Will the recovery continue?
It’s likely to be another action-packed week despite numerous countries seeing it shortened by bank holidays. The jobs report is typically the highlight when it comes to the first week of the month but there will be competition from the OPEC+ meeting, Bank of Canada rate decision and inflation data.
We’ve seen a shift in markets over the last couple of weeks, with interest rate concerns being replaced by recession fears and then risk appetite improving after a challenging period. Can it be sustained?
There’ll be no shortage of central bank policymakers speaking over the next week which will naturally have a big role to play in the markets, as has been the case for much of the year. Can they keep investors happy or will they ruin the recovery?
US
It will be a busy week filled with a wrath of economic data and central bank speak. The majority of economic data is expected to show broad weakness. Traders will pay close attention to the Conference Board consumer confidence reading on Tuesday which is expected to show a significant deceleration. On Wednesday, the ISM manufacturing report is expected to soften alongside a decline in prices paid. The main economic release will be the nonfarm payroll report. With many companies concerned about a deceleration in consumer spending, it will be important to see if hiring remains strong. The consensus estimate for the change in nonfarm payrolls is 329,000 jobs, a decent dip from the 428,000 created in the prior month.
Fed speak begins on Monday with the hawkish Waller as he discusses the economic outlook. Wednesday is a busy day with the release of the Beige Book and remarks from the Fed’s Williams and Bullard. On Thursday, the Fed’s Logan speaks at an event on Monetary Policy Implementation and Digital Innovation and Mester talks about the economic outlook. On Friday, the Fed’s Brainard speaks at an event hosted by the Urban Institute.
EU
Speeches from ECB policymakers have become a lot more interesting in recent months as the central bank has gradually come around to the idea of abandoning its net asset purchases and negative interest rate policy. President Christine Lagarde laid out those plans clearly this week – a rate hike in July and September taking the deposit rate out of negative territory – in a highly unusual move. Others have since supported those views with some wanting more. Commentary will remain key.
A plethora of economic data from the eurozone will land next week, the highlight of which will naturally be the inflation data on Tuesday. We may soon see why the ECB felt the need to lay the groundwork for impending hikes. The individual country inflation data at the start of the week may provide clues as to what’s to come on Tuesday when the overall eurozone data is released.
UK
A shortened week for the UK thanks to the Jubilee bank holiday on Thursday and Friday. The rest of the week offers very little with tier two and three data being released on Tuesday and Wednesday.
Russia
This week, the CBR cut rates by another 300 basis points, taking the key rate to 11%. That’s only 1.5% above where it was prior to the invasion and 9% from the post-invasion peak. The move was done to arrest the appreciation in the rouble and has had some effect. But further rate cuts are likely, with many anticipating that the rouble will remain strong regardless of the central bank’s actions. It’s worth noting that the CBR is not waiting for scheduled meetings to cut rates so another could come before 10 June.
Lots of data next week as we start to see the economic ramifications of the decision to invade Ukraine.
South Africa
A number of economic releases are due next week including the whole economy PMI survey and unemployment. The central bank has been hiking aggressively recently and may not be done.
Turkey
Inflation data is the highlight next week but frankly, no one should care what it says at this point as the central bank certainly doesn’t. Maintaining that external factors are to blame rather than its misguided monetary policy, it’s clear that there will be no rate hikes any time soon, with households and businesses left to pay the price of President Erdogan’s warped ideology.
China
China releases official PMIs on Tuesday and the Caixin Manufacturing PMI on Wednesday. There is downside risk to these numbers after recent soft data, and if the prints are weak, Chinese equities could face another sell-off.
China’s covid zero policy continues to dominate the economic outlook. Although Shanghai appears to be past the worst, Chinese markets remain vulnerable to spikes in cases in major cities leading to immediate movement restrictions. Any headlines along this line could weigh on local equities and also regional markets.
The PBOC appears to have capped the rise by USD/CNY for now via the fixing. China appears conflicted as to whether to allow more weakness to boost exports and weaker fixings this week can’t be ruled out. That could be a headwind for regional currencies as well.
India
India releases PMIs this week and Q4 GDP, however, markets could range trade ahead of the next RBI meeting on the 6-8 June where another rate hike is expected. Indian equity markets have moved to the lower end of their 2022 range, while the rupee has fallen to 2022 lows. Both remain vulnerable to swings in global risk sentiment. The US dollar retracement has passed the rupee by, suggesting more weakness may come.
