After the great start of banks with better-than-expected earnings on Friday, we will have more earnings reports in the week ahead, and it will be a busy week full of data to watch. The focus of the week will be the PMI numbers.
Tuesday, April 18: China’s Q1 GDP and Other Economic Data!
With the great PMI numbers we had in recent months, especially Service PMI at the highest level since 2011, it is likely to see improving numbers. Reopenings which released the compressed spring of demand and started in January, were the main GDP driver. The initial forecast for China’s Q1 GDP is to rise by 2.2% quarter-over-quarter, which would be a sharp improvement from the flat outcome seen in Q4. We expect a 4% growth on the annual scale, which would be much better than 2.9% in Q4. We also expect other data from China, including Retail Sales, Industrial Production, and labor market data. Industrial Production and Fixed Asset investments are expected to increase, but March Retail Sales will likely grow only 0.8%, much less than 3.5% in February. China’s unemployment in March is also expected to remain at 5.6%.
Tuesday, April 18: UK labor data.
The labor market is still growing in the UK while wages decrease. We expect Average Earnings to cool to 6.2% from 6.5% and Average Earnings Index +Bonus to ease to 5.1% from 5.7%. Unemployment is expected to remain unchanged at 3.7%, but there is a chance of surprise as well. Overall, labor market data in February can support the UK Sterling.
Wednesday, April 19: UK Inflation.
With Tuesday’s labor market data and Wednesday’s inflation numbers, we will better see what we expect from BoE’s next policy meeting. In February, the headline inflation ticked 10.4%, and core CPI inflation ticked up to 6.2%. However, the bullish factors of headline inflation ticked lower in March, so we are optimistic about seeing headline CPI down to 9.8%. In line with lower expected wages, inflation also should decrease to under 10%. Conversely, Producer Price Index (PPI) should increase by 0.1% after a surprise fall of -0.1% in February. Despite these expected outcomes, the Bank of England will raise its policy rate by 25 bps to 4.50% in its May monetary policy announcement. A significant downside CPI surprise will make the BoE pause the rate hike cycle.
Wednesday, April 19: EU Inflation.
The headline inflation across the Eurozone is expected to remain unchanged at 0.9% in the final reading for March. We also expect no change in the initial 6.9% estimates in the annual scale. The key Core CPI rate should also remain unchanged at 5.7% annually and 1.2% for March.
Thursday, April 20: US data
It will be a busy day in the US with Existing Home Sales, Weekly Claims & Philly Fed Manufacturing Index. After the increase in sales in February to a 4.58 million-unit pace with a 14.5% upside surprise, which also increased the house prices on a not-seasonally adjusted monthly basis for the first time since mid-2022, March data can be disappointing. We expect existing home sales to ease to a 4.48 million-unit pace in March. In the labor market and after last week’s surprise jump to 239K applications, we expect initial claims to receive unemployment benefits to increase by another 1K to 240K. Moreover, finally, the Philadelphia Fed Manufacturing Index is expected to improve to -20.0 from -23.2 but remain very weak and in negative territory. These data tell us that Fed will raise the interest rates only one more time, and we can expect a pause after that.
Friday, April 21: PMI Day
On the last day of this week, PMI numbers will be in focus. Most developed economies will release their Purchasing Managers Index numbers. These data will give us a brighter idea of how the global economy is improving and what we can expect. A brighter outlook will help us to find what can be the best investment. In Australia, the manufacturing PMI should fall to 48.8 from 49.1, but Service PMI can rise to 51.2 from 50.7. In Japan, manufacturing PMI should also fall to 48.9 from 49.2, and Service must be unchanged at 54. Eurozone Manufacturing will fall to 46.9 from 47.3, and Service PMI to rise to 56.3 from 55. In the UK, Manufacturing PMI supposes to stay unchanged at 47.9, while the Service sector should rise to 53.9 from 52.9, leaving the Composite at 52.7. Moreover, finally, in the United States, Manufacturing PMI should increase to 49.5 from 49.2 and Service PMI to 53.8 from 52.6.
Earnings of the week.
After a much better-than-expected earnings report last week, the banking sector will continue with Charles Schwab (SCHW) on Monday. J&J (JNJ), Bank of America (BAC), Netflix (NFLX), and Goldman Sachs (GS) will report on Tuesday. On Wednesday, Tesla (TSLA), L’Oreal ADR (LRLCY), Morgan Stanley (MS), IBM (IBM), and Nasdaq Inc (NDAQ) will have an earnings call. On Thursday, we should watch the Taiwan Semiconductor (TSM), Philip Morris (PM), AT&T (T), American Express (AXP), and Union Pacific (UNP) reports. Moreover, finally, Friday’s focus will be on Procter&Gamble (PG) earnings report.
