08 May 2022 – The Week Ahead

Outlook:

In the week ahead, we provide you with all the necessary to build your strategy during the upcoming week with extra knowledge and up-to-date updates.

Investors will be watching the U.S. inflation data as experts expect to see it exceeding 40 years high. Meanwhile, investors await the OPEC+ meeting and expect the oil cartel to keep production increase to 400,000 barrels a day. Furthermore, several Federal Reserve officials are set for speeches to comment on the current policy measures.

In the U.S.

Wednesday’s CPI data for April will show whether the fastest surge in inflation in over 40 years has peaked. The annual rate of inflation came in at 8.5% in March as gasoline costs hit record highs. Experts expect an annual rate of 8.1%, but a stronger than expected reading could undermine the possibility of a more aggressive monetary policy from the Fed.

Economists warned that aggressive tightening could tilt the economy into a recession. Also, there will also be a barrage of speeches by Fed policymakers in the coming week. Nevertheless, the Nasdaq and S&P 500 posted their fifth straight weekly declines last week, and the Dow Jones Industrial Average posted its sixth. It was the longest losing streak for the S&P 500 and the Nasdaq in more than a decade.

Markets have priced in a roughly 75% chance of a 75 basis-point rate hike at the Fed’s June meeting, despite Fed Chair Jerome Powell ruling that out last Wednesday. Investors see market volatility to continue as a more hawkish Fed, an increase in yields, and geopolitical risks weigh on market sentiment.

U.S. Major in The Week Ahead

Eurozone and U.K

The European Union is nearly agreeing on the new sanctions against Moscow, including a ban on Russian oil, which makes up over a quarter of EU imports.

Thus, that will push European refineries to find new oil suppliers and increase bills. The expected increase in European energy prices will heavily affect inflation and growth in Eurozone while the cost-of-living crisis is squeezing consumers globally.

The latest data on Germany’s ZEW sentiment index will highlight the difficulty central banks are facing as they try to control soaring prices amid concerns over the growth outlook. However, economists are expecting the ZEW index to have dropped again in April from a level that was already the lowest since the beginning of the pandemic in 2020.

Several European Central Bank officials are due to speak during the coming week, including President Christine Lagarde

In the U.K., the economy is expected to have expanded by 1% in the first quarter, but the monthly reading for March is expected to be dulled. Last week the Bank of England warned that Britain risks a double-whammy of a recession and inflation above 10% as it hiked interest rates to 1%, their highest since 2009.

European Major in The Week Ahead:

Japan and China

As per the governmental reports, the Japanese economic recovery is already underway, and it will be aided by new stimulus measures. The preliminary April composite PMI rose for a second month, which might hold at a four-month high.

Additionally, Japan’s March current account figures will be influential, As the capital flows associated with past investments drive Japan’s current account surplus. The MOF figures showed that Japanese investors sold about 143 billion yen ($1.2 billion) in January. The TIC data showed the liquidation of slightly less than $1 billion.

On the other hand, China reports several reports this week for April data that will get attention. Rather, China’s reserves fell dramatically. The TIC data shows that China has reduced its Treasury holding in recent months by about $26 billion between December 2021 and February 2022.

Besides, the compression of demand is distorting China’s trade balance due to the COVID response. Imports likely fell for the second consecutive month in April on a year-over-year basis. Exports have been erratic and probably slowed from the 14.7% year-over-year pace seen in March. China’s trade surplus averaged $54.3 billion in the first quarter. Also, China will report April CPI and PPI as Economists look for a decline to 7.5%. China’s CPI is expected to have edged up to 1.9% from 1.5% in March.

Crude oil

European Union governments moved closer on Sunday to agreeing on sanctions against Russia that include a ban, which makes up over a quarter of EU imports. Under the first plan, all EU countries would stop buying Russian crude within six months and Russian refined products by the end of the year.

The move will push European refineries into a race to find new crude suppliers and leave drivers with bigger bills at the pump at a time when the cost-of-living crisis is squeezing consumers globally. The looming ban saw U.S. crude prices rise about 5% for the week last week, while Brent rose almost 4% as the prospect of tighter supply offset concerns over the outlook for the global economy.

Meanwhile, investors await the OPEC+ meeting and expect the oil cartel to keep production increase to 400,000 barrels a day