Following last week's macro fireworks, the coming week will be an absolute snoozer with virtually nothing on the calendar until Thursday's Initial claims, which is the key event of the week, as well as much Fed president jawboning again, including both good and bad cops talking QE4EVA either up or down. And with earnings season basically over, at least coffee consumption will be higher than average.
Weekly event preview via Goldman:
Monday, May 6
- No major data releases or speeches.
Tuesday, May 7
- 10:00AM JOLTS job openings, March (last 3,925k) The Job Openings and Labor Turnover Survey (JOLTS) contains information about hiring, firing, and quit rates, in addition to job openings. Fed Vice Chair Yellen noted that hiring and quit rates were among the set of indicators that she would look toward to determine when a substantial improvement in the labor market?the condition to which the Fed has tied ending QE?has occurred. Although the firing rate has improved significantly since the crisis, the hiring rate, at 3.3%, remains depressed. Quit rates are also below average at 1.7%.
- 03:00PM Consumer credit, March (consensus +$16.0bn, last +$18.1bn) Consumer credit outstanding likely continued to grow in March, probably driven by non-revolving (non-credit card) debt.
Wednesday, May 8
- 08:30AM Fed Governor Stein speaks at Chicago Fed conference. Stein will speak on a panel discussing "dollar funding and the lending behavior of global banks."
Thursday, May 9
- 08:00AM Richmond Fed President Lacker (FOMC non-voter) speaks on financial stability. Lacker's speech is titled "Ending too big to fail is going to be hard work." Recently, President Lacker?generally known for his more hawkish monetary policy views?noted the possibility of continued disinflation prompting additional monetary stimulus.
- 08:30AM Initial jobless claims, week ended May 3 (consensus 335k, last 324k). Continuing jobless claims, week ended April 27 (consensus 3,018k, last 3,019k). Initial claims unexpectedly fell to 324k (from 342k) last week. The Labor Department did not note any special factors distorting the print, but nonetheless the consensus expects a modest retracement back toward the 342k 4-week moving average.
- 10:00AM Wholesale inventories, March (consensus +0.4%, last -0.3%). The consensus expects that wholesale inventories rose modestly in March, despite no growth in manufacturing inventories. Inventory accumulation seems to have cooled over the course of Q1, and we expect little contribution from inventory investment to Q2 growth.
- 01:15PM Philadelphia Fed President Plosser (FOMC non-voter) speaks on monetary policy. Plosser noted in mid-April that he favors reducing the pace of asset purchases in the next "few months."
Friday, May 10
- 08:25AM Chicago Fed President Evans (FOMC voter) speaks at Chicago Fed conference. In mid-April Evans stated that "QE will probably continue through this year," a more dovish view than the median Committee member, based on our read of the March meeting minutes.
- 09:30AM Fed Chairman Bernanke speaks at Chicago Fed conference. These will be the first public remarks from Bernanke following the May FOMC statement released last week. The topic of the speech is not yet available; however the conference will focus on bank structure and regulation, suggesting that the speech may not extensively address the economic outlook or monetary policy.
- 02:00PM Kansas City Fed President George (FOMC voter) speaks on the economy. President George has dissented from each FOMC decision so far this year, on concerns about financial imbalances and a potential un-anchoring of inflation expectations.
- 02:00PM Monthly Treasury Statement (MTS), April (consensus +$106.0bn, last -$106.5). The Federal budget was likely temporarily in surplus in April, a seasonally strong month for receipts. The MTS may also shed light on the extent of weakness in defense spending so far in Q2, following sizable drags on GDP growth from this component over the previous two quarters.
SocGen tabulates the above:
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And key market issues to keep an eye on in the coming days:
TOP ISSUES FOR THE WEEK AHEAD EMU-SPEAK
On 7 May, President Barosso, Commissioner Rehn, Eurogroup President Dijsselbloem and Portuguese Finance Minister Gaspar will take part in a high-level conference on the Blueprint for deep and genuine EMU. Commissioner Barnier is also due to speak at the event. Although we do not expect any news, we will be paying attention to comments around banking union in particular and any hints of progress on the calendar. At present, the best case remains that a Single Supervisory Mechanism will be in place by mid-2014 and a Single Resolution Mechanism (including the possibility of direct recapitalisation of European banks by the ESM) by mid-2015.
MARKET ISSUES: Fast tracking of banking union is key to addressing financial fragmentation medium-term. Near-term, we look for some measures to help SME financing sometime in the autumn of 2013. On the data front this week, the Sentix survey will be closely watched with the previous two releases hit by Cyprus and the uncertainty of the Italian election outcome. We expect to see a modest improvement, but still signalling overall weakness.
RBA ON HOLD
Market expectations for rate cuts have been building since late March, but we remain non-believers and expect the RBA to stay on hold this week. Data reports remain mixed (as will be the case for the agenda this week with retail sales, trade, home prices and employment data), but overall not weak enough to justify a rate cut.
MARKET ISSUES: RBA on hold offers a favourable fundamental backdrop for the AUD cheered by a risk-on mood after the good US jobs report last Friday.
BOK TO CUT 25BP
In our opinion, the economic data in Korea has for some time been able to justify a rate cut and we believe that this week should see the central bank finally act.
MARKET ISSUES: Lower rates should also feed through to a weaker won and help ease overall monetary conditions.
BOE ON HOLD AND THE QUEEN’S SPEECH
Much as the London weather, the mood among the MPC seems to have improved in recent weeks. Coupled with the recent changes to the Funding for Lending schemes, we thus consider it likely that the MPC will opt for no change this week (on both rates and asset purchases).
On UK government policy, the Queen’s speech Wednesday is set to outline reform of pensions and care and a few populist measures to lure voters back from anti-European UKIP, which had its best showing ever in last week’s council elections.
MARKET ISSUES: Betterfundamentals and BoE on hold underpin our positive Sterling view versus euro.
NBP ON HOLD
The bottoming out of the Polish economy remains sluggish and CPI has undershot its target. Moreover, the minutes from the previous NBP meeting showed a very divided MPC. In our opinion, ‚wait and see? will win the day this week and we expect the NBP to remain on hold. The probability of a rate cut in June or July, however, has significantly increased.
MARKET ISSUES: Market expectations are for no change and the real question mark is on the June and July meetings.
NORGES BANK ON HOLD
Economic activity data remains mixed with weak underlying inflationary pressures. While Q1 growth should hold up reasonably well, the recent bleak indicators coming from the euro area are a concern. At the same time, the domestic housing market remains in overheating mode and concern is that the counter-cyclical capital buffers will prove too-little-too-late. On balance, domestic upside risks balance out external downside risks and point to rates on hold.
MARKET ISSUES: Market expectations are for no rate cut and more likely the NOK will take its fundamental cue from oil.