Date : 28th May 2018.
MACRO EVENTS & NEWS OF 28th May 2018.
Main Macro Events This WeekGeopolitics reared its ugly head again, knocking core sovereign yields lower, while elevating those on the periphery especially in Europe. Mixed messages between Kim and Trump kept markets on their toes about the diplomatic climate between North Korea and the U.S., after the summit was called off, then possibly back on again. Along with worries over Korea and China, concerns about Turkey, Italy and now Spain, have resurfaced. Even against U.S. allies, a 25% tariff on auto imports was floated, leading to concerns that global growth could be compromised down the road.
United States: The week of May 28 will be a busy, holiday-shortened one in the U.S., with a slew of data releases after the return from the long Memorial Weekend. The focus will be squarely on the April jobs report after recent readings have fallen short of expectations, but in April the gain is expected to be in line with the year-to-date average. Front and center will be Nonfarm payrolls (Friday), expected to rise 195,000 in May, following a weaker-than-expected April gain of 164,000. The unemployment rate is estimated to be steady at 3.9%. Consumer confidence should be 128.0 in May (Tuesday), down only slightly from a strong 128.7 reading in April and the 17-year high of 130.0 in February. MBA mortgage market applications are due (Wednesday), along with the ADP employment survey seen rising 200k in May from 204k in April. Advanced trade indicators deficit may widen to -$70.5 in April (Wednesday) from $68.3 bln, along with a second update on Q1 GDP. Personal income is expected to rise 0.3% in April (Thursday), following a similar gain in the prior month, while PCE may rise 0.4%. Initial jobless claims are set to fall 8k to 226k in the week ended May 26, following the prior pop to 234k from 222k in the week of May 12. Chicago PMI is due, in addition to NAR pending home sales seen rising to 108.2 in April from 107.6 and delayed EIA inventory data (due to holiday).
Canada: The BOC’s announcement (Wednesday) is front and center this week. No change to the current 1.25% policy setting is expected alongside a maintenance of their gradualist tone, with a likely reiteration that they “will remain cautious with respect to future policy adjustments, guided by incoming data.” As for data that will guide the Bank of Canada, this week has real Q1 GDP (Thursday), March GDP also due Thursday, the current account and the industrial product price index on Wednesday, and the march average weekly earnings on Thursday.
Europe: The ECB is heading for difficult times as political jitters in Italy, and now Spain, threaten to destabilize markets, just as inflation is expected to finally move higher and vindicate the ECB’s move towards policy normalization. So far, the ECB taken the uptick in Italian yields with apparent calm, but if turbulence increases and deepens pressure on Draghi to try and step in with verbal intervention, volatility will intensify.
At the same time, this week’s round of preliminary may inflation data is expected to show an uptick in headline rates, that will back the ECB’s move towards a phasing out of QE. May numbers should bring us closer to “normal”. German HICP (Wednesday) is seen rising to 1.8% y/y from 1.4% y/y, the French rate (Wednesday) to 2.0% y/y from 1.8% y/y and the Italian headline rate (Thursday) to 0.9% y/y, which should bring the Eurozone HICP (Thursday) to 1.6% y/y – up from 1.2% y/y in the previous month. The ESI Economic Confidence (Wednesday) is seen falling back just slightly to 112.5 from 112.7 in the previous month, signalling a slowdown in growth momentum, but not to an extent that would worry the ECB unduly and partly due to capacity constraints in countries such as Germany. Final Markit Manufacturing PMI readings for May (Friday) expected to confirm preliminary numbers, leaving the Eurozone reading at a still robust 55.5. And even if preliminary numbers came in weaker than expected, they still showed that job creation continues and hence the German unemployment rate for May (Wednesday) expected unchanged at a very low 5.3%. The overall Eurozone rate for April meanwhile is seen falling to 8.4% from 8.5% in the previous month.
UK: The calendar this week brings the May Gfk consumer confidence report (Wednesday), where a fractional improvement is anticipated to a -8 reading after -9 in the month prior, April lending data from the BoE (Thursday), and the May manufacturing PMI survey (Friday), which it is anticipated to dip to 53.5 in the headline reading from the 53.9 reading of April.
Japan: The April unemployment (Tuesday) is expected unchanged at 2.5%, with the job offers/seekers ratio steady at 1.59. April retail sales (Wednesday) should rise to a 0.5% y/y growth rate from 0.1% for large retailers, and edge up to 1.1% y/y from 1.0% overall. April industrial production (Thursday) is penciled in at a 1.0% y/y rate, slightly slower than the prior 1.4%, while the contraction in April housing starts (Thursday) is expected to have deepened to -8.5% y/y from -8.3%. April construction spending is also due Thursday. Friday brings the Q1 MoF Capex survey, and the May manufacturing PMI. The preliminary reading came in at 52.5, the lowest since August. It was 53.1 last May.
China: The official CFLP manufacturing PMI (Thursday) is forecast edging up to 51.5, after having dipped 0.1 point to 51.4 in April. It was at 51.2 a year ago. The index has generally been on a downtrend from 52.4 in September, and the slippage has rung some alarm bells over growth. Also, the Caixin/Markit manufacturing PMI (Friday) should dip to 51.0 from 51.1, and is down from 51.6 in February (the highest since the same reading in August). It was 49.6 last May.
Australia: The Building permits (Wednesday) are expected to rise 2.0% in April after the 2.6% gain in March. Private capital expenditures (Thursday) are seen expanding 2.0% in Q1 after the 0.2% dip (q/q, sa) in Q4. The next Reserve Bank of Australia event is the policy meeting on June 5, where no change to the current 1.50% setting for the cash rate, is expected.
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Andria Pichidi
Market Analyst
HotForex
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