This week, investors will focus on Powell’s speech, China’s GDP, the U.S. CPI and other economic data, while also continuing to pay attention to the progress of Biden’s $2.25 trillion infrastructure proposal, as well as the Iranian nuclear issue comprehensive agreement negotiations.
This week, a series of important macroeconomic data and the official opening of the Q1 earnings season of U.S. stocks are expected to become an important window for global investors to verify investment logic and explore investment opportunities.
① Powell will make two appearances
This week, Federal Reserve Chairman Jerome Powell will make two public speeches.
On Monday (April 12) at 07:00, Powell appears on the CBS program 60 Minutes.
On Thursday (April 15) at 00:00, Powell speaks at the Economic Club of Washington.
Powell said on a program over the weekend that the U.S. economy is at an inflection point and that growth and hiring are expected to accelerate in the coming months, but that some risks remain, particularly the resurgence of the new crown epidemic. He said it would be wise if people could continue to keep their social distance and wear masks.
The consistent message of Powell’s recent speech is all about making sure everyone in the market knows that the Fed not only expects inflation to move up, but is also prepared for it to ease investor anxiety and panic. Powell’s speech this week is expected to continue his consistent stance.
②Heavyweight economic data, the U.S. March CPI and “horror data” will break the market calm?
Agencies predict that the U.S. CPI for March to be released this week will grow 2.5% year-on-year, significantly higher than the 2% target previously set by the Federal Reserve.
The key to this data is that now that the U.S. individual investor sentiment index is at a new high since January 2018 and the VIX, a measure of market volatility, has fallen back to a low since February last year, will the current market calm be broken if the CPI data is interpreted as a signal that inflation will accelerate next?
From last week’s experience, the Fed’s firm stance on maintaining accommodative policy has temporarily overwhelmed inflationary concerns. The U.S. March PPI growth rate released on Friday hit a ten-year high, and although U.S. bond yields rose significantly, the ten-year U.S. bond yield remained below the 1.70% level, and the three major U.S. stock indices still closed up collectively.
Investment agency Northwestern Mutual Wealth Management chief investment strategist Schutte (Brent Schutte) said investors still misunderstand the Fed, which will not take any tightening measures until it makes up for all the losses in inflation and employment.
It is also believed that the inflation reflation trade that dominated the bond market in early 2021 has moderated, and that inflation expectations measures previously pushed up by the Fed’s ultra-easy policy and huge fiscal stimulus have stalled at high levels and have yet to receive sustained support from real data. The same is true for the yield curve, as U.S. bond yields have retreated from their recent peaks. Not only is this relevant to bond positions, but without follow-up support from the data, market bets on the Fed tightening as early as the end of 2022 could fade, potentially weakening demand for the dollar.
But that doesn’t mean that gold will benefit.
Phillip Streible, chief market strategist at Blue Line Futures, said gold can’t perform well in the current environment where the economy is rapidly returning to growth. Only in the case of rising inflation and slowing economic growth will gold perform well, and the current market is not in that environment. He said that if gold falls below $1,700, it may be bought at $1,680. The only uncertainty that could push gold prices higher at the moment is the outbreak of geopolitical tensions.
For his part, Adam Button, chief forex strategist at Forexlive.com, said the market is in a precarious position.
“If gold closes above $1755, it will confirm the March double bottom and point to $1840. If it fails, then it will go back to $1,676 or lower.”
Other important economic data releases this week include.
Monday, April 12: Eurozone retail sales for February and the monthly three-month U.K. GDP rate for February.
April 13 (Tuesday): Chinese March trade data, U.S. March quarterly CPI, Eurozone/German ZEW economic sentiment index for April, U.K. February macroeconomic data.
April 15 (Thursday): Fed’s Brown Book on economic conditions, U.S. initial jobless claims, U.S. March retail sales data (horror data), U.S. April New York/Philadelphia Fed manufacturing index, Australia’s March quarterly unemployment rate.
April 16 (Friday): China’s first quarter macroeconomic data, National Bureau of Statistics monthly report on residential sales prices in 70 large and medium-sized cities, Eurozone CPI for March, U.S. preliminary University of Michigan consumer confidence index for April.
Canadian Imperial Bank of Commerce believes that economic expectations for the second quarter will support the pound, which is expected to maintain its recent upward momentum against the dollar, reaching 1.38 by the end of the second quarter and 1.41 by the end of the third quarter.
The Bank of Tokyo-Mitsubishi UFJ believes that the rebound in global growth optimism will boost AUDUSD and recommends going long AUDUSD with an entry price of 0.7620, a target price of 0.7895 and a stop loss at 0.7460. Australian employment data released this week is expected to have more upside surprise risk than downside, and is expected to provide support in the short term.
③ U.S. stocks enter a new round of earnings season
At the U.S. stock level, the traditional six major banks will collectively announce their quarterly reports in the second half of the week, officially kicking off the latest round of U.S. stock earnings season. After the S&P 500/Dow hit record highs last week, higher valuations will need to be supported by strong results.
According to Lufthansa data, the market currently expects the S&P 500 component revenue to grow at an overall rate of 25%. What is worth looking forward to is the probability of a huge revenue and profit boost as the U.S. banking industry makes a big push to release provisions made for potential loan losses.
