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Trading  | April 9, 2018

In the traditional data lull following the (disappointing) payrolls report, this week the market focus will be on US CPI and the FOMC minutes on Wednesday, as well as the now daily jawboning over the escalating trade war between the US and China. Also on deck is the latest China CPI and PPI report, as well as data from the UK. In EM, there are monetary policy meetings in Mexico, Korea, Poland, Peru and Ukraine

Some details: in the US, this week attention will be on the US CPI release and FOMC minutes on Wednesday. Consensus expects 0.2% mom and 2.1% yoy. The large yoy jump is linked to last year’s one off negative adjustment in wireless telephone services inflation.  BofA also is looking for acceleration in core services, with medical care services coming in positive.

As the chart below shows, expect a sharp spike higher in core CPI now that cell phone plans are no longer in the base calculation.

Meanwhile, in terms of the FOMC minutes, consensus expects an optimistic undertone with some concern around trade tensions and tighter financial conditions.

Also a key report is due out of China which will release its CPI, expected to rise 2.3% yoy in March with a likely moderation in overall food price inflation. Commodity prices suggest a softening in March PPI to 3.2% yoy. In addition, new bank loans are expected to rise to RMB 1,150bn and for M2 growth to increase slightly to 9.0% yoy due to an easier comparison base.

It will be a busy week for central bank jawboning, with roughly 33 speakers on deck (from Citi):

Elsewhere, there are monetary policy meetings in Mexico, Korea, Poland, Peru and Ukraine. Sovereign rating review in Poland, Saudi Arabia and Kazakhstan.

From Deutsche Bank, here is a breakdown of key events by day:

  • Monday: A quiet start to the week with February trade data in Germany, March house prices data in the UK and the April Sentix investor confidence reading for the Euro area. There is no data due in the US today. The ECB’s Praet is due to participate in a meeting of the European Finance Forum in Frankfurt and ECB’s Constancio in Brussels.
  • Tuesday: With little of note in Asia overnight, the early focus in Europe will likely be the February industrial production print in France. In the US the most significant release is the March PPI report, while other data due includes the March NFIB small business optimism reading and February wholesale inventories print. Away from that, Facebook’s Zuckerberg is due to testify before the Senate Panel following the investigation into the scandal around data protection. The ECB’s Nouy, Nowoty and Visco are also due to speak at separate events.
  • Wednesday: Overnight, China’s CPI and PPI prints for March will be of most significance, while Japan will also release March PPI data. In Europe we’re due to get the March Bank of France industry sentiment print and February trade and industrial production data in the UK. In the US the big highlight is the March CPI report, while later in the evening we’ll get the March monthly budget statement and latest FOMC meeting minutes.
  • Thursday: There’s no data to highlight on Thursday in Asia however BoJ Governor Kuroda is due to speak. In Europe France’s CPI report for March and the February industrial production print for the Euro area is due. The BoE’s credit conditions and bank liabilities survey will also be out. In the US data includes the latest weekly initial jobless claims print, and March import price index reading. In the evening the Bundesbank’s Weidmann and Fed’s Kashkari are due to speak at separate events. The ECB’s Coeure is also due to speak in Paris.
  • Friday: It’s a relatively busy end to the week on Friday. In China we are due to receive March trade stats. In Europe March inflation prints in Germany and Spain are due, along with the February trade balance reading for the Euro area. In the US we end the week with February JOLTS data and the preliminary April University of Michigan consumer sentiment reading. The Fed’s Rosengren and Bullard are also scheduled to speak in the afternoon. Away from this, the Summit of the Americans will also begin (through to April 14th) while US banks JP Morgan, Wells Fargo and Citigroup are both due to report earnings.

Finally, here is a preview of key US events alongside consensus estimate from Goldman:

The key economic release this week is the CPI report on Wednesday. The minutes of the March FOMC meeting will also be released on Wednesday. In addition, there are several scheduled speaking engagements by Fed officials this week.

Monday, April 9

  • There are no major economic data releases.

Tuesday, April 10

04:30 AM Dallas Fed President Kaplan (FOMC non-voter) speaks: Dallas Fed President Kaplan will give a speech at Tsinghua University School of Economics and Management in Beijing. Audience and media Q&A is expected.

