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The US’ decision to withdraw from the Iran nuclear deal and the latest US April CPI update had been the two key items thus far, broadly supporting markets. The question will be whether the current pace can be sustained as we move into the data week ahead.
Despite having over 90% of the companies on the S&P 500 index with a 78% earnings beat, which is above the 5-year average, US equity markets could not muster a swing higher. This was not until the abovementioned leads this week assisted prices on a breakout, where the S&P 500 index found a lift from the symmetrical triangle pattern and a break of the 2,700 level. While the boost for energy stocks had been concentrated on Iranian concerns, the rise into the end of the week goes to show the stronghold that monetary policy has on equities.
Into the fresh week, a series of Fed speakers’ comments would be watched, over and above the confirmation hearings on Tuesday for Fed vice-chair nominee Richard Clarida and Fed Governor Michelle Bowman. Voters including Fed’s Mester, Williams and Bostic will be on the wires ahead of the release of May’s Federal Open Market Committee meeting minutes the following week. Any reactions to the latest inflation miss would be scrutinised as with the views on rate hikes after hearing Fed Powell dismissed concerns of rate hikes upending the economy. The impact would be for both US indices and the greenback among others.
Separately, a slew of releases will also be expected in the US including April’s retail sales and industrial production on Tuesday and Wednesday respectively. Steady numbers are expected for both April’s retail sales and industrial production, ones to watch on the health of the US economy.
The Asia Pacific region meanwhile would find a heavy week of data. After receiving an improved set of Chinese trade numbers, retail sales, industrial production and urban fixed asset investments would be reported next Tuesday. Industrial production faltered in the previous release, coming in below the market’s expectations at 6.0% year-on-year. In line with trade numbers, the market will be watching to see if the production performance had also shaken off the Chinese New Year distortions to revert up to 6.4% YoY growth for April, one that would have ripple effects for the Asian region.
For Japan, it will be an important week with tier-1 releases such as Q1 GDP and April inflation due on Wednesday and Friday respectively. With the last CPI release cooling accommodation removal expectations, the incoming data will be watched for clues for changes in the BoJ views. Consensus for both headline numbers currently points to potentially further backing of the abovementioned expectation, one to be wary for further USD/JPY downsides.
Lastly, Chinese delegates led by Vice-Premier Liu He are also expected to head to Washington for another round of meetings. While early talks due today have yet to produce any updates, this will be another indication on continued conversations with any conclusions likely to be bonuses in what is expected to be a long-drawn out process.