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Key Events And Issues In The Week Ahead

Submitted by Tyler Durden on 04/08/2013 07:53 -0400

The week ahead is light on major market moving data releases. From a policy perspective and in light of the recent moves in treasuries, FOMC minutes are likely to be followed by markets. Retail sales in the US are likely to print below consensus both on the headline and on the core metrics. That said, this needs to be seen against the backdrop of first quarter retail consumer spending data surprising to the upside. Producer prices are also likely to come in on the soft side of market expectations. Finally, do not expect large surprises from the U of Michigan consumer confidence.

Monday, April 8

Interesting: Chile CPI,

Tuesday, April 9

Interesting: Mexico Inflation, Canada Housing Starts, UK Industrial and Manufacturing Production, UK Trade Balance, Australia NAB Business Survey

Wednesday, April 10

US FOMC Minutes
US Federal Budget Balance
Poland MPC: We expect the MPC to stay on hold, leaving the policy rate unchanged at 3.25%.
Brazil IPCA Inflation: We forecast 6.62%yoy, up from 6.31%yoy previously.
Also interesting: China and India Trade Balance, Spain and Italy Industrial Production, Australia Consumer Confidence

Thursday, April 11

US Initial Jobless Claims
Korea MPC: We forecast a 25bp rate cut to 2.50% in the policy rate, from 2.75% currently.
Indonesia MPC: We expect the MPC to be on hold at this meeting.
Chile MPC: We forecast the policy rate to remain unchanged at 5.00%.
Peru MPC: We forecast the policy rate to remain unchanged at 4.25%.
Also interesting: Turkey Current Account, France and Germany HCPI, Canada New Housing Price Index, Australia Inflation Expectations

Friday, April 12

US Retail Sales: We expect retail sales to come in flat at the headline print (vs consensus of +1.1%). Retail sales control is expected to come in at +0.2% vs consensus of +0.4%.
US Producer Prices: Ex food and energy, US producer prices are expected to come in at +0.1%, below consensus expectations of +0.2%.
US U. Michigan Consumer Sentiment: We expect U of Michigan consumer confidence to come in at 78.6, in line with consensus.
US Business Inventories
Also interesting: Euro area and India IP, Brazil Monthly Real GDP, Spain and Italy HCPI

SocGen highlights the key issues for the week ahead:

BOK TO CUT UNDER SHADOW OF NORTH KOREA

Aggressive rhetoric from North Korea remains a source of concern and although experts continue to see outright conflict as a tail risk, the situation merits close attention. Even before this uncertainty shock, the South Korean economy was losing momentum and we believe that the ground is ripe for a 25bp rate cuts when the BoK meet Thursday.

MARKET ISSUES: Geopolitics, soft economic data and a BoK rate cut set a fundamental backdrop of negatives for the KRW.

MODEST TRADE GAINS FOR GREATER CHINA

Taiwan just released its March trade data. Similar to the recent tone set by the Korean export data, Taiwan’s export growth of 3.3% yoy remained well below the longterm average. On Wednesday it is China’s turn and we expect to see only modest gains. China’s exports surprised on the upside in February with much of the strength delivered by the US and EU. Given the overall level of activity in both these economies, we believe this is not a sustainable pattern and look for a pullback in Chinese export growth to 9% yoy in March.

MARKET ISSUES: Hope is for a policy driven growth spurt in Japan, but elsewhere in the region, our expectation remains for a gradual recovery given the current economic environment in the US and the EU and the lack of appetite in China for policy easing.

NEXT A NEW ITALIAN PRESIDENT

Italy is still without a new government after the 24-25 February election and while hope remains that the two working groups will be able to find compromise and the basis for a stable government, the risk that Italy will soon return to the voting booths remains high. On 18 April, the process to select a new president ahead of the expiration of President Napolitano’s mandate on 15 May will begin. The prolonged political gridlock is creating an additional headwind for the Italian economy adding to downside risks to our central scenario. The one positive development over the weekend was approval for the payment of €40bn (2.6% of GDP) of public sector arrears. In our opinion, this factor taken in isolation will boost GDP growth by 0.4pp relative to our baseline. Due to the timing of the measures, the bulk of the impact will appear on the annual GDP numbers for 2014. Minister of Finance Grilli is due to meet EU Commissioner Rehn on Monday to discuss the impact hereof on Italian public finances. We expect Italy to be allowed flexibility on this point as already signalled by the Commission.

MARKET ISSUES:

Italy is currently in a unsustainable vacuum. The real risk is to see Italy fall behind on the structural reform program badly need to secure sustainable growth for the economy in the medium term.

US CONSUMER BLUES

March retail sales are expected to mirror the surprise slowdown in US employment and we look for 0.1% mom. Excluding autos, we look for 0.2%. The soft patch that we look for in the data over the coming weeks can essentially be linked to the fiscal austerity. We nonetheless maintain our call for a reacceleration in activity in the second half of 2013. Housing remains a positive tailwind to the economy and business balance sheets are in good health. As the fiscal tightening starts to fade gradually, we believe conditions for sustainable recovery are in place.

MARKET ISSUES: The soft data patch will ease fears of any premature QE exit.

Source: Goldman and SocGen