Macro: Sandcastle economics
Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.
Chief Investment Officer
Summary: Equities recovered from their weak performance early yesterday and were up again overnight as much of Asia was closed for holiday and the USD and EUR eased lower again. It will be interesting to watch the European equities today after a very weak close yesterday, and as the German constitutional court is set to rule on the legality of the ECB purchase programme.
What is our trading focus?
What is going on?
US is trying to open up with the US’ most populous state California announcing that it will reopen this week, or at least ease Covid19 restrictions.
Australia’s RBA was out with a very positive forecast for the Australian economy, as it offers a baseline scenario of a 6% drop in GDP this year, but a full rebound in 2021, estimates the peak unemployment rate in Australia will be about 10% in the coming months.
Adecco CEO sees ‘early signs’ of stabilization, across key labour markets in Spain, Italy and France but the visibility is still poor in many countries. Latin American and Japan were strong in Q1.
Fed announces purchase programme of ‘eligible’ ETFs in early May following the footsteps of Bank of Japan reinforcing the support for the market.
What we are watching next?
German constitutional court ruling on the legality of the ECB purchase programe. As noted above on the comments on Italian BTP futures, the court’s ruling doesn’t necessary create a new crisis if they rule negatively, but certainly could create volatility. The risks generally run one way, i.e., a ruling in favour would likely not garner as much positive attention as a negative ruling generates negative attention in the form of possible BTP and Euro downside (for the later, still focusing on EURUSD and EURJPY.)
Big miners report earnings – Q1 earnings from gold giants Newmont Corp (NEM:arcx) on Tuesday and Barrick Gold Corp (GOLD:arcx) on Wednesday to give us further clues on the state of the industry and the precious metal market in particular. Investors will also be seeking clues about how the pandemic will effect growth plans from the world’s top diversified miners such as Anglo American and Rio Tinto Group.
More Q1 earnings – this week the most important earnings that could impact sentiment are Disney (Tue), Regeneron (Tue), PayPal (Wed), Shopify (Wed), Uber Technologies (Thu), Booking (Thu) and Siemens (Fri).
US-China relationship – this is a critical additional layer to this crisis, as a further falling out between the world’s two largest economies and renewal of trade tensions or worse will add another level of seriousness to concerns that the recovery will stumble. USDCNH, noted above, is a key market barometer, but new Trump tariffs, etc., would also dent confidence broadly.
US Apr. ISM Non-manufacturing and US employment data – The March-April data cycle will be the worst for the USA in terms of rate of change to the shock of the Covid19 crisis and sets the bar of the shape of the recovery as May will see considerable opening up from shutdowns across the US. We watch the ISM Non-manufacturing survey and subcomponents for benchmarking the state of the US services sector, but even more so the Friday US employment report. Bloomberg expectations for the US Nonfarm Payrolls change for April is running at -22 million, more than 20 times the worst ever single month reading, and the unemployment rate expected to rise to 16.3%. The US April ADP private payrolls survey is up on Wednesday and is expected at -20 million.
Economic Calendar Highlights (times GMT)
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