Key Events In The Coming Week: Things Finally Slow Down

After two weeks of furious economic news and corporate reports, things are finally quieting down as is often is the week after payrolls, with Fed Chair Powell's appearance on Wednesday likely the week's top event alongside a dismal CPI report on Tuesday and the retail sales and industrial production reports on Friday.

As noted on Friday, in Powell's last minute announced appearance, he will be speaking on current economic issues at a webinar hosted by the Peterson Institute. but the focus will be on what he says about the policy towards negative rates. Market pricing of the future fed funds rate has dipped into negative territory in recent weeks even if some of this is technical. The Fed does seem very reluctant to endorse negative rates as an option but the market is concerned that they may have no choice in the future. So the Fed may need to increasingly lay out a convincing narrative as to how they’ll avoid it for markets to not price it in.

There’ll be a few interesting data releases to look out for, including Q1 GDP readings from Germany (Friday) and the UK (Wednesday), US CPI (tomorrow – expected to see the weakest core print on record), along with the important monthly Chinese data dump for April and US Retail sales (Friday).

Earnings season is starting to wind down, though there’ll still be 20 S&P 500 and 71 Stoxx 600 companies reporting. 86% of the S&P 500 has reported first quarter results for 2020 through the end of last week. 66% of those companies have beat earning-per-share estimates, which is below the historical average of 73%.

The blended (actual and estimated results) earnings decline is -13.6% for the quarter. If those results hold, it will be the largest year-over-year decline since the third quarter of 2009. It would also be the fourth quarter in the past five that the S&P 500 reported a year-over-year decline in earnings. The S&P 500 doesn’t seem to be that fussed though and is now at levels it traded at in October last year just before the phase one deal was signed with China. Meanwhile the NASDAQ is now up for 2020 (+1.66%). A truly remarkable achievement in the face of something akin to an economic depression. In terms of the earnings highlights, tomorrow we’ll hear from Allianz, Duke Energy, Vodafone, Deutsche Post and ThyssenKrupp. Then on Wednesday, we’ll hear from Cisco Systems and Commerzbank. And on Thursday, there’s Deutsche Telekom, Merck and Applied Materials.

As Reid notes, for those missing the days when major stress was thinking about Brexit, you’ll be pleased to learn that there’ll also be another round of talks between the UK and the EU on their future relationship post-Brexit starting today.

Below is a day-by-day calendar of events, courtesy of Deutsche Bank

Monday

  • Data: Italy March industrial production
  • Central Banks: Bank of Japan release Summary of Opinions
  • Politics: Third UK-EU future relationship negotiating round begins

Tuesday

  • Data: China April PPI, CPI, Japan preliminary march leading index, US April CPI, NFIB small business optimism index, monthly budget statement
  • Central Banks: Fed’s Bullard, Harker and Mester speak
  • Earnings: Allianz, Duke Energy, Vodafone, Deutsche Post, ThyssenKrupp

Wednesday

  • Data: Japan March current account balance, UK preliminary Q1 GDP, Euro Area March industrial production, US weekly MBA mortgage applications, April PPI
  • Central Banks: Reserve Bank of New Zealand monetary policy decision
  • Earnings: Cisco Systems, Commerzbank

Thursday

  • Data: Japan preliminary April machine tool orders, Germany final April CPI, Canada March manufacturing sales, US April import price index, export price index, weekly initial jobless claims
  • Central Banks: ECB publishes Economic Bulletin, Mexican central bank monetary policy decision, BoE Governor Bailey speaks, Bank of Canada release Financial System Review and Governor Poloz speaks
  • Earnings: Deutsche Telekom, Merck, Applied Materials

Friday

  • Data: Japan April PPI, China April industrial production, retail sales, Germany preliminary Q1 GDP, France final April CPI, Italy March industrial sales, industrial orders, final April CPI, Euro Area March trade balance, preliminary Q1 employment, second release of Q1 GDP, US April retail sales, industrial production, capacity utilisation, foreign net transactions, May Empire State manufacturing survey, preliminary May University of Michigan sentiment, March business inventories, job openings, Canada March international securities transactions, April existing home sales

Finally, looking at just the US, Goldman notes that the key economic data releases this week are the CPI report on Tuesday and the retail sales and industrial production reports on Friday. There are several speaking engagements from Fed officials this week, including from Chair Powell on Wednesday.

Monday, May 11

  • 12:00 PM Atlanta Fed President Bostic (FOMC non-voter) speaks:  Atlanta Fed President Raphael Bostic will discuss the response to the coronacrisis in a webinar. Prepared text is not expected. Audience Q&A is expected.

