, 6pm) followed by Powell press conference (6:30pm).
Data: N/A
Earnings: Micron, General Mills
Events: Speech by the Bank of Canada’s Gravelle in Toronto (1:50pm).
Data: US current account balance (Q4, 12:30pm); US Philadelphia Fed business outlook (Mar, 12:30pm); US S&P manufacturing & service sector PMIs (March first estimate, 1:45pm); US Conference Board leading index (Feb, 2pm); US existing home sales (Feb, 2pm).
Earnings: Nike, FedEx, Cintas
Events: Speech by the Fed’s Bostic at 2024 Household Finance conference (8pm).
Data: Canadian retail sales (Jan, 12:30pm).
Earnings: N/A
Events: Speeches by the ECB’s Centeno at Awards Ceremony in Lisbon (4pm).
Data: Eurozone headline & core CPI (February final estimate, 10am); Eurozone trade balance (Jan, 10am).
Earnings: N/A
Events: Guindos in Madrid (8:30am).
Data: German & Eurozone ZEW survey – expectations & current situation (Mar, 10am); Eurozone labour costs & wage growth (Q4, 10am).
Earnings: N/A
Events: Lagarde in Frankfurt (8:45am), Lane in Frankfurt (9:30am), Hernandez de Cos in Frankfurt (12pm), Schnabel in Frankfurt (1:45pm), Holzmann in Vienna (3:30pm), Nagel on the future of European finance (4:45pm).
Data: German PPI (Feb, 7am); Eurozone European Commission consumer confidence (March first estimate, 3pm).
Earnings: N/A
Events: N/A
Data: Eurozone new car sales (Feb, 7am); French business & manufacturing confidence (Mar, 7:45am); HCOB manufacturing & service sector PMIs for France (8:15am), Germany (8:30am) & Eurozone (9am) – all March first estimates; ECB current account (Jan, 9am).
Earnings: Porsche, BMW, Enel
Events: Nagel in MNI online event (9am), Holzmann in Vienna (10am), Centeno in Lisbon (11am), Nagel the future of digitalisation and finance (1pm) & Lane on inflation (5pm).
Data: German import price index (Jan, 7am); French wages (Q4 final estimate, 7:45am); German IFO business expectations (Mar, 9am).
Earnings: N/A
Events: N/A
Data: Rightmove house prices (Mar, 12:01am).
Earnings: N/A
Events: N/A
Data: N/A
Earnings: N/A
Events: N/A
Data: Headline & core CPI, RPI & PPI (Feb, 7am); Land Registry house prices (Jan, 9:30am).
Earnings: N/A
Events: Bank of England policy decision & meeting minutes (12pm).
Data: Public sector finances (Feb, 7am); S&P manufacturing & service sector PMIs (March first estimate, 9:30am).
Earnings: N/A
Events: N/A
Data: GfK consumer confidence (Mar, 12:01am); retail sales (Feb, 7am); CBI industrial trends survey (Mar, 11am).
Earnings: N/A
Events: N/A
Data: Chinese data (IP, retail sales, FAI & unemployment rate – all for Feb, 2am); Chinese FDI (Feb, Tentative).
Earnings: N/A
Events: RBA policy decision (3:30am) followed by press conference (4:30am); BOJ policy decision (TBA).
Data: Japanese industrial production & capacity utilisation (January final estimate, 4:30am).
Earnings: Wanhua Chemical, Xiaomi
Events: PBoC policy decision 1 & 5 yr LPR (1:15am).
Data: Australian Judo Bank manufacturing & service sector PMIs (March first estimate, 10pm); Japanese imports & exports (Feb, 11:50pm).
Earnings: Tencent Holdings
Events: N/A
Data: Japanese Jibun Bank manufacturing & service sector PMIs (March first estimate, 12:30am); Australian labour market data (Feb, 12:30am); Japanese headline & core CPI (Feb, 11:30pm).
Earnings: China Mobile, CNOOC, Ping An Insurance
Events: RBA financial stability review published (12:30am).
Data: N/A
Earnings: China Shenhua Energy, China Petrol, Zijin Mining, Fubon Financial
(Long)View from London, 15th March 2024:
“Equities: The Worry List”
Quarterly Asset Allocation No. 57, 14th March 2024:
“How Much is the US in a Bubble?”
Quarterly Asset Allocation No. 57, 12th March 2024:
“China: Economy Bouncing (but structurally impaired)”
(Long)View from London, 8th March 2024:
“What’s Going on with Gold? Plus Puzzling ECB Reticence”
Quarterly Asset Allocation No. 57, 7th March 2024:
“US Macro: Sectoral and Structural Health”
Quarterly Asset Allocation No. 57, 6th March 2024:
“Eurozone: Europe is Deleveraging!”
Monthly Commodity Update, 5th March 2024:
“Prices Turning: Uranium, Iron Ore and Oil”