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Good afternoon,

Earnings season is heating up, but the S&P may soon be down to its last October low, says one Mott Capital analyst. But maybe the upcoming Tax Day just has him down bad. 

Don’t make any Friday plans, because it’s set to be jam-packed with macro drops. It’ll be the week that can’t end quicker for Bud Light, who’s facing mounting boycott calls and going to trial after kicking the hornet’s nest. 

Let’s dive in.

Economy Heat Check

As of 4/14/2023 market close, unless otherwise stated.

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Bad News Briefings

Market movers like to bury bad news on Friday afternoon, so we've decided to excavate them. 

• Bud Light faces boycott calls (WSJ)

• Ex-Louis Vuitton CEO frontrunner to head LVMH (BBG)

• OpenAI denies GPT-5 rumors (WE)

• Amazon launches AI initiative (VB)

• LVMH stormed by French protestors (Forbes)

• FTX has recovered $7.3B in client assets (Reuters)

Performance Review

Firm updates your bank may be less inclined to disclose. 

• Barclays to cut 100+ investment banking roles (BBG)

• Saudi Arabia transfers $78B of Aramco shares to wealth fund (WSJ)

• Banks facing mounting pressure to pay depositors more (WSJ)

• Deutsche Bank's new FX big dog in Singapore (EF)

• Junk-rated companies increasingly facing credit downgrades and defaults (WSJ)

• Morgan Stanley VP identified as man who fell from tower (EF)

Week Ahead: Signal to Noise

Next week’s market outlook and whether you should actually care. 

• Tuesday, April 18: US New Residential Construction (🐻); NAHB housing market index (🐻)

• Wednesday, April 19: Eurozone inflation (🐂); UK inflation (🐂)

• Thursday, April 20: US Initial Jobless Claims (🐻); US NAR Existing Home Sales (🐻); NZ quarterly CPI report (🐂)

• Friday, April 21: S&P Global Flash US Composite PMI (🐂); Existing home sales (🐻); S&P Global Flash PMI’s (France, Germany, Eurozone) (🐂); S&P Global Flash UK PMI’s (🐂); Jibun Bank Flash Japan Composite PMI (🐂)

Signals 🐂

Flash PMI Data

Last chance for J Pow memes for a hot minute. Outside of housing, PMI data is anticipated on Thursday and Friday. Each of which will serve to inform Fed decision-making ahead of its blackout period, which begins on Saturday. 

A soft US inflation print and further signs of deflation across parts of Asia weighed on the US dollar heading into the weekend, with investors fairly certain that the Fed’s terminal rate will peak at 5.25% with an outside chance of a pause at the next FOMC meeting. This week’s key data points include global flash PMI reports, which will show if price pressures are continuing to recede and if growth potential will be as soft as feared.

With freshly renewed concerns of a global recession, PMI data is as important as ever. Sure, the financial meltdown concerns may have been knocked from the top spot for headlines. But the FOMC minutes actually tipped their hat to the potential for a “mild recession” in the US. And with that comes the question over whether it will be the soft or hard landing.

Global manufacturing PMI has contracted for seven consecutive months. It looked on the cusp of reverting to expansion in February, but the March report expanded at a faster pace. That begs the question as to whether we’ll see another acceleration of a slowdown. So, traders will be keeping a close eye on how flash PMI’s for the US, Asia and Europe play out this week.

Inflation Data

UK inflation, wages and jobs data could move the needle for the BOE’s next decision, following Huw Pill’s comments on a “positive demand shock.” Money markets are currently pricing in an 80% chance of a 25 bps hike. Firmer wages and employment data on Tuesday followed by hotter inflation on Wednesday likely all but confirms it. 

As it stands, expectations are for CPI to soften. But, that’s from Boris Johnson’s ego-high levels. Even if it manages to do so, the BOE may still be tempted to hike with a low unemployment read.

Eurozone inflation has generally exceeded expectations to keep pressure on the ECB to keep hiking. But, it’s possible they may drop to 50 bps increments – especially if we see some softening in Eurozone CPI data on Wednesday.

New Zealand’s inflation remains as hot as ever. The RBNZ delivered a hawkish 50 bps hike when a 25 bps one was expected earlier this month. So, unless we see a material drop in prices, it’s possible the RBNZ could hike by another 25 or 50 bps. 

Things may change with a negative business sentiment reading – typically one of their warning signs of a recession. Then again, they seem to be asking for it at this point to help deflate prices.

Noise 🐻

US Housing Data 

Housing data is considered to be the focal point of the week after inflation and retail sales just took center stage. We said that too in weeks past, but let’s be honest. Inflation and PMI data are the main macro-signal events you’re going to have enough time for with the earnings week ahead and whatever dumb stuff Dimon forgot its earnings spotlight. 

NAHB Housing Index data, housing starts and existing home sales are all expected to be updated during the week, offering a picture of the housing market amid a rising rate environment. Mortgage rate and application data will also be provided by the Mortgage Bankers Association in mid-week. 

It is important to note for all salty apartments downsizers, with the Fed continuing to hike interest rates, the passthrough effect on mortgages and households is still coming through. If you are following housing, watch the housing starts, building permits and mortgage application data.

Initial Jobless Claims

The next monthly unemployment report comes out May 5th. That’s all. But here’s a chart with cool colors in case you want to fear-bait on Twitter or confuse your parents when they bug you about not going into office on Friday.

Undrafted

All other speeches and prints.

Monday, April 17:

• US: Empire State Manufacturing Survey

• Canada: Wholesale prices

• EU: Reserve assets

• UK: BOE Jon Cunliffe speaks

• China: 1-year lending facility rate

• New Zealand: Food and rental price indices; Business PSI

Tuesday, April 18:

• Canada: Monthly CPI (core, median, trimmed)

• EU: ZEW economic sentiment (EU, Germany)

• UK: Earning and employment report

• China: Q1 GDP; Fixed asset investment; Retail sales industrial output

• Australia: RBA minutes

Wednesday, April 19:

• Canada: Producer prices; Housing starts, house prices

• EU: Construction output; Balance of payments

• Japan: Industrial production, capacity utilization

• Australia: Leading Index

Thursday, April 20:

• US: Philadelphia Fed Manufacturing Survey; Weekly Economic Index

• EU: Trade balance; German producer prices

• China: 1 and 5-year loan prime rate

• Japan: Trade balance; Tertiary industry activity

• Australia: Judo Bank Flash Australia PMI’s

Friday, April 21:

• US: FOMC voting member Lisa Cook speaks 

• Canada: Retail sales

• EU: Consumer confidence

• UK: Retail sales; GfK consumer confidence

• Japan: CPI (March)

Meme Bank

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