Tuesday, May 12

  • 08:30 AM CPI (mom), April (GS -0.91%, consensus -0.8%, last -0.4%); Core CPI (mom), April (GS -0.22%, consensus -0.2%, last -0.1%); CPI (yoy), April (GS +0.28%, consensus +0.4%, last +1.5%); Core CPI (yoy), April (GS +1.67%, consensus +1.7%, last +2.1%): We estimate a 0.22% decline in April core CPI (mom sa), which would lower the year-on-year rate by four tenths to +1.7%. We expect a significant impact of the coronavirus that is disinflationary on net. Our monthly core inflation forecast reflects a collapse in hotel and airline prices, as well as more modest declines in apparel and new car prices. We also look for deceleration in shelter categories due to rent freezes and landlord concessions, but we do not expect outright deflation in this category. On the positive side, we look for another monthly increase in used car, tobacco, and alcohol prices. We estimate a 0.91% decline in headline CPI (mom sa), reflecting lower energy prices.
  • 09:00 AM St. Louis Fed President Bullard (FOMC non-voter) speaks; St. Louis Fed President James Bullard will discuss the economic outlook on a virtual panel. Prepared text and audience Q&A are TBD.
  • 09:00 AM Minneapolis Fed President Kashkari (FOMC voter) speaks: Minneapolis Fed President Neel Kashkari will participate in an online discussion on the economy and the coronacrisis. Prepared text is not expected. Audience Q&A is expected.
  • 10:00 AM Philadelphia Fed President Harker (FOMC voter) speaks: Philadelphia Fed President Patrick Harker will speak on the effects of the coronacrisis. Prepared text and audience Q&A are expected.
  • 10:00 AM Vice Chair for Supervision Quarles (FOMC voter) speaks: Federal Reserve Board Vice Chair for Supervision Randal Quarles will testify in front of the Senate Committee on Banking, Housing, and Urban Affairs. Prepared text and questions from senators are expected.
  • 05:00 PM Cleveland Fed President Mester (FOMC voter) speaks: Cleveland Fed President Loretta Mester will participate in a virtual moderated Q&A. Prepared text and audience Q&A are expected.

Wednesday, May 13

  • 09:00 AM Chair Powell (FOMC voter) speaks: Federal Reserve Chair Jerome Powell will discuss the state of the economy in an online event hosted by the Peterson Institute for International Economics. Prepared text and moderator Q&A are expected.
  • 08:30 AM PPI final demand, April (GS -0.6%, consensus -0.5%, last -0.2%); PPI ex-food and energy, April (GS +0.1%, consensus flat, last +0.2%); PPI ex-food, energy, and trade, April (GS +0.1%, consensus -0.1%, last +0.2%): We estimate that headline PPI decreased 0.6% in April, reflecting lower energy prices, as well as fairly soft core prices. We expect a 0.1% increase in the core measure excluding food and energy, and also a 0.1% increase in the core measure excluding food, energy, and trade.

Thursday, May 14

  • 08:30 AM Initial jobless claims, week ended May 9 (GS 2,600k, consensus 2,500k, last 3,169k); Continuing jobless claims, week ended May 2 (consensus 24,800, last 22,647k); We estimate initial jobless claims declined but remain elevated at 2,600k in the week ended May 9.; 08:30 AM Import price index, April (consensus -3.2%, last -2.3%)
  • 01:00 PM Minneapolis Fed President Kashkari (FOMC voter) speaks: Minneapolis Fed President Neel Kashkari will participate in an online discussion on health and economy. Prepared text is not expected. Audience Q&A is expected.
  • 06:00 PM Dallas Fed President Kaplan (FOMC voter) speaks: Dallas Fed President Robert Kaplan will participate in a moderated discussion with Dallas Mayor Eric Johnson.

Friday, May 15

  • 08:30 AM Retail sales, April (GS -10.5%, consensus -11.7%, last -8.4%); Retail sales ex-auto, April (GS -8.5%, consensus -8.4%, last -4.2%); Retail sales ex-auto & gas, April (GS -7.0%, consensus -6.0%, last -2.8%); Core retail sales, April (GS -5.0%, consensus -4.2%, last +2.0%): We estimate that core retail sales (ex-autos, gasoline, and building materials) declined by 5.0% in April (mom sa), with normalization in grocery store sales and mass merchants (following March stockpiling) and further declines in most other brick and mortar categories. We believe last month’s report (March) received a boost from non-response among the hardest hit retailers, and while this may attenuate the April declines as well, we note scope for downward revisions to March growth in this week’s report. We expect more pronounced April weakness in the higher level aggregates in this week’s report, with a second month of collapse in food services driving a ~2pp wedge between the ex-auto ex-gas and retail control categories. We expect a 10.5% decline in the headline measure and an 8.5% drop in ex-auto, based on the steep drop in Auto SAAR and large declines in gasoline prices and gallons consumed.
  • 08:30 AM Empire Manufacturing Survey, May (consensus -60.0, last -78.2)
  • 09:15 AM Industrial production, April (GS -11.5%, consensus -11.5%, last -5.4%): Manufacturing production, April (GS -13.0%, consensus -12.5%, last -6.3%); Capacity utilization, April (GS 64.0%, consensus 64.0%, last 72.5%): We estimate industrial production fell by 11.5% in April, reflecting a pullback in manufacturing output—particularly for autos, which plummeted. We estimate capacity utilization declined by 8.5pp to 64.0%.
  • 10:00 AM JOLTS Job Openings, March (last 6,882k)
  • 10:00 AM University of Michigan consumer sentiment, May preliminary (GS 68.5, consensus 68.0, last 71.8): We expect the University of Michigan consumer sentiment index declined by 3.3pt to 68.5 in the preliminary May reading, reflecting further job losses but signs of a plateau in new virus cases, increases in equity markets, and gradual reopening in several states.

Source: Deutsche Bank, Goldman, BofA