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Across this Global Week Ahead, I would wager on fresh U.S. consumer price inflation (CPI) data for February becoming our main macro event.
I wrote macro event folks.
Not credit event!
In Europe, traders will see a U.K. budget arrive on Wednesday, and a European Central Bank meeting end on Thursday.
In Asia, mainland China’s People’s Congress wraps up.
Will any of this address rising financial market worries?
Only a weaker CPI reading has a chance at that.
Last week, sentiment became unsettled by a slide in bank stocks, after Silicon Valley Bank , the U.S. 18th largest bank by assets, saw a major bank run, and epic panic hit its regional bank shares.
The FDIC, Federal Reserve and U.S. Treasury stepped up over the weekend.
President Biden will step up today, Monday March 13th.
Here are Reuters’ five latest world market themes, reordered for equity traders—
(1) On Tuesday at 8:30 am ET, we get the FEB U.S. Consumer Price Inflation data.
U.S. inflation data have been pivot-points for markets and Tuesday's report will likely be consequential as investors gauge whether the Federal Reserve will return to the jumbo-sized rate hikes that shook markets last year.
Fed Chairman Jerome Powell told U.S. lawmakers last week that the central bank may need to take interest rates higher than previously anticipated if the data continue to show that inflation remains hot, despite a barrage of rate hikes already taken.
That could be bad news for investors hoping that U.S. stocks continue their early-year rally, which has melted away in the face of rising Treasury yields and renewed Fed hawkishness.
For now, markets are preparing for higher rates.
Investors on Thursday priced in a roughly 70% chance that the Fed will raise rates by 50 basis points at its March 22nd meeting.
Economists polled by Reuters expect consumer prices to have risen by +0.4% in February, after rising +0.5% in January.
(2) On Thursday, the European Central Bank (ECB) meets.
The European Central Bank has raised rates by 3 percentage points since July to 2.5% and looks set for another half-point increase on Thursday.
A surprise surge in underlying euro-area inflation last month has policymakers fretting that price pressures could be even stickier than feared. Austria's central bank chief Robert Holzmann wants half-point rises at each of the next four meetings.
Markets, ready and willing to take a punt on how high rates will go, have rapidly positioned for a move towards 4% by year-end. Morgan Stanley and BNP Paribas reckon this is where rates will peak.
Expect ECB Chief Christine Lagarde to be put on the spot on how high rates will go. Bond markets have already readjusted to a hawkish path ahead, so there shouldn't be too many surprises.
Right?
(3) What about Emerging Markets’ stock pain?
Emerging markets face their demons as traders mull whether the Fed will lift rates as high as 6.0%, a level many see as testing the pain threshold for developing economies.
It's not just the scale of the hikes, but also the speed that makes uncomfortable reading for those holding stocks, bonds and currencies from emerging economies, which often buckle when global rates rise.
Riskier, more fragile emerging markets, especially those with twin deficits, could feel the heaviest punch if the Fed goes all the way to 6.0%.
China's reopening could provide a cushion to some emerging market assets.
A hawkish Fed also poses a conundrum for emerging central banks who beat major peers in hiking rates and are now front-runners in cutting them — Hungary, Poland, Chile or Brazil, for instance.
But the timing of any such moves now looks increasingly in flux.
(4) China’s National People’s Congress wraps up.
Hints on whether China's new 5% growth target is as modest as many suggest come on Wednesday with the release of the first retail and factory data of the year, two days after the week-long National People's Congress wraps up.
The finale of the annual rubber-stamp parliament saw Xi Jinping secure a precedent-breaking third term as president on Friday.
Premier-in-waiting Li Qiang, best known for overseeing Shanghai's stifling COVID-19 lockdowns, is poised to be confirmed on Saturday to China's second-highest post.
Li's task now will be guiding China's post-pandemic economic re-emergence. China grew just 3% in 2022, its worst showing in decades.
December data wasn't so hot for retailers, as a surge in infections following the rollback of pandemic-related curbs kept people at home.
Lego is optimistic: Most of the 145 new stores it plans to open this year will be in China.
(5) On Wednesday, the U.K. Spring Budget arrives.
