Please see the below article from Brooks Macdonald providing their Weekly Market Commentary. Received yesterday afternoon 24/04/2023.
Fears over US economic weakness created additional volatility last week as investors returned from Easter breaks
After markets became increasingly concerned about weakness within economic growth last week, this week has a series of US data points to ensure economic momentum stays centre stage. Last week equity markets were broadly flat with bond yields moving higher as investors ratcheted up the probability of a May US interest rate hike despite mostly weaker US economic data.
This week sees some major US data releases include the US Federal Reserve’s (Fed’s) preferred inflation measure and Q1 Gross Domestic Product (GDP)
Thursday sees the release of the US Q1 GDP print which is expected to show that the economic expanded at 1.9% on an annualised basis during the quarter. This compares to a rate of 2.6% in the last quarter. With January and February’s consumer spending buoyed by warmed than expected weather, economists are expecting a softer March which will drive this fall in the rate of GDP expansion. On Friday the release of the core Personal Consumption Expenditure (PCE) report, the Fed’s preferred inflation measure, will contain the personal consumption and spending numbers for March which will confirm whether the US consumer has lost some of its strength from the start of the year. Europe also sees a mix of growth and inflation data this week with the GDP and CPI releases for both Germany and France coming alongside a number of consumer and business confidence surveys.
Alongside the economic data, investors will also be able to test consumer demand through the earnings of US corporates such as McDonald’s, PepsiCo, Coca-Cola and Hilton this week. This week also sees the release of Q1 earnings for Credit Suisse and UBS, the first results since the banking turmoil and the merger of the two Swiss banks. The key items to watch will be the extent of depositor and wealth management withdrawals and how this has impacted the two banks’ loan-to-deposit ratios.
The Bank of Japan’s first policy meeting under Governor Ueda also takes place this week amidst growing Japanese inflation
The next Bank of Japan policy meeting takes place this week and will be the first meeting for the incoming Governor, Kazuo Ueda. This comes at a time when market participants increasingly expect the Bank of Japan to abandon or revise some of its policy tools such as yield curve control, forward guidance and quantitative easing. Some form of policy review is likely given inflationary pressures appear to be building however the new Governor may wait until the summer before any tweaks. Over the course of this week we also see Japanese labour data, retail sales and the Tokyo Consumer Price Index (CPI) release so plenty for Ueda to consider.
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Alex Clare
25/04/2023