LONDON (Reuters) -U.S. inflation numbers lit a fuse under world markets and forced a sharp re-think on U.S rate cut bets, so data and earnings should keep traders nervy as they stay alert to possible Japanese intervention on the yen and geopolitical tensions.
British data and China’s latest numbers are also in focus, as India gets ready to vote and finance ministers and central bankers descend on Washington for the IMF/World Bank Spring meetings.
Here’s your heads-up on what’s coming in markets next week from Lewis Krauskopf in New York, Rae Wee in Singapore, Bharath Rajeswaran in Bengaluru, and Karin Strohecker and Naomi Rovnick in London.
1/ TEFLON ECONOMY
Markets hastily ditched bets for a mid-year Fed rate cut, with September now seen as the likely start date for easing as sticky inflation underlies a strong economy.
That puts the U.S. consumer into sharper focus with retail sales data due on April 15 and a slew of corporate earnings. March retail sales likely climbed 0.3%, a Reuters poll of economists showed. That follows a lower-than-expected 0.6% rise in February that suggested a slowdown in consumer spending amid rising inflation and high borrowing costs. Earnings results that could also shed light on consumer spending include Bank of America, credit card companies American Express and Discover Financial Services and consumer products giant Procter & Gamble. Netflix and UnitedHealth Group are also reporting, as are luxury house LVMH and telecoms firm Nokia in Europe.
2/ ON TRACK?
It’s another week filled with Chinese data and this time, investors get a first look at how growth in the world’s second-largest economy is shaping up.
First quarter gross domestic product numbers are due on Tuesday, alongside data on house prices and retail sales.
Expectations are for the economy to have grown 4.6% on an annual basis, a rocky start for Beijing in meeting its 2024 growth target of around 5%.
The devil is in the detail. Granted, there are some green shoots from upbeat manufacturing and services surveys to rising consumer prices, but persistent producer price deflation points to a shaky recovery.
China’s central bank on Monday left a key rate unchanged.
An ailing property market remains a drag – it’s hard to write off a sector that once accounted for over a quarter of GDP.
3/ INDIA VOTES
India, the world’s largest democracy by population, starts voting from April 19 in national elections to be held in seven phases until June 1. It’s India’s second-longest election, with results expected from June 4.
Incumbent Prime Minister Narendra Modi seeks a rare third consecutive term, with the BJP-led National Democratic Alliance (NDA) expected to lead the Indian National Congress-led INDIA (Indian National Developmental Inclusive Alliance).
Since the NDA won key state elections in December, markets have rallied on hopes of policy continuity at the national level.
India’s benchmark stock indexes Nifty 50 and Sensex as well the broader, domestically focused mid-caps are at record highs, helped by sustained domestic inflows and a strong economic outlook. A NDA loss, viewed as a low-probability, could trigger a (temporary) pull back.
4/ SUMMER RATE CUT BOE
British inflation has slowed, putting the Bank of England on track to start cutting rates from 16-year highs. Attention turns to Wednesday’s March consumer prices data to confirm the trend.
Companies’ expectations for selling prices and pay increases in the year ahead are cooling, according to a BoE survey that its rate-setting Monetary Policy Committee monitors closely. Consumers expect lower inflation too.
But ratesetters are divided over when to call time on their battle against inflation, with no urgency to rescue an economy that entered a shallow recession late last year before manufacturing and mortgage approvals data signaled a recovery.
Traders, who had played with the idea of a June rate cut, now expect easing to start in August. Some of that repricing is related to the pull-back in U.S. rate-cuts bets.
5/ SPRING HAS SPRUNG
Finance ministers and central bank governors across the world descend on Washington, DC, for the annual Spring Meeting of the IMF/World Bank, starting Monday.
A raft of reports on the economic outlook and financial stability will be released, while G20 and G7 policymakers also get together.
There is no shortage of topics to chew over – the dual track trajectory of a U.S. economy marching ahead while the rest of the world more or less sputters – and all the monetary policy and financial market consequences that might entail.
Whether central banks have really won the inflation battle yet (IMF Chief Kristalina Georgieva does not think so), especially as Middle East tensions fire up oil prices. Or how economies, especially emerging markets, will navigate still elevated debt burdens.
(Graphics by Vineet Sachdev, Kripa Jayaram and Sumanta Sen; Compiled by Dhara Ranasinghe; editing by Stephen Coates)
