Macro Matters - Weekly review, w/c April 24

TradeDay Macro Matters

Welcome to our weekly macroeconomic recap, covering major developments in global markets with a focus on the US.

Macroeconomic / Geopolitical Developments

• Bond markets remain volatile, signaling recession concerns.

• Services PMIs are improving, but manufacturing recovery remains elusive.

Bond Markets Warn of Recession

Volatility in bond markets has eased since March’s banking crisis, but the focus has shifted to the Fed’s next moves. Short-term bond yields have risen, reflecting inflation concerns, while long-term yields remain subdued, signaling recession fears.

PMIs Show Mixed Trends

Global PMIs for April surprised to the upside, driven by the services sector as inflation pressures ease. However, manufacturing remains in contraction, particularly in Europe. In the US, manufacturing has stabilized but lacks momentum, highlighting ongoing growth challenges.

What’s Next?

The Fed’s blackout period leaves markets in speculation mode. Key US economic releases this week include Q1 GDP and Core PCE, expected to reflect gradual normalization.

US Developments

• Increasing signs of a recession.

• Fed blackout period begins.

• Earnings season reveals mixed results.

US Recession Warnings Mount

The US Leading Economic Index fell sharply in March, hitting its lowest level since November 2020. The Conference Board forecasts a mid-2023 recession, citing elevated jobless claims and deteriorating economic conditions.

Fed Blackout Period

As the Fed enters its blackout period, markets are split between concerns over inflation and recession. Recent comments from Fed members suggest continued focus on inflation, with rates likely staying above 5%.

Mixed Earnings Results

While some banks impressed earlier, recent results from Tesla and Morgan Stanley have disappointed. Tesla’s focus on sales growth over profitability and Morgan Stanley’s 19% earnings decline highlight pressures across sectors. FactSet projects a Q1 earnings decline of -6.2% for S&P 500 companies, marking the second consecutive quarter of negative growth.

What’s Next for the US?

Q1 GDP data on Thursday is expected to show 2–2.6% growth, fueled by consumer spending. US futures remain range-bound, with key levels at 4096.5 for the E-Mini S&P and 12925.5 for the NASDAQ. Earnings highlights this week include Meta Platforms, Amazon, and Alphabet.

Europe Developments

• UK wage growth and inflation drive rate hike expectations.

• Eurozone PMIs show strength in services, weakness in manufacturing.

Bank of England Likely to Hike Rates

UK inflation remains stubbornly above 10%, with rising wage growth and consumer confidence supporting the case for a 25bps rate hike in May.

Eurozone PMIs Boost ECB Optimism

Eurozone composite PMI improved to 54.4 in April, driven by services. However, manufacturing continues to struggle with weak new orders, keeping inflation concerns alive for the ECB.

What’s Next for Europe?

Key data includes Germany’s IFO survey and inflation numbers later this week, which will set the tone for Eurozone HICP inflation next week.

Asia Developments

• New Zealand inflation surprise weakens the Kiwi.

• Structural changes at the Reserve Bank of Australia.

• Japan’s wages remain pivotal for monetary policy.

Kiwi Under Pressure

New Zealand inflation came in below expectations, lowering rate hike projections and pressuring the NZD.

Changes at the RBA

The Reserve Bank of Australia introduced a new rate-setting committee, increasing diversity and independence. This structural shift has supported the AUD.

Japan’s Monetary Policy Outlook

New BoJ Governor Kazuo Ueda is likely to maintain ultra-loose monetary policy for now, with future decisions hinging on wage growth.

Commodities

• Oil prices retreat amid recession fears.

• Precious metals lose momentum as sentiment declines.

Oil Faces Demand Concerns

WTI crude has pulled back sharply, with momentum now negative. A decisive break below $75.70 could lead to deeper corrections toward $66.80 or $64.12.

Metals Struggle Amid USD Strength

Gold fell below $2000, with a key support level at $1950. Silver faces similar challenges, with a break below $24.67 signaling further downside.

On the Calendar

Central Banks:

• Friday: Bank of Japan policy decision.

Major Macro Data:

• 24/04: German IFO Survey

• 25/04: US Consumer Confidence, New Home Sales

• 26/04: Australian CPI, US Durable Goods

• 27/04: EU Consumer Confidence, US GDP and PCE

• 28/04: Bank of Japan decision, German GDP and inflation, US Core PCE

Key Earnings:

• 24/04: Coca-Cola, First Republic Bank

• 25/04: Alphabet, Microsoft, Visa, McDonald’s

• 26/04: Meta Platforms, Boeing

• 27/04: Amazon, Intel, Snap

• 28/04: Chevron, Exxon

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