What to expect this week? Experts explain – Executive Digest

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The week that passed

US stock markets fell for the third consecutive week, with the Nasdaq leading the decline, falling more than 4%. This drop was triggered by the fact that ASML, a Dutch technology giant that supplies chips to the semiconductor industry, reported results below expectations, along with rising geopolitical tensions and the fading of hopes of interest rate cuts from the Fed. in 2024.

– In the US, Powell stated that interest rates should remain high until inflation reaches the target.

– US retail sales exceeded expectations in March, with an increase of 0.7% m/m. The retail sales control group, essential for GDP, rose 1.1%.

– China’s Q1 GDP outperformed, reaching 5.3% versus the 5.0% forecast.

– Inflation in March in the United Kingdom was higher than expected, standing at 3.2% year-on-year and the general rate at 4.2%. Unemployment rose to 4.2%.

– In the United Kingdom, the February unemployment rate rose to 4.2%, exceeding expectations of 4%.

– The VIX index rose for the third week, reaching 18. Wall Street’s fear indicator is rising.

– Oil fell 5%, to $81.50, due to increased demands in the USA and tensions in the Middle East.

– The Australian job market fell, losing 6,600 jobs in March, with unemployment at 3.8%.

– Gold rose 1.70% to $2385, but still far from last week’s peak of $2431.

Highlights for this week

Ø US manufacturing and services PMI

Tuesday, April 23, 2024 at 2:45 pm

Recent developments in stronger-than-expected US economic conditions have necessitated a delay in the Fed’s interest rate cuts, with markets now looking for a shift in September rather than the initial June schedule. The scale of rate cuts until 2024 has also been revised downwards to two 25 basis point (bp) cuts, instead of the previous three. Greater resilience in US economic conditions could validate this timetable and reinforce the growing chorus among Fed members for greater patience in policy easing.

In March, provisional US PMI figures indicated steady growth, with the manufacturing PMI standing at 51.9, while services activities decreased slightly to 51.7 from the previous 52.3. The “tepid” expansion of economic conditions is expected to continue, which should maintain hopes of a soft landing.

Ø Q1 2024 inflation rate in Australia

Wednesday, April 24th at 2:30 am

In the December 2023 quarter (Q4), inflation rose 0.6% to an annual rate of 4.1% y/y, below the 4.3% expected and well below the 5.4% printed in the September quarter . The RBA’s preferred inflation measure, average inflation, increased by 0.8% q/q, which saw the annual average measure decline to 4.2% y/y, a significant drop from 5.2 % in the September quarter and below the RBA forecast of 4.5%. Michelle Marquardt, head of price statistics at the ABS, said: “The CPI rose 0.6 percent in the December quarter, below the 1.2 percent increase in the September 2023 quarter. This was the smallest quarterly increase since the March 2021 quarter“.

The March 2024 quarter (Q1) is expected to show that headline inflation rose 0.9% over the quarter to an annual rate of 3.5%. The average is also expected to increase by 0.9% in the quarter, allowing the annual average to decrease to 3.9% compared to the previous year.

Ø BoJ interest rate decision

Thursday, April 25th, at 11pm

At the previous meeting, the BoJ raised its short-term interest rate from -0.1% to a range of 0%-0.1%, for the first time in 17 years, in the hope that a virtuous price spiral- wages can bring its objective of “sustainable and stable inflation of 2%” within sight.

The central bank also abandoned its yield curve control (YCC) policy. At the next meeting, the central bank is expected to keep policy settings on hold, having previously indicated patience in its future policy assessments.

Expectations for rates are that the BoJ will potentially raise rates only at the July or September meeting. The focus for the next meeting will be the BoJ’s quarterly outlook report, with eyes on how the weaker yen and rising oil prices in recent months will raise the bar on its inflation outlook, which will define expectations for the central bank’s next rate change.

Ø Underlying PCE inflation in the US

Friday, April 26th, at 1:30 pm

Both headline and underlying PCE price inflation have been on a downward trend since September 2022. However, in February, headline inflation increased from 2.4% to 2.5%, while underlying inflation remained stable at 2 .8%. Global PCE for March is expected to increase 0.3% from the previous month, which would increase the global rate to 2.5%. The underlying PCE price index is also expected to increase 0.3% month over month, leaving the underlying annual inflation rate at 2.8%.

Following a third consecutive CPI report, the Federal Reserve chairman was forced to acknowledge this week that rates would have to remain higher for longer until greater confidence emerges that inflation is returning to target. After having priced 170bps of rate cuts at the start of the year, there are now just 42bps of rate cuts set for 2024, with a first rate expected in September.

Ø US Q1 2024 earnings season

The Q1 2024 earnings season picks up speed next week, with companies including Lockheed Martin, Visa, Tesla, Boeing, Meta, Caterpillar, Alphabet, Intel Corp, Microsoft, Exxon Mobile Corp and Chevron Corp reporting results.

Article written by XTB experts