Weekly Market Outlook (01-05 April)

UPCOMING EVENTS:

• Monday: China
  Caixin Manufacturing PMI, US ISM Manufacturing PMI, BoC Business Outlook
  Survey.
• Tuesday: RBA
  Minutes, Switzerland Retail Sales, Switzerland Manufacturing PMI, German
  Inflation data, US Job Openings.
• Wednesday: China
  Caixin Services PMI, Eurozone CPI and Unemployment Rate, US ADP, Canada
  Services PMI, US ISM Services PMI.
• Thursday:
  Switzerland CPI, Eurozone PPI, US Challenger Job Cuts, US Jobless Claims.
• Friday:
  Eurozone Retail Sales, Canada Jobs data, US NFP.

Monday

The US ISM Manufacturing PMI is expected
at 48.4 vs. 47.8 prior. The recent S&P
Global US Manufacturing PMI beat expectations
rising for the third consecutive month highlighting a pickup in activity in the
Manufacturing sector in Q1 2024. The commentary in the report was generally
upbeat, but there were also some worrying signals on the inflation part saying
that “A steepening rise in costs, combined with strengthened pricing power
amid the recent upturn in demand, meant inflationary pressures gathered
pace again in March. Costs have increased on the back of further wage growth
and rising fuel prices, pushing overall selling price inflation for goods
and services up to its highest for nearly a year.

Tuesday

The US Job Openings are expected at 8.790M
vs. 8.863M prior. This will be the first major US labour market report of
the week and, although it’s old (February data), it’s generally a market
moving release. The last
report we got a miss with negative
revisions to the prior readings highlighting a resilient although weakening
labour market. The market will also focus on the hiring and quit rates as they
both fell below the pre-pandemic trend.

Wednesday

The Eurozone CPI Y/Y is expected at 2.6{721fc769be108e463fe4e33f629fb22fe291c423a7a69eaaf65dcb28e9b05dea}
vs. 2.6{721fc769be108e463fe4e33f629fb22fe291c423a7a69eaaf65dcb28e9b05dea} prior, while the Core Y/Y measure is seen at 3.0{721fc769be108e463fe4e33f629fb22fe291c423a7a69eaaf65dcb28e9b05dea} vs. 3.1{721fc769be108e463fe4e33f629fb22fe291c423a7a69eaaf65dcb28e9b05dea} prior. The
market is fully pricing the first rate cut in June and given the consensus
within the ECB itself, we will likely need a huge miss in the data to see
the market pricing in an April move. We got a miss in the French CPI
readings last Friday and we will get the German figures the day before, which
should guide the expectations for the Eurozone CPI. We will also see the latest
Unemployment Rate which is expected to remain unchanged at the record low of
6.4{721fc769be108e463fe4e33f629fb22fe291c423a7a69eaaf65dcb28e9b05dea}.

The US ISM Services PMI is expected at
52.6 vs. 52.6 prior. The recent S&P
Global US Services PMI missed expectations
slightly falling to a three-month low although the commentary in the report was
generally good saying that “Service providers reported a slower pace of
expansion linked in part to ongoing cost of living pressures. However,
service providers have also become increasingly optimistic about the outlook,
with confidence striking a 22-month high in March.” The most important
data to watch will be the price and employment sub-indexes.

Thursday

The Switzerland CPI Y/Y is expected at
1.4{721fc769be108e463fe4e33f629fb22fe291c423a7a69eaaf65dcb28e9b05dea} vs. 1.2{721fc769be108e463fe4e33f629fb22fe291c423a7a69eaaf65dcb28e9b05dea} prior, while the M/M measure is seen at 0.3{721fc769be108e463fe4e33f629fb22fe291c423a7a69eaaf65dcb28e9b05dea} vs. 0.6{721fc769be108e463fe4e33f629fb22fe291c423a7a69eaaf65dcb28e9b05dea} prior. As a
reminder, the SNB
decided to cut rates by 25 bps at the March
meeting given the steady easing in inflation and the rate being well within
the 0-2{721fc769be108e463fe4e33f629fb22fe291c423a7a69eaaf65dcb28e9b05dea} target since last summer. Further easing in the data should see
the market fully pricing in another rate cut in June from the current 60{721fc769be108e463fe4e33f629fb22fe291c423a7a69eaaf65dcb28e9b05dea}
probability.

The US Jobless Claims continue to be one
of the most important releases every week as it’s a timelier indicator on the
state of the labour market. This is because disinflation to the Fed’s target is
more likely with a weakening labour market. A resilient labour market though
will make the achievement of the target much more difficult. Initial Claims
keep on hovering around cycle lows, while Continuing Claims remain firm around
the 1800K level. There’s no consensus at the time of writing although the last
week we saw Initial Claims beating
expectations at 210K vs. 212K expected and Continuing Claims rising slightly to
1820K from the prior positively revised 1790K figure.

Friday

The US NFP report is expected to show 200K
jobs added in March vs. 275K in February
with the Unemployment Rate seen unchanged at 3.9{721fc769be108e463fe4e33f629fb22fe291c423a7a69eaaf65dcb28e9b05dea}. The Average Hourly Earnings
Y/Y is expected at 4.1{721fc769be108e463fe4e33f629fb22fe291c423a7a69eaaf65dcb28e9b05dea} vs. 4.3{721fc769be108e463fe4e33f629fb22fe291c423a7a69eaaf65dcb28e9b05dea} prior, while the M/M measure is seen at 0.3{721fc769be108e463fe4e33f629fb22fe291c423a7a69eaaf65dcb28e9b05dea}
vs. 0.1{721fc769be108e463fe4e33f629fb22fe291c423a7a69eaaf65dcb28e9b05dea} prior. The general expectation into the report is positive
given the strong Jobless Claims and the Present Situation Index, which might
further be consolidated by the employment components in the ISM PMIs. Fed Chair
Powell said that an “unexpected” weakening in the labour market could warrant a
policy response but that will likely require the Sahm Rule to be triggered,
which would need the Unemployment Rate to jump to 4.4{721fc769be108e463fe4e33f629fb22fe291c423a7a69eaaf65dcb28e9b05dea}.

The Canadian Labour Market report is
expected to show 25K jobs added in March vs. 40.7K in February
with the Unemployment Rate ticking higher to 5.9{721fc769be108e463fe4e33f629fb22fe291c423a7a69eaaf65dcb28e9b05dea} vs. 5.8{721fc769be108e463fe4e33f629fb22fe291c423a7a69eaaf65dcb28e9b05dea} prior. The market
will be particularly focused on the wage growth data as that’s what the BoC is
most concerned with.