What mattered last week and a preview of the week ahead 6th May

What mattered last week:

  • U.S. stocks finished the week flat to slightly higher.
  • Disappointment after softer PMI’s in China and the U.S., a less dovish FOMC (than the market had hoped for) combined by some caution as U.S. – China trade talks in Beijing resumed.
  • Was offset by a “goldilocks” U.S. employment report, as the economy created 263,00 jobs in April, as well as U.S. Q1 2019 corporate earnings results continuing to beat expectations.
  • After recently trading to its highest level since 2007, the ASX 200 closed last week around -0.75% lower, as profit taking drifted in ahead of this weeks RBA interest rate meeting.
  • In the currency space, the U.S dollar Index, the DXY has struggled to make any real headway against the other major currencies after recently trading to its highest level in almost 2 years. The jury remains out whether the DXY is “pausing or failing”.
  • Which is reflected by the antipodean currencies, the AUDUSD and the NZDUSD remaining range bound ahead of key central bank meetings.

For the week ahead, the key events are:

Australia: Balance of trade, retail trade, RBA interest rate decision (Tuesday), home loans data and RBA Statement of Monetary Policy (Friday).

  • RBA interest rate meeting (Tuesday): The market is evenly balanced heading into Tuesday’s meeting with 40% of a rate cut of 10bp currently priced. My bias is for the RBA to stay on hold at 1.50%, and to move to an easing bias.

New Zealand: Global dairy trade auction (Tuesday), RBNZ interest rate decision and MPS (Wednesday).

  • RBNZ interest rate decision (Wednesday): Like the RBA meeting the day before, the market is evenly balanced with 52% or 13 bp of a 25bp cut currently price. With growth slowing and confidence fragile, our bias is for the RBNZ to cut rates to 1.50%.

China: Foreign exchange reserves (Tuesday), balance of trade (Wednesday), CPI and PPI (Thursday).

Japan: BoJ minutes and Nikkei services PMI (Wednesday), consumer confidence, machine tool orders (Thursday).

U.S.: JOLTs job openings (Wednesday), PPI and balance of trade (Thursday) and CPI (Friday).

  • CPI (Friday): The market is looking for core prices to rise by 0.2% for the month of April, which will take the year on year rate to a mild 2.1%, thereby keeping the Fed on hold.

Fed Speakers on the wires this week include Harker, Kaplan, Quarles, Brainard, Bostic, Evans and Powell.

U.S. Q1 2019 earnings season continues is winding down with less than 25% of S&P500 companies left to report in coming weeks.

Canada: Ivey PMI and housing starts (Wednesday), new housing price index, balance of trade (Thursday), employment (Friday).

  • Employment (Fri): The market is looking for a 15K increase in employment in April, with the unemployment rate remaining stable at 5.8%.  

Euro Area: EA retail sales (Monday), German factory orders and construction PMI (Tuesday), German industrial production (Wednesday), German balance of trade (Friday).

UK: Halifax price index (Wednesday), RICS housing price index (Thursday), balance of trade, GDP and industrial production (Friday).


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