Last week sentiment was driven by positive updates on the coronavirus spread and the positive news regarding Remdesvir, which overshadowed the worse earnings from US banks. This week sentiment should be driven by similar themes: the coronavirus infection curve, the reopening plans from major economies, remedies for Covid-19 and SP500 earnings. The positive vibes were not echoed in FX space, with NZD and EUR weaker, Jpy and Gbp stronger and USD rather mixed.
Themes for the Week Ahead:
Coronavirus: broadly positive news from Italy, Spain, Germany and the US in terms of case-count. Reopening plans proceed in Austria, Denmark, Spain and Italy is also starting to marginally remove lockdowns. There is criticism regarding Trump’s plans to reopen the US, but the seed has been planted.
EU Debt: Italy’s bond yields are drifting higher, concerns are growing about its debt ratios and anti-euro sentiment is rising in bloc’s third-biggest economy.
Earnings: focus is on the second-half and 2021 outlook, since poor Q1 and Q2 earnings are largely priced in already. It’s more about the commentary than numbers this time round. Among the names will be Netflix, AT&T, T-Mobile, Verizon, Delta, Southwest Airlines, Amazon, Coca-Cola, energy plays like Kinder Morgan, Halliburton, Baker Hughes, Visa, Amex, Capital One, Invesco, Eli Lilly, Biogen, Lockheed Martin, Equifax and Intel.
Flash PMIs: this week we will see how economies fared in April as the full effects of lockdowns appeared. Naturally, markets are expecting dismal readings.
Data in the Week Ahead:
- NZ CPI (backward looking, but food prices increased in Q1)
- RBA Minutes & Lowe Speech (markets expecting bearish comments so risk is to the upside if Lowe talks about light at the end of the tunnel)
- UK Employment Change (widespread job cuts expected)
- GER ZEW (weakness still expected)
- UK CPI (backward looking, but could be lower as BRC shop prices were lower)
- CAD CPI (backward looking but might surprize as IVEY PMI prices component rose recently)
- EU Flash PMIs (all expected to be weaker than previous)
- US Jobless Claims (might be a bit less than last week due to Easter weekend)
- UK Retail Sales (expected to be weak)
- GER IFO (expected to be weak)
On the Radar
The performance in FX doesn’t mirror the boost in risk-appetite in stocks and there is little clarity going into the week. Weakness in the Euro seems to be the only clear theme with EurAud, EurGbp, EurJpy, EurNzd all pointing lower. Gold is pulling back, but shorts need to be aware of key supports now. SP500 remains bullish on charts but earnings could change things this week so caution is advised and a “flexible” stance is required across all instruments.