Britain's Finance Minister Jeremy Hunt delivers his Spring Budget on March 15.
After market mayhem in September as Hunt's predecessor Kwasi Kwarteng and former Prime Minister Liz Truss unveiled lavish tax cuts, forecasters expect Hunt to prioritize keeping public finances steady, resisting giveaways that could destabilize sterling, stocks or gilts.
So, traders' main focus is on growth and borrowing forecasts to be released alongside the budget.
The Office for Budget Responsibility has predicted +1.3% GDP growth for 2024. The Bank of England forecasts a slight contraction. An OBR downgrade might affect sterling , but the pound is moving mainly on interest rate differentials, with U.S. rates expected to rise further than in the U.K.
U.K. public borrowing plans are expected to fall, potentially supporting gilts. An expected extension to household energy bills support may be viewed as inflationary, however.
Zacks #1 Rank (STRONG BUY) Stocks
Here are three new large cap stocks to consider.
(1) Mercedes Benz (MBGAF - Free Report) : This is a $78 a share German multinational automotive company, with a market cap of $83.8B. I see a Zacks Value score of A, a Zacks Growth score of D and a Zacks Momentum score of F.
(2) Airbnb (ABNB - Free Report) : This is an $120 a share internet home rental/unique stay company, with a market cap of $76.8B. I see a Zacks Value score of F, a Zacks Growth score of B and a Zacks Momentum score of C.
(3) EssilorLuxottica (ESLOY - Free Report) : This is an $85 a share lens, frames, and sunglasses company, with a market cap of $49.1B. I see a Zacks Value score of C, a Zacks Growth score of D and a Zacks Momentum score of D.
What do marquee luxury cars, unique home stay experiences and Ray Ban sunglasses have in common?
They show a very busy shopper. One that is very mobile. Once again.
Key Global Macro
On Monday, there is a Eurogroup meeting.
On Tuesday, U.S. NFIB small business optimism index for FEB comes out. 90.3 was the prior reading.
Our main event hits the tape at 8:30 am ET: the U.S. Consumer Price Index (CPI).
The Broad FEB CPI should be +6.2% y/y, after a prior +6.4% y/y reading.
The core CPI should be +5.5% y/y, down a touch from +5.6% y/y.
On Wednesday, the U.S. Producer Price Index (PPI) for FEB should be +5.1% y/y, down from a prior reading at 6.0%.
On Thursday, Australia’s unemployment rate may rise to 3.9% from 3.7%.
We get U.S. starts and building permits data. Starts may be down -0.6% in February, while permits are down -0.5%.
The ECB shows us its latest monetary policy decision.
On Friday, the Euro Area harmonized index of consumer prices (HICP) for FEB should be +8.5% y/y. That’s the same as the prior reading.
Conclusion
I shall close up this Global Week Ahead with Zacks Research Director Sheraz Mian’s key earnings points.
His four key points:
(1) Expect total S&P500 earnings for Q1-23 to be down -9.0% from the same period last year on +1.9% higher revenues.
This would follow the -5.8% decline in the preceding period’s earnings (Q4-22) on +5.5% higher revenues.
In short, Q1 looks a tad worse.
(2) Estimates have come down the most for the Aerospace, Basic Materials, Autos, Consumer Discretionary, Retail, Medical and Transportation sectors.
The Utilities sector is the only S&P500 sector that has enjoyed modest positive revisions since the start of January.
Only a defensive S&P500 sector earnings revisions rising? That’s a soft outlook.
(3) The direction of Q1-23 earnings estimates is in-line with the trend we have been seeing over the few quarters.
But the magnitude of negative revisions is smaller, relative to what we had seen in the comparable periods for the preceding two quarters.
Quiet!
(4) Earnings estimates for full-year 2023 have been coming down as well.
From their peak in mid-April 2022, the aggregate total for the year has been cut by -12.4% for the index as a whole and -14.5% excluding the Energy sector’s contribution.
Summing it up: There is still no bottom to the covering analyst worry.
Have a great trading week.
Regards,
John Blank Zacks Chief Equity Strategist and Economist
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Main Event Is the CPI: Global Week Ahead
Across this Global Week Ahead, I would wager on fresh U.S. consumer price inflation (CPI) data for February becoming our main macro event.
I wrote macro event folks.
Not credit event!
In Europe, traders will see a U.K. budget arrive on Wednesday, and a European Central Bank meeting end on Thursday.
In Asia, mainland China’s People’s Congress wraps up.
Will any of this address rising financial market worries?
Only a weaker CPI reading has a chance at that.
Last week, sentiment became unsettled by a slide in bank stocks, after Silicon Valley Bank , the U.S. 18th largest bank by assets, saw a major bank run, and epic panic hit its regional bank shares.
The FDIC, Federal Reserve and U.S. Treasury stepped up over the weekend.
President Biden will step up today, Monday March 13th.
Here are Reuters’ five latest world market themes, reordered for equity traders—
(1) On Tuesday at 8:30 am ET, we get the FEB U.S. Consumer Price Inflation data.
U.S. inflation data have been pivot-points for markets and Tuesday's report will likely be consequential as investors gauge whether the Federal Reserve will return to the jumbo-sized rate hikes that shook markets last year.
Fed Chairman Jerome Powell told U.S. lawmakers last week that the central bank may need to take interest rates higher than previously anticipated if the data continue to show that inflation remains hot, despite a barrage of rate hikes already taken.
That could be bad news for investors hoping that U.S. stocks continue their early-year rally, which has melted away in the face of rising Treasury yields and renewed Fed hawkishness.
For now, markets are preparing for higher rates.
Investors on Thursday priced in a roughly 70% chance that the Fed will raise rates by 50 basis points at its March 22nd meeting.
Economists polled by Reuters expect consumer prices to have risen by +0.4% in February, after rising +0.5% in January.
(2) On Thursday, the European Central Bank (ECB) meets.
The European Central Bank has raised rates by 3 percentage points since July to 2.5% and looks set for another half-point increase on Thursday.
A surprise surge in underlying euro-area inflation last month has policymakers fretting that price pressures could be even stickier than feared. Austria's central bank chief Robert Holzmann wants half-point rises at each of the next four meetings.
Markets, ready and willing to take a punt on how high rates will go, have rapidly positioned for a move towards 4% by year-end. Morgan Stanley and BNP Paribas reckon this is where rates will peak.
Expect ECB Chief Christine Lagarde to be put on the spot on how high rates will go. Bond markets have already readjusted to a hawkish path ahead, so there shouldn't be too many surprises.
Right?
(3) What about Emerging Markets’ stock pain?
Emerging markets face their demons as traders mull whether the Fed will lift rates as high as 6.0%, a level many see as testing the pain threshold for developing economies.
It's not just the scale of the hikes, but also the speed that makes uncomfortable reading for those holding stocks, bonds and currencies from emerging economies, which often buckle when global rates rise.
Riskier, more fragile emerging markets, especially those with twin deficits, could feel the heaviest punch if the Fed goes all the way to 6.0%.
China's reopening could provide a cushion to some emerging market assets.
A hawkish Fed also poses a conundrum for emerging central banks who beat major peers in hiking rates and are now front-runners in cutting them — Hungary, Poland, Chile or Brazil, for instance.
But the timing of any such moves now looks increasingly in flux.
(4) China’s National People’s Congress wraps up.
Hints on whether China's new 5% growth target is as modest as many suggest come on Wednesday with the release of the first retail and factory data of the year, two days after the week-long National People's Congress wraps up.
The finale of the annual rubber-stamp parliament saw Xi Jinping secure a precedent-breaking third term as president on Friday.
Premier-in-waiting Li Qiang, best known for overseeing Shanghai's stifling COVID-19 lockdowns, is poised to be confirmed on Saturday to China's second-highest post.
Li's task now will be guiding China's post-pandemic economic re-emergence. China grew just 3% in 2022, its worst showing in decades.
December data wasn't so hot for retailers, as a surge in infections following the rollback of pandemic-related curbs kept people at home.
Lego is optimistic: Most of the 145 new stores it plans to open this year will be in China.
(5) On Wednesday, the U.K. Spring Budget arrives.
Britain's Finance Minister Jeremy Hunt delivers his Spring Budget on March 15.
After market mayhem in September as Hunt's predecessor Kwasi Kwarteng and former Prime Minister Liz Truss unveiled lavish tax cuts, forecasters expect Hunt to prioritize keeping public finances steady, resisting giveaways that could destabilize sterling, stocks or gilts.
So, traders' main focus is on growth and borrowing forecasts to be released alongside the budget.
The Office for Budget Responsibility has predicted +1.3% GDP growth for 2024. The Bank of England forecasts a slight contraction. An OBR downgrade might affect sterling , but the pound is moving mainly on interest rate differentials, with U.S. rates expected to rise further than in the U.K.
U.K. public borrowing plans are expected to fall, potentially supporting gilts. An expected extension to household energy bills support may be viewed as inflationary, however.
Zacks #1 Rank (STRONG BUY) Stocks
Here are three new large cap stocks to consider.
(1) Mercedes Benz (MBGAF - Free Report) : This is a $78 a share German multinational automotive company, with a market cap of $83.8B. I see a Zacks Value score of A, a Zacks Growth score of D and a Zacks Momentum score of F.
(2) Airbnb (ABNB - Free Report) : This is an $120 a share internet home rental/unique stay company, with a market cap of $76.8B. I see a Zacks Value score of F, a Zacks Growth score of B and a Zacks Momentum score of C.
(3) EssilorLuxottica (ESLOY - Free Report) : This is an $85 a share lens, frames, and sunglasses company, with a market cap of $49.1B. I see a Zacks Value score of C, a Zacks Growth score of D and a Zacks Momentum score of D.
What do marquee luxury cars, unique home stay experiences and Ray Ban sunglasses have in common?
They show a very busy shopper. One that is very mobile. Once again.
Key Global Macro
On Monday, there is a Eurogroup meeting.
On Tuesday, U.S. NFIB small business optimism index for FEB comes out. 90.3 was the prior reading.
Our main event hits the tape at 8:30 am ET: the U.S. Consumer Price Index (CPI).
The Broad FEB CPI should be +6.2% y/y, after a prior +6.4% y/y reading.
The core CPI should be +5.5% y/y, down a touch from +5.6% y/y.
On Wednesday, the U.S. Producer Price Index (PPI) for FEB should be +5.1% y/y, down from a prior reading at 6.0%.
On Thursday, Australia’s unemployment rate may rise to 3.9% from 3.7%.
We get U.S. starts and building permits data. Starts may be down -0.6% in February, while permits are down -0.5%.
The ECB shows us its latest monetary policy decision.
On Friday, the Euro Area harmonized index of consumer prices (HICP) for FEB should be +8.5% y/y. That’s the same as the prior reading.
Conclusion
I shall close up this Global Week Ahead with Zacks Research Director Sheraz Mian’s key earnings points.
His four key points:
(1) Expect total S&P500 earnings for Q1-23 to be down -9.0% from the same period last year on +1.9% higher revenues.
This would follow the -5.8% decline in the preceding period’s earnings (Q4-22) on +5.5% higher revenues.
In short, Q1 looks a tad worse.
(2) Estimates have come down the most for the Aerospace, Basic Materials, Autos, Consumer Discretionary, Retail, Medical and Transportation sectors.
The Utilities sector is the only S&P500 sector that has enjoyed modest positive revisions since the start of January.
Only a defensive S&P500 sector earnings revisions rising? That’s a soft outlook.
(3) The direction of Q1-23 earnings estimates is in-line with the trend we have been seeing over the few quarters.
But the magnitude of negative revisions is smaller, relative to what we had seen in the comparable periods for the preceding two quarters.
Quiet!
(4) Earnings estimates for full-year 2023 have been coming down as well.
From their peak in mid-April 2022, the aggregate total for the year has been cut by -12.4% for the index as a whole and -14.5% excluding the Energy sector’s contribution.
Summing it up: There is still no bottom to the covering analyst worry.
Have a great trading week.
Regards,
John Blank
Zacks Chief Equity Strategist and Economist