- BoJ, ECB and Riksbank meetings accompany busy schedule of data and corporate
earnings; German & Spanish CPI, UK CBI Distributive Trades, US Durable
Goods, Pending Home Sales, Goods Trade Balance, Jobless Claims, Wholesale
Inventories; Italy and US to auction debt
- Germany CPI: Easter timing effects to see aberrant March drop reversed,
larger than expected Spanish HICP rebound implies risks to upside of
consensus
- ECB: no policy changes expected, but may change balance of risks to
'broadly balanced', while stressing core CPI still not showing any
significant upward momentum
- US Durable Goods Orders: headline and core measures seen posting solid
gains for third month, Shipments data key for tomorrow's Q1 GDP
- US Trade Balance: modestly wider deficit expected, some risk of better
than expected outturn
- Pending Home Sales: reactive correction to February surge expected, though
still has plenty of room to catch up with New and Existing Home Sales
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** EVENTS PREVIEW **
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Statistically we arrive today at the 'business end' of the week, with a hefty dose of central bank meetings - BoJ, Riksbank & ECB, another busy day for corporate earnings, while govt bond auctions see Italy sell 5 & 10-yr BTPs and the US offers a new 7-yr Treasury. In statistical terms, Spain and Germany publish provisional April CPI, the various Eurozone EC, German & Italian Confidence surveys are accompanied by the UK CBI Distributive Trade survey, while the US has Durable Goods Orders, Pending Home Sales, the Advance Goods Trade Balance, Initial Claims and Wholesale Inventories. As for the Trump tax cut package, there is a clear sense of anti-climax in markets given that this has been eagerly anticipated for the past six months, but perhaps it is primarily indicating that Trump and Mnuchin know that it was always going to be necessary to give Congress considerable leeway to chisel out the details of the legislation, above all given the obvious fact that it is absolutely not fiscally neutral.
** Eurozone - April Prov. CPI / ECB rate decision **
- Preliminary HICP readings in the Eurozone are expected to underline that the March drop was heavily influenced by Easter timing effects with Germany forecast to bounce to 1.9% y/y from 1.5%, and tomorrow's Eurozone to 1.8% y/y from 1.5%, and rather more important core CPI is also seen rebounding to 1.0% y/y from 0.7%. The latter remains a key consideration in terms of the ECB's policy outlook, and even with the expected bounce, it can hardly be said to be showing any sign of significant upward momentum. The risks look to be skewed quite heavily to the upside of forecasts. given the much sharper than expected rebound in Spanish HICP (0.9% m/m 2.6% y/y vs. expected 2.3% y/y and February's 2.1% y/y. Having clearly laid out its stall for monetary policy for 2017 at last December's meeting, it is unsurprising that no changes are expected at today's meeting, or indeed until much later in the year. As for the message from Draghi and the council, it is abundantly clear that the hawks are pushing ever harder for a further reduction in the pace of QE, and for the council to outline an exit plan, and even if the doves admit that a reduction will have to be at least considered later in the year. So once again, Draghi may be forced into sending some rather mixed signals about the policy outlook at the press conference, doubtless underlining that the improved performance of Eurozone economy and the pick-up in inflation is contingent on the ECB fulfilling its current policy pledges, while probably stressing that the myriad of Eurozone and global geo-political risks continue to suggest some downside risks to its growth forecasts, and that once the energy price base effect unwind is complete, inflation may still fall significantly short of its target of 'just below 2.0%'. Nevertheless Coeure has recently suggested that he views the overall balance of risks to the outlook as being balanced, and it will be interesting to see whether the initial statement and/or the press conference takes this stance, given that Coeure is generally the best proxy for the majority view of the council.
** U.S.A - Durable Goods Orders, Trade Balance, Pending Home Sales **
- The consensus sees Durable Goods Orders posting gains at headline and core levels for a third consecutive month, with headline forecast to rise 1.3% m/m, while the ex-Transport measure is seen up 0.4% m/m and the CapEx proxy that is Non-defence Capital Goods ex-aircraft up 0.5%, overall pointing to a very solid quarterly performance that has been signalled by manufacturing sector surveys. It is the Shipments rather than Orders data which feeds into tomorrow's advance Q1 GDP reading, and if the impressive 3-month annualized rate of 9.5% for Capital Goods Shipments seen in February is roughly sustained, then this should go some way to offsetting the expected drag from sluggish personal consumption. The other statistic today which may prompt some last minute tweaks to GDP forecasts will be the Advance Goods Trade Balance, where a modest widening to $-65.2 Bln from February's final $-63.9 Bln is expected, which would imply that Net Exports should make a very modest positive contribution to Q1 GDP. That said, falling energy imports and a likely drop in consumer goods imports imply some risk that the deficit may prove to be smaller than the consensus expects. After posting the strongest monthly rise in 7 years at 5.5% m/m, Pending Home Sales are seen dipping 1.0% m/m, though this would run counter to normal seasonal trends, which nearly always see a m/m gain in March, and the Pending Home Sales measure has been lagging both New and Existing measures, as such the risk here is of a better than expected reading.
from Marc Ostwald