06:00 AM NFIB small business optimism, March (consensus 107.0, last 107.6)

08:30 AM PPI final demand, March (GS flat, consensus +0.1%, last +0.2%); PPI ex-food and energy, March (GS +0.2%, consensus +0.2%, last +0.2%); PPI ex-food, energy, and trade, March (GS +0.2%, consensus +0.2%, last +0.4%): We estimate a flat reading in headline PPI in March, reflecting firm core prices, offset by a decline in energy prices and unchanged food prices. We expect a 0.2% increase in the core PPI and the PPI ex-food, energy, and trade services categories. In the February report, the producer price index was firmer than expected, reflecting strength in the core measure, particularly in upstream prices.

10:00 AM Wholesale inventories, February final (consensus +0.8%, last +1.1%)

Wednesday, April 11

  • CPI (mom), March (GS -0.09%, consensus flat, last +0.2%); Core CPI (mom), March (GS +0.13%, consensus +0.2%, last +0.2%); CPI (yoy), March (GS +2.28%, consensus +2.4%, last +2.2%); Core CPI (yoy), March (GS +2.06%, consensus +2.1%, last +1.8%): We estimate a 0.13% increase in March core CPI (mom sa), which would boost the year-over-year rate by three tenths to 2.1% on a rounded basis. Our forecast reflects an expected pullback in apparel prices from elevated levels, as wintry weather may have increased discounts on spring merchandise. We also look for sequential price declines in lodging away from home, as well as in motor vehicles, where the post-hurricane pricing boost has appeared to have run its course and industry data suggests a step up in cash incentives. On the positive side, we expect a second consecutive month of higher airfares, reflecting the firming in jet fuel quotes. Finally, we expect month-to-month shelter inflation to reaccelerate, but to only partially reverse last month’s stepdown. We estimate a 0.09% decrease in headline CPI, reflecting a drop in gasoline prices.
  • 02:00 PM FOMC minutes from the March 20-21 meeting: The FOMC raised the funds rate target range by 25bp at its March meeting and published a mixed but generally upbeat post-meeting statement. In the Summary of Economic Projections (SEP), the median dots continued to show three hikes in 2018 but now show 8 cumulative hikes in 2018-2020. In the minutes, we will look for an update of the Committee’s inflation outlook and views about the importance of the modest core inflation overshoot now projected in the SEP. Investors may also pay close attention to any discussion of potential changes to the post-meeting press conference format—in particular a possible increase in their frequency (though we agree with Chairman Powell that any such change would not have near-term policy implications).

02:00 PM Monthly budget statement, March (consensus -$185.0, last -$215.2bn).

Thursday, April 12

  • 08:30 AM Import price index, March (consensus +0.1%, last +0.4%)
  • 08:30 AM Initial jobless claims, week ended April 7 (GS 220k, consensus 230k, last 242k); Continuing jobless claims, week ended March 31 (consensus 1,832k, last 1,808k): We estimate initial jobless claims declined 22k to 220k in the week ending April 7 after rising sharply in the week of Good Friday. The level of claims appears elevated in California and Pennsylvania, and the timing of the holiday may have also boosted the measure in the previous week. Continuing claims—the number of persons receiving benefits through standard programs—have continued to decline in recent weeks.
  • 05:00 PM Minneapolis Fed President Kashkari (FOMC non-voter) speaks: Minneapolis Fed President Kashkari will participate in a moderated Q&A with the CEO of Associated General Contractors of Minnesota. Audience Q&A is expected.

Friday, April 13

  • 08:00 AM Boston Fed President Rosengren (FOMC non-voter) speaks: Boston Federal Reserve President Eric Rosengren will give the keynote speech at an Economic Outlook Breakfast hosted by the Greater Boston Chamber. Audience Q&A is expected.
  • 09:00 AM St. Louis Fed President Bullard (FOMC non-voter) speaks: St. Louis Federal Reserve President James Bullard will give a lecture on “Living Standards across U.S. Metropolitan Statistical Areas” in a lecture format at Washington University. Audience and media Q&A is expected.
  • 10:00 AM University of Michigan consumer sentiment, April preliminary (GS 99.5, consensus 100.6, last 101.4).: We estimate the University of Michigan consumer sentiment index declined 1.9pt to 99.5 in the preliminary estimate for April. We note some downside risk to our forecast from the recent stock market decline and news on trade policy. The report’s measure of 5- to 10-year inflation expectations remained at 2.5% in March, near the middle of its 12-month range.
  • 10:00 AM JOLTS job openings, February (last 6,312k)
  • 01:00 PM Dallas Fed President Kaplan (FOMC non-voter) speaks: Dallas Fed President Kaplan will give a speech at an Odessa Chamber of Commerce member luncheon in Odessa, Texas. Audience and media Q&A is expected.

Source: DB, BofA, Goldman

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