Australia
Australia releases Q1 GDP on Wednesday and trade balance on Thursday. The trade balance will be closely watched to see if the Chinese slowdown is impacting Australia’s terms of trade which could be a negative for equities.
The Australian dollar has ridden the US dollar correction higher but despite data, elections, and monetary policy changes, the short-term direction of the currency continues to be dominated by the swings in risk sentiment day-to-day.
New Zealand
No significant data next week. Like the Australian dollar, the New Zealand dollar remains hostage to the daily swings we are seeing in investor risk sentiment from North American markets.
Japan
Japanese PMIs on Tuesday and Friday may cause only short-term volatility. The Nikkei continues to closely track the directional movements of the Nasdaq and S&P 500. Meanwhile, USD/JPY continues to be guided by movements in the US/Japan rate differential. There is potential for USD/JPY to have a culling of long positioning, but if the US 10 year yield moves back towards 3.0%, USD/JPY could just as easily be heading higher once more.
Singapore
No significant data or events.
Economic Calendar
Monday, May 30
Economic Data/Events
- EU leaders begin two-day special meeting in Brussels
- Germany CPI
- Eurozone economic confidence, consumer confidence
- Thailand capacity utilization, manufacturing production index
- Japan machine tool orders
- Sweden GDP
Tuesday, May 31
Economic Data/Events
- US Consumer Confidence
- Eurozone CPI
- France CPI
- Poland CPI
- Canada GDP
- Czech Republic GDP
- India GDP
- Switzerland GDP
- Turkey GDP
- Japan industrial production, unemployment
- South Africa trade
- Germany unemployment
- Mexico reserves, unemployment
- Australia building approvals, BoP current account, consumer confidence
- China PMI
- Singapore money supply
- India GDP, fiscal deficit, eight infrastructure industries
- Thailand BoP, trade
- Hong Kong budget balance, money supply
- Japan retail sales, consumer confidence index, housing starts
- New Zealand building permits, business confidence
- Riksbank Governor Ingves speaks
- ECB’s Makhlouf speaks
- Bank of Italy releases annual report
Wednesday, June 1
Economic Data/Events
- US construction spending, ISM manufacturing, light vehicle sales
- Fed release Beige Book; also begins balance sheet runoff
- Fed’s Williams speaks at Colombia University
- Fed’s Bullard speaks
- Australia trade, PMI
- Eurozone PMI
- Germany PMI
- UK PMI
- India PMI
- Thailand PMI
- Unemployment: Eurozone, Italy, Russia
- Bank of Canada rate decision
- New Zealand house prices
- Hong Kong retail sales
- Hungary GDP
- Australia GDP, house prices
- Thailand business sentiment index
- China Caixin PMI
- Japan capital spending, company profits, vehicle sales, Jibun Bank PMI
- Russia industrial production
- BOE’s Hauser is a panelist at NY Fed’s conference on monetary policy and digital innovation
- BOE’s Decision Maker Panel survey results released
- ECB’s Knot gives a keynote speech at the Bank of International Settlements’ “Green Swan” conference
- PBOC Governor Yi Gang, ECB President Christine Lagarde and others speak about the green transition
Thursday, June 2
Economic Data/Events
- US factory orders, durable goods, initial jobless claims
- OPEC+ begins two-day meeting
- Fed’s Mester speaks about the economic outlook
- Riksbank Deputy Governor Jansson speaks
- Eurozone PPI
- Australia trade
- New Zealand terms of trade index
- Thailand forward contracts, foreign reserves
- Singapore electronics sector index, PMI
- Japan monetary base
- Spain unemployment
- EIA crude oil inventory report
Friday, June 3
Economic Data/Events
- US May change in nonfarm payrolls: 329Ke v 428K prior, unemployment rate, average hourly earnings
- Eurozone retail sales, Markit services PMI
- France industrial production
- Australia home loans value
- Singapore retail sales, PMI
- The UN’s Food and Agriculture Organization posts monthly food price index
Sovereign Rating Updates
- Austria(Moody’s)
- France (Moody’s)
- Saudi Arabia (Moody’s)
- Germany(DBRS)
