While earnings season continues, investors will mainly focus on Central Bank interest rate announcements in the US, Europe, and Australia. At the same time, the US Nonfarm payroll announcement on Friday also should be watched closely, along with PMI numbers across the globe. Let’s review the most important event and data in the week ahead.
Sunday, April 30: China PMI
After an initial jump in both Manufacturing and non-manufacturing activities right after lifting the Covid restrictions, the Chinese economy increased much slower than expected almost in all sectors. Manufacturing PMI fell to 49.2 in April from 51.9 in March, while None-Manufacturing PMI, which was supposed to slow down from 58.2 in March to 57 in April, missed the estimates at 56.4. The economic weakness in other parts of the world is not leaving China’s economy unaffected, especially in manufacturing sectors with slower demand out of China.
Monday, May 1: US ISM Manufacturing PMI
While most economies will be closed on Monday, May 1, due to International Labor Day, the US manufacturing purchasing Index will give us a clearer idea of economic condition in April. It has been under the 50-breakeven point in the last five months, while all subcomponents were below the 50-level for the first time since 2009. This weakness is expected to continue for the sixth month at 46.7, slightly higher than 46.3 in March, which still marks a contraction in the Manufacturing sector. These data should increase the fear of recession.
Tuesday, May 2: Reserve Bank of Australia
According to recent data, inflation in Australia has slowly begun to rise since March. Recent evidence suggests that inflation has already peaked, and policymakers may be discouraged from increasing rates due to a cautious outlook on consumer spending. Despite this, we anticipate that the RBA will keep interest rates at the same level of 3.60%, which they did in the previous meeting. While some analysts believe the Reserve Bank of Australia may raise the rate by 25 bps to 3.85% due to recent evidence of inflation re-increasing, the consensus estimate is that the rate will remain unchanged. This decision may cause the Australian Dollar to experience more pressure against the Euro and USD, as it is expected to see the rate hike in both Fed and ECB meetings later this week.
Tuesday, May 2: Eurozone Inflation
Before the ECB meeting on Thursday, Eurozone inflation numbers will be in focus to see what we have to expect from Thursday’s monetary policy meeting. While the consumer price index has been decreasing slowly on the annual scale after peaking at 10.7% last October, excluding the volatile energy and food prices, inflation raised again in March to 5.7%. For April, the consensus estimate for headline inflation is to rise slightly to 7.0% year-over-year, while core inflation should stay unchanged at 5.7%.
Tuesday, May 2: US JOLTS Job Openings
According to the US Bureau of Labor Statistics, the number and rate of job openings on the last business day of February fell under 10 Million for the first time since July 2021. For March, we expect a further decline to 9.7 million. A weaker or stronger number will tell us more about the US labor market condition and how much employers are interested in hiring new employees.
Wednesday, May 3: US ISM Service PMI
Since we have the Fed meeting on the same day, the market can ignore the PMI results in the short term, but these numbers will be important for market movements later this week or next. It is while we can see the pull-back from robust peaks in November of 2021, with many of the various component categories of the service sector now in contraction territory. However, the services sector has kept its head above the 50-expansion level to expand the past three months, excluding a fall in December 2022. For April, in line with the production and manufacturing sector, the ISM services index is expected to rise modestly to 51.8.
Wednesday, May 3: FOMC policy meeting
US Federal Reserve Open Market Committee’s two-day interest rate decision and policy meeting will end on Wednesday. We will have the Fed announcement and Fed Chair Powell’s speech 30 minutes later. At the last meeting and for the ninth straight hike to the highest rate since 2007, the FOMC increased the fund’s rate band by 25 basis points to a 4.75% to 5.0% range, as widely expected. While the market expects another 25 bps rate hike in this meeting, investors mostly are looking to see what policymakers think, will that rate hike and this level be sufficient, and a pause for the rest of the year is appropriate, or if it is still too soon to signal such a thing with inflation remaining sticky. Any hawkish signal will increase the USD value, pressure the stock markets, and vice-versa.
Thursday, May 4: ECB meeting
After the meeting, ECB’s Lagarde said that European Central Bank would “monitor financial market developments” and decisions would be data-based. In the previous session, ECB raised the rates by 50 bps to 3.00% and the refi rate to 3.50%. However, since the consensus estimate expects inflation to have ticked up slightly in April, but market uncertainty is also high with increasing fear of recession, we expect only a 25 bps hike, bringing the Deposit Rate to 3.25%, which can continue in the following meetings to 4% by year-end. That will not be enough to support the common currency or even European stock markets.
Friday, May 5: US labor market (NFP) data
Considering initial Jobless claims reports published in recent weeks, we can expect a slight weakness in April nonfarm payroll numbers, but not breaking. With a 62.6% Participation Rate, we hope 180K newly created jobs, down from 236K in March, which will increase the April unemployment rate to 3.6% from 3.5% in March. In addition, another 0.3% increase in average hourly earnings would keep the year-over-year rate at 4.2%. While comprehensive data would be positive, since it will publish after the May Fed meeting, it would not impact the market as usual.
Earnings of the week
On the earning calendar, we have to watch the British American Tobacco ADR report on Monday, Pfizer (PFE), HSBC (HSBC), AMD (AMD), Starbucks (SBUX), and Ford Motor (F) on Tuesday. In contrast, Qualcomm (QCOM) and Airbus Group (EADSY) reports will be published on Wednesday. This week’s focus on the earnings calendar will be the Thursday and Apple (AAPL) report. However, we should also watch the Shell (SHEL), Booking (BKNG), and Volkswagen (VWAGY) reports on Thursday.
