After a barrage of big data releases and events last week, the calendar slows down this week… or at least was supposed to until Trump blew up the Chinese trade deal late on Sunday sending global markets reeling to start the week. That said, trade aside, we still have another round of trade meetings to look forward to between the US and China, as well as US CPI and PPI data which becomes a focal point in light of the recent Fed comments. We’ve also got a slew of data due out in China, the remaining PMIs in Europe and plenty of Fed speakers scheduled through the week.
Naturally, trade talks – or the lack thereof – will be the early focus next week as China’s top trade envoy Liu He returns (perhaps) to Washington on Wednesday. Until Trump’s forceful intervention on Sunday, when the president threatened to hike tariffs on Chinese imports on Friday as the trade talks drag on for too long, markets had already been left confused by the message following talks in Beijing this week. Initially the comments from the US side appeared mostly positive, however late last week, Chinese media reported that officials “may have hit an impasse” which caused markets to temporarily sell-off. In fairness, the details were less negative than the headline suggested, but the story could nevertheless be a signal from Chinese officials about their willingness to walk away from talks if a satisfactory deal isn’t soon completed. Of course, Trump’s tweet on Sunday blew up any tentative ceasefire that had been cobbled together over the past few months. So, as DB’s Craig Nicol writes, “it remains to be seen but with a tentative end-May deadline for an agreement to be reached, next week’s talks could go a long way to deciding the fate of those negotiations.“
Meanwhile, it’s a bit light on data in the US this week, however, we still have more important inflation data to digest starting with the April PPI report on Thursday and then the April CPI report on Friday. The latter is expected to rise +0.2% mom for the core, which would be enough to lift the annual rate by one-tenth to +2.1% yoy. Given Powell’s recent comments emphasizing that a good portion of the weakness in core inflation was due to “transient factors”, and that the trimmed mean rate is at the Fed’s target, inflation data will likely be garnering more attention again in the near term. Our US economists recently dug into the details of core inflation in a report this week which you can find here.
As for Europe, the main highlight will almost certainly be the remaining April PMIs on Monday when we get services and composite prints. All the focus will be on whether or not there is further divergence between the manufacturing and services sectors, or whether the gap is starting to close. The flash prints implied a decent decline for the non-core countries so that will be closely watched. Also worth flagging in Europe next week are March industrial production prints in Germany on Wednesday and France and the UK on Friday, along with the March and Q1 GDP reading for the latter.
In Asia, it’s a busy week for data in China with the Caixin PMIs due on Monday, April trade numbers due on Wednesday and April CPI and PPI on Thursday. In Japan we get the Nikkei PMIs over Tuesday and Wednesday.
It’s also a reasonably busy week for Fedspeak which will likely be a focal point given the message particularly about inflation being transitory from the Fed on Wednesday. Bullard, Daly and Kaplan are all due to participate at the Hoover event early tomorrow morning before Harker speaks on Monday, Kaplan and Quarles on Tuesday, Brainard on Wednesday, Powell, Bostic and Evans on Thursday and Bostic, Brainard and Williams on Friday. It’s worth noting that Powell’s comments are due to come at a Fed community conference which isn’t typically seen as a venue for policy discussion. In Europe, the ECB’s Lautenschleager and Praet will speak on Monday, while Coeure, Villeroy and Lautenschlaeger also speak on Friday while over at the BoE we’re due to hear from Cunliffe, Haldane and Ramsden early in the week.
As for earnings, the run rate slows now with just 57 S&P 500 companies due to report. Through this weekend we’ve had earnings reports from 382 S&P 500 companies with 288 beating on earnings for an aggregate beat of +6.3%, but just 214 on sales. As DB notes, the breadth of beats in the US has rebounded from the seven-year low in Q4 and the size of beat is running well above average. On top of that, guidance has seen the bottom-up consensus 2019 estimate rise for the first time since mid-2018. All-in-all a fairly positive earnings season so far then.
Finally, other things to watch next week include a meeting in Berlin between Merkel and US Secretary of State Pompeo, the European Commission’s latest economic forecasts also due on Tuesday, Pompeo meeting with UK PM May on Wednesday in London, South Africa national and legislative elections on Wednesday, Brazil’s rate decision on Wednesday and Norway’s rate decision on Thursday. It’s worth noting that markets in the UK are also closed on Monday.
Summary of key events by day, courtesy of Deutsche Bank:
- Monday: The final April services and composite PMIs will be the main focus with data due in China and Europe. The May Sentix investor confidence reading and March retail sales for the Euro Area are also due. The Fed’s Harker is also scheduled to speak in the afternoon, while the ECB’s Praet and Lautenschlaeger are due to speak.
- Tuesday: Overnight, the final April manufacturing PMI in Japan is due, while China’s April foreign reserves data is also due out. In Europe we’ll get March factory orders in Germany, the March trade balance for France and April house price data in the UK. In the US the March JOLTS report and March consumer credit print is due. Elsewhere, the latest EU commission forecasts are due, while the BoE’s Cunliffe and Haldane will speak. The Fed’s Kaplan and Quarles will also speak, while US Secretary of State Pompeo is due to meet with German Chancellor Merkel in Berlin.
- Wednesday:China’s April trade data will be due out during the morning, along with the remaining April PMIs in Japan. In Germany the March industrial production print is due out. Away from that, the BoE’s Ramsden is due to speak and the BoJ’s latest meeting minutes are due. Pompeo is also due to meet with UK PM May in London. Meanwhile, China’s Liu He returns to Washington for another round of trade talks. The Fed’s Brainard is also due to speak.
