Fed rate cut hopes wane

The Federal Reserve

How soon will the Fed cut rates? It appears that, following the stronger-than-expected job report on Friday, futures traders have cut estimates to the lowest level since October on how much the Federal Reserve will cut rates this year. Federal Reserve (Fed) funds futures contracts for December now show expectations of around 60 basis points cut in total this year, compared to the 150 basis points priced at the start of 2024. The Chicago Mercantile Exchange (CME) FedWatch tool has also dropped. Now 50% expect a 25 basis-point cut in June, compared to above 60% a week ago.

Atlanta Fed President Raphael Bostic

The Fed has projected that it will cut rates by 75 basis points this year. but we recently heard some of its members becoming more and more cautious. Last Wednesday, for example, Atlanta Fed President Raphael Bostic said rates should likely not be reduced until the fourth quarter of this year, and he would only go for a 25-basis-point cut in 2024.

Westpac consumer sentiment

In Australia, Westpac consumer sentiment fell for a second straight month in April, to 82.4. An index below 100 means pessimists outnumber optimists. This has been the case for nearly two years now. In another survey,National Australia Bank (NAB) business confidence rose 1 point to +1. A reading above zero reflects an improvement in business confidence.

The BRC-KPMG Retail Sales Monitor

The BRC-KPMG Retail Sales Monitor shows that food spending lifted retail sales by the most since August. Total retail spending in March was 3.5% higher than a year earlier, exceeding the pace of the most recent consumer price inflation data for the first time in more than two years. But these figures are not seasonally adjusted, so the fact that Easter Sunday fell on March 31 this year, more than a week earlier than in 2023, has had a positive effect. Over the first three months of the year, food sales increased by 6.8% compared to the first quarter of 2023, while non-food spending fell by 1.9%.

British Retail Consortium

That latest British Retail Consortium (BRC) data gives us a good indication of what we could expect from Tesco tomorrow when the group releases its full-year earnings. In January, the UK supermarket giant raised its profit forecast for the full 2023–24 financial year on the back of better-than-expected Christmas trading results. Revenue is expected to rise by 4.7% year-on-year and earnings by 9.2%. As the UK's largest grocer by market share, Tesco is often viewed as a bellwether for wider consumer spending and confidence levels.

BP

On the corporate front, BP expects first-quarter upstream production to be higher than in the previous three months. Imperial Brands profit for the first half of the year will be higher on the back of strong tobacco pricing. HSBC agrees to sell its Argentina business for $550 million and will record a $1 billion pre-tax loss from the divestment in the first quarter of fiscal 2024.