Ahead of the game: 29 April 2024

US equity markets gained this week as stronger-than-expected corporate earnings from Tesla, Microsoft, and Alphabet helped offset weaker-than-expected Q1 2024 US GDP and firmer-than-expected inflation data.

In a holiday-shortened week, the ASX 200 gave up early gains after index heavyweight BHP's share price fell 4.5% following its bid to buy British mining rival Anglo American in a deal that would create the world's biggest copper producer.

• In the US, Durable Goods Orders in March rose 2.6% vs 2.2% expected
• Q1 2024 US GDP rose by 1.6% QoQ, below the 2.5% expected
• The Core PCE Price index increased at 3.7% YoY, up from 2% prior
• The Euro Area Composite Flash PMI for April increased to 51.4 from 50.3 prior, marking its fastest rate in eleven months
• In Germany, the IFO Business Survey increased to 89.4 from 87.9 prior
• In the UK, the Composite Flash PMI for April rose to 54 from 52.8 prior, marking its strongest rate since May 2023
• In Japan, the Manufacturing PMI increased to 49.9 from 48.5, edging closer to expansion territory
• In Australia, headline inflation in Q1 2024 eased to 3.6% YoY from 4.1% in the previous quarter, higher than market expectations of 3.4%
• The RBA’s preferred measure of inflation, the Trimmed Mean, increased by 4% