Market Focuses on Upcoming China Data and Corporate Earnings

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Markets in Asia have opened cautiously this week, with the dollar holding its gains from Friday and stocks and bonds remaining unchanged. Investors are eagerly awaiting updates on Chinese economic growth and global PMIs, along with the Fed's Beige Book and speeches from at least eight Fed officials. Analysts are optimistic about the Chinese data, especially after recent trade figures and the fastest growth in house prices in 21 months. The central bank has also played its part by injecting funds into the financial sector, which should help to replenish liquidity gaps created by upcoming tax payments by banks and companies.


The Citi economic surprises index for China data is at its highest level in 17 years, and the market sees upside risk for Tuesday's releases on GDP, retail sales and industrial output. Additionally, the CME Fedwatch Tool briefly caused a stir when it showed the probability of a Fed hike on May 3 at a dead cert 98%, before settling at 83%. Markets have shifted even further on the ECB to price in a 46% chance it will hike by a full 50 basis points on May 4.


This week's corporate earnings will also provide information on how resilient corporate balance sheets are to potential future financial pressures. Barclays analysts note that quarterly bank results, especially for U.S. regional banks, should offer a first glimpse of the fallout from the March turmoil and the related tightening of lending conditions. Goldman Sachs and Morgan Stanley were both expected to report a drop in profit, but this may not be inevitable given last Friday's upside surprises on earnings. State Street, M&T Bank, and Charles Schwab are set to report later today, and it will be interesting to see if the banking stress had more impact on them than on the larger institutions.


In addition to the updates on Chinese economic growth and global PMIs, speeches by Bank of England Deputy Governor Jon Cunliffe and Federal Reserve Bank of Richmond President Thomas Barkin, and ongoing G7 foreign ministers summit in Japan, the Empire Manufacturing Survey and the NAHB housing survey are due. With so many key developments and data releases this week, investors are on high alert, and the first week of May is shaping up to be a doozy.


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