According to Refinitiv IBES data as of April 1, analysts have raised their S&P 500 earnings growth estimate for the first quarter to 24.2%, better than the 21% estimate on Feb. 5. This would be the highest earnings growth rate for the S&P 500 in more than a decade. The non-consumer essentials and financial sectors are expected to lead the market with earnings growth rates of 98% and 76%.
The current enthusiasm of retail investors is heating up along with the improvement of the market. The American Association of Individual Investors (AAII) weekly survey shows that the percentage of investors who are long U.S. stocks increased 24% last week to a net long of 36.51%, a new high since January 2018.
Northwestern Mutual Wealth Management Chief Investment Strategist Schutte said value stocks will likely continue to lead stocks higher in the new earnings season, in part because vaccines will continue to drive the economic recovery, suggesting investors have some appropriate hedging in their portfolios. For example, it’s good to buy into the raw materials sector, which is tied to commodities.
Manuelian, head of equity trading at trading house Wedbush Securities (Sahak Manuelian), also believes that inflation will not be a factor holding the market back on the upside and that the market is not too risky at the moment. As long as all the liquidity in the market is still flowing, stocks should continue to move higher and the Fed’s balance sheet will only get bigger under the accommodative policy stance.
④ OPEC and IEA monthly reports are coming!
On Tuesday (April 13), OPEC will release its monthly crude oil market report. On Wednesday, the IEA will also release its monthly crude oil market report.
International oil prices closed lower last week as the market was doubting the prospects of a rebound in demand. Analysts say OPEC+ is ready to increase production, but investors are still not convinced that demand will rebound soon because they are not sure about the global supply balance. Yawger, an energy futures analyst at Mizuho Securities, said.
“Is the judgment on demand overblown? Is the demand that was suppressed (by the epidemic) going to explode? The market is hoping to figure that out before the peak summer driving season.”
Investors will focus on information on this front in two crude oil reports.
⑤ Coinbase Direct Listing
Coinbase, the largest U.S. cryptocurrency exchange, will land on the Nasdaq exchange on Wednesday with a direct listing, which will be a major milestone for both the virtual currency and U.S. stock markets.
The company’s revenue in the first quarter doubled nine-fold year-over-year, achieving $1.8 billion in revenue in the quarter, driven by bitcoin’s wild spike. Some industry insiders say that Coinbase’s IPO will bring the industry to the next stage of “compliance development,” which will facilitate the entry of ordinary investors and institutions outside of the cryptocurrency community, which is a significant benefit to the industry.
In addition, the listing of Coinbase on the U.S. stock market may set off a new wave of digital currency exchange listings.
(6) U.S.-Japan summit meeting
The summit meeting between Japanese Prime Minister Yoshihide Suga and U.S. President Joe Biden will be held in Washington, D.C., on April 16, local time.
Kyodo News reported on the 10th that the US White House spokesman Pusaki said at a press conference on the 9th that “the two heads will probably prepare a statement”, implying that some kind of outcome document will be issued.
Pusaki also said he would “take questions after the talks,” which is believed to be a joint press conference being planned by the two sides. Pusaki again stressed that Kan is the first foreign head of state to hold face-to-face talks since Biden took office, “showing the importance of the relationship between the two countries.
(7) U.S. Presidential Climate Envoy Kerry to Visit China This Week
John Kerry, the U.S. president’s special envoy on climate issues, will visit China this week in an attempt to make climate change an area of closer cooperation amid deepening tensions between the two countries, according to the Washington Post’s 11-day news. The report said it will be the first official visit to China by a senior Biden administration official.
The former secretary of state is expected to travel to Shanghai to meet with Chinese officials, the report said, citing people familiar with the matter. The Washington Post described Kerry’s visit as “a sensitive one. The report also cited observers as saying that climate change is one of the few areas where U.S. and Chinese interests may overlap, raising the possibility of restarting talks that were suspended during the Trump administration.
⑧ Three central bank interest rate resolutions
The New Zealand/Korea/Turkey central banks will announce interest rate resolutions this week that will have an impact on the stock and foreign exchange markets.
On Wednesday at 10:00, the New Zealand Federal Reserve announces its interest rate decision.
Thursday at 09:00, the Bank of Korea announces its interest rate resolution.
At 19:00 on Thursday, the Turkish central bank announces its interest rate resolution.
Westpac said that after the fall below 0.6945 New Zealand will expand the downside correction, due to the recent slowdown in New Zealand’s economic momentum and the possible negative impact of government housing restrictions, while the dollar is supported by fundamentals, the New Zealand dollar against the dollar if it falls below 0.6945, will confirm that its downside correction from the February 25 high of 0.7465 may not be completed, the currency pair there is room for further decline, if the upper A break of 0.7070 will be bullish in the short term.
The bank said that although the New Zealand dollar has recently retreated, it is still bullish in the long term and is expected to hit 0.7600 by the end of the year, mainly due to a weaker dollar (as global growth improves relative to the U.S.) and optimistic global risk sentiment. If the New Zealand Fed’s monetary policy remains unchanged this week, the New Zealand dollar is unlikely to see a decline, so always beware of two-way risks.
Recent Comments