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Good afternoon,

Liquidity is tighter, economic data is softer and the prospects of more central bank hiking kick off Wall Street’s week.

Just when you thought you’d heard the last of Musk and Tim Cook post-SpaceX explosion and earnings, respectively, get ready for Round Two of earnings virtue signaling from Credit Suisse, Microsoft, Alphabet and Amazon.

Let’s dive in.

Economy Heat Check

As of 4/21/2023 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.

• NBCUniversal CEO Jeff Shell to depart after probe into improper conduct (WSJ)

• AT&T's latest earnings revealed a FCF of $1B – $1.5B below its estimates (CNBC)

• Sega buys Angry Birds maker for $776M (Engadget)

• BuzzFeed shuts down News (USA)

• Twitter started removing legacy blue checkmarks (Verge)

Performance Review

Firm updates your bank may be less inclined to disclose.

• Ex-Millenium, CS trader may save Credit Suisse traders who are unwanted by UBS (EF)

• Charles Schwab’s top investor sold entire $1.4B stake amid bank turmoil (MI)

• Wells Fargo privately worries union “resurgence” could reach its workers next (BBG)

• Wells Fargo lays off dozens of Des Moines workers (KCCI)

• Bank of America signals early warning signs with declining deposits and higher funding costs (SA)

• Billion-dollar hedge fund startups rise to pre-pandemic levels (BBG)

Week Ahead: Signal to Noise

Next week’s market outlook and whether you should actually care. Per popular demand, we'll keep it TL;DR level so the length doesn't make it all noise.

Signals

The rate of inflation in the US is slowing overall, yet it remains elevated no matter which metric you look at – Friday’s PCE release may be no different. There was some excitement that headline inflation fell to a 2-month low, yet core CPI ticked higher. At 5.6% year-over-year, it’s still too soon to be calling for cuts this year. Consumer 1-year inflation expectations spiked higher according to last week’s Michigan Consumer Survey. So, expect traders to be fully focused on the monthly PCE and core PCE figures Friday morning.

Friday marks the first monetary policy meeting for new Bank of Japan (BOJ) Governor Ueda. Most expect the central bank to remain unchanged in its ultra-dovish stance, seeing as we’ve heard nothing but dovish comments from members ahead of the event. But, they rarely ever announce a decision with adequate forward guidance beforehand.

An ex-BOJ member recently said the BOJ should surprise markets with a change to their yield curve control policy, which currently targets the 10-year JGB yield to “around 0%, within a 25 bps range.” Is that a tip off? We won't be staying up late in the US Thursday over a pipe dream.

If there’s a single data set which could quickly prompt bets for an RBA hike in May, it’s Australia’s quarterly inflation report on Wednesday. The RBA paused in April. Ever since then, they’ve hung their hat on the fact that the (relatively new) monthly CPI figures (year-over-year) have slowed over the past two months. Early fanboys argue that the quarterly report is more robust and less volatile. So, anything short of disinflation could support the Australian dollar. Yields currently anticipate it will continue higher.

Noise

All other speeches and prints.

Monday, April 24:

• US: Chicago Fed National Activity Index; Dallas Fed Manufacturing Survey

• Canada: New Housing Price Index

• EU: German IFO business climate

• Australia: New insights into the rental market

Tuesday, April 25:

• US: Building permits (revised); Philadelphia Fed Non-Manufacturing Survey; Conference Board Consumer Confidence; New residential sales; Richmond Fed Survey of Manufacturing Activity; Dallas Fed Texas Retail Outlook Survey

• UK: Public sector finances

• Switzerland: Trade balance

• Japan: Services PPI

• Australia: Public holiday – Anzac Day

Wednesday, April 26:

• US: Advance International Trade in Goods; MBA applications; Advance durable goods; Wholesale inventories; EIA weekly report; Corporate Bond Market Distress Index (CMDI)

• Canada: Monthly Survey of Manufacturing (Flash); BOC minutes

• EU: France Consumer Confidence; France Q1 GDP

• Switzerland: Wage Index

Thursday, April 27:

• US: Gross Domestic Product (first release); Initial jobless claims; Pending Home Sales Index; Weekly Economic Index

• Canada: Payroll employment, earnings and hours and job vacancies

• EU: Economic Sentiment Indicator and Business Climate

• UK: Q4 trade for goods and services

• China: Industrial profits

• Japan: Indexes of Business Conditions (revised)

• Australia: Import/Export Prices Index

Friday, April 28:

• US: Employment Cost Index q/q; University of Michigan consumer survey (final); Dallas Fed PCE

• Canada: Gross Domestic Product (by industry, m/m)

• EU: Q1 GDP (Eurozone, Germany, France); Germany CPI; France CPI

• UK: Government debt and deficit (December 2022)

• Switzerland: Retail trade turnover; ZEW investor sentiment

• Japan: Tokyo consumer prices; Employment report; Construction orders; Industrial output (preliminary); Retail sales; Foreign investment

The Week That Was

Weekly recap of what you missed while your partner was at Coachella.

• Overall, comments from Fed members were predictably hawkish ahead of the blackout period, which kicked off on April 22.

• RBA minutes signaled that the move to pause at their last meeting was mixed. The central bank noted that prior tightening cycles have paused prior to their peaks.

• China’s data far exceeded expectations with 4.5% YTD growth, strong retail sales and lower unemployment. Yet the response to the release was lackluster at best given the numbers aren’t replicable. There are already concerns of growth slowing going forward. Alternatively, some predict a risk rally ahead of the data, thanks to the PBOC reducing stimulus last Friday.

• GBP was broadly higher following another stubbornly strong (and double-digit) inflation rate. Rising wages and a tight labor market all but confirmed the BOE will hike rates by another 25 bps in May.

• SNB members continue to make hawkish comments, hiking the odds of another hike from their previous odds of just 1.5%.

• New Zealand’s inflation came in much softer than expected – below the market and RBNZ’s own forecasts. That weighed on the Kiwi dollar, as traders priced in the prospects of a slower rate of tightening – or even a pause in policy.

• Lower oil prices and expectations the BOC will continue to hold rates steady weighed on CAD.

• The Philly Fed business index sank to a post-pandemic low. Its 6-month outlook remained negative, while CAPEX contracted at a faster pace.

• Initial jobless claims in the US rose, indicating softness in the employment market.

• Weaker-than-expected tax filings in the US fanned fears that the US government could reach its debt limit by as early as May or June.

• Joe Biden intends to limit US investments within parts of China’s economy, such as AI and quantum computing.

Meme Bank

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