- Thursday: The overnight focus will be on the April CPI and PPI prints in China. There are no data releases due in Europe, while in the US we’ll get the April PPI report along with the latest claims reading, March trade balance and March wholesale inventories data. The Fed’s Powell, Evans and Brainard are also due to speak at a Fed community research event.
- Friday: A busy day for data releases includes March trade data in Germany, March industrial production in France and the UK, and March and Q1 GDP for the UK. In the US the April CPI report is due out along with the April monthly budget statement. The Fed’s Bostic and Williams are also due to speak, along with the ECB’s Coeure, Galhau and Visco.
And visually, courtesy of Amplify:
Finally, here is Goldman focusing on the US, and noting that the key economic data release this week is the CPI report on Friday, adding that there are several scheduled speaking engagements by Fed officials this week.
Monday, May 6
- 09:30 AM Philadelphia Fed President Patrick Harker (FOMC non-voter) speaks: Philadelphia Fed President Patrick Harker will discuss the economic outlook at Drexel University. Prepared text and audience Q&A are expected.
Tuesday, May 7
- 07:00 AM Dallas Fed President Kaplan (FOMC non-voter) speaks; Dallas Fed President Robert Kaplan will speak on a moderated panel at Tsinghua University in Beijing. Audience and media Q&A are expected.
- 10:00 AM JOLTS Job Openings, March (consensus 7,350, last 7,087k)
- 11:35 AM Vice Chair for Supervision Quarles (FOMC voter) speaks: Fed Governor Randal Quarles will discuss financial regulation at Yale University. Moderator Q&A is expected.
- 03:00 PM Consumer credit, March (consensus +$16.0bn, last +$15.2bn)
Wednesday, May 8
- 08:30 AM Fed Governor Brainard (FOMC voter) speaks: Fed Governor Lael Brainard will give opening remarks at a “Fed Listens” event at the Richmond Fed. Prepared text is expected.
Thursday, May 9
- 08:30 AM Fed Chair Powell (FOMC voter) speaks; Fed Chair Jerome Powell will give opening remarks at a Fed conference on community development in Washington, D.C. Prepared text is expected.
- 08:30 AM PPI final demand, April (GS +0.3%, consensus +0.2%, last +0.6%); PPI ex-food and energy, April (GS +0.2%, consensus +0.2%, last +0.3%); PPI ex-food, energy, and trade, April (GS +0.2%, consensus +0.2%, last flat): We estimate a 0.3% increase in headline PPI in April, reflecting relatively firm energy prices. We expect a 0.2% increase in the core measure excluding food and energy, and also a 0.2% increase in the core measure excluding food, energy, and trade.
- 08:30AM Trade balance, March (GS -$50.3bn, consensus -$51.1bn, last -$49.4bn): We estimate the trade deficit increased to $50.3bn in March, reflecting a slightly larger trade in goods deficit.
- 08:30 AM Initial jobless claims, week ended May 4 (GS 215k, consensus 220k, last 230k): Continuing jobless claims, week ended April 27 (last 1,671); We estimate jobless claims fell to 215k in the week ended May 4 following volatility in the prior weeks likely related to this year’s timing of Easter. The claims reports of recent weeks suggest that the pace of layoffs remains low.
- 09:45 AM Atlanta Fed President Bostic (FOMC non-voter) speaks; Atlanta Fed President Raphael Bostic will discuss the economic and monetary policy outlook at the Louisiana Bankers Association’s Convention and Exposition. Audience Q&A is expected.
- 01:15 PM Chicago Fed President Evans (FOMC voter) speaks; Chicago Fed President Charles Evans will speak at a Fed conference on community development in Washington, D.C.
Friday, May 10
- 08:30 AM CPI (mom), April (GS +0.46%, consensus +0.4%, last +0.4%); Core CPI (mom), April (GS +0.21%, consensus +0.2%, last +0.1%); CPI (yoy), April (GS +2.14%, consensus +2.1%, last +1.9%); Core CPI (yoy), April (GS +2.14%, consensus +2.1%, last +2.0%); We estimate a 0.21% increase in April core CPI (mom sa), which would boost the year-over-year rate by a tenth to +2.1%. Our forecast reflects a boost of roughly +0.01pp each from online sales taxes in California, oil-price pass through in the airfare category, and a rebound in the tax preparation category following a sharp drop over the last two months. We also expect a modest rebound in the apparel category following last month’s methodological changes. We look for another firm shelter inflation reading, as alternative rent measures have risen further, apartment completions have peaked, and aggregate vacancy rates remain low. On the negative side, we expect a sizable drop in used car prices. We look for a 0.46% increase in headline CPI (mom sa), mostly reflecting a boost from higher gasoline prices.
- 08:30 AM Fed Governor Brainard (FOMC voter) speaks: Fed Governor Lael Brainard will speak at a Fed conference on community development in Washington, D.C. Prepared text and audience Q&A are expected.
- 09:08 AM Atlanta Fed President Bostic (FOMC non-voter) speaks: Atlanta Fed President Raphael Bostic will discuss the economic and monetary policy outlook at an East Mississippi Business Development Corporation event. Audience and media Q&A is expected.
- 10:00 AM New York Fed President Williams (FOMC voter) speaks: New York Fed President John Williams will speak at the Bronx Bankers Breakfast. Prepared text and audience Q&A are expected.
- 02:00 PM Monthly budget statement, April (consensus +$160.0bn, last -$146.9bn)
Source: DB, Goldman, BofA
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