Trading with point and figure

SPX

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from Marc Ostwald


- Data and events schedule modest, digesting Carney comments, Japan CPI &
Lipper Fund flows, awaiting Canada CPI & Retail, IMF/G2-0 meeting,
corporate earnings and smattering of Fed speak

- Lipper fund flows: no evidence of risk aversion, plenty of yield grabbing
evident in HY bond fund inflow surge

- Carney dons all too familiar 'unreliable boyfriend' clothing once again

- Charts: CRB, US HY OAS spread, USD/RUB vs USD/TRY, US Sorghum shipments,
Monthly vs quarterly Japan Tankan

..........................................................................

********************
** EVENTS PREVIEW **
********************

The week ends with something of a whimper in terms of the line-up of scheduled data and events. There are the Japan Tokyo CPI and German PPI to digest ahead of Canadian CPI and Retail Sales and the advance Eurozone Consumer Confidence. In event terms, the only Fed speaker is Evans, whom we have already heard from twice in the past week, while the IMF / World Bank meetings draw to a close with the weekend G20 meeting. The US Corporate earnings schedule has Baker Hughes, GE, Honeywell and Schlumberger. Talking points du jour are a) Talking of comebacks, BOE governor Carney struck back against any doubters that he is still King of the 'unreliable boyfriends' with his comments casting a whole of doubt that a further 25 bps MPC rate hike is a Slam dunk as markets have long been discounting, and b) the latest Lipper fund flow data, which saw US 'junk' bond funds take in the most weekly cash ($3.0 Bln) since 2016 (second week of inflows), while Money Market funds posted their largest outflows ($34.9 bln) since March 2016. Per se this evidences a two fingered salute to any of the myriad of geopolitical and economic risks of the moment, even if equity market trends remain less convincing on that front. It is little wonder than that Fed's Brainard talked yesterday of asset prices being stretched, warned it was premature for regulators to revisit liquidity and capital requirements for the largest banks. She also suggested that it may even be appropriate for the Fed to ask banks to build an extra counter-cyclical capital buffer to guard against these emerging risks. As previously noted, complacency looks to be the hallmark of many capital markets flows at the current juncture.

Next week brings a heavily back loaded week for data, with Friday's raft of advance Q1 GDP readings (US, UK, France, Spain, Austria, Belgium, preceded Thursday by South Korea), US Durables, flash PMIs and a host of business and consumer confidence measures, and of course ECB and BoJ meetings, and a further ratcheting up in the pace of US Corporate Earnings.

** Canada - March CPI **
- If the Bank of Canada's very cautious guidance on Wednesday is anything to go by, then what is a rather fluid rate trajectory is rather less contingent on CPI developments in the short-term than business investment trends, which have been weaker than anticipated, and which need to improve to give the BoC 'greater confidence' in its overall economic outlook. Wilkinsalso noted that it was important for the BoC to make the 'right calls on temporary factors on inflation so that you don't over-steer'. Per se there is something of any asymmetric skew to how the BoC might react to any surprises on today's CPI, where headline is expected to rise 0.4% m/m to push the y/y rate up to 2.4% (from 2.2%), matching its 2014 high, while the various core measures are seen averaging 2.1%, roughly 0.1 ppt higher than February. An upside miss on core measures would likely elicit no response from the BoC, while a downside surprise may at the margins re-enforce the BoC's current caution, and would likely have markets pushing modestly back on July rate hike expectations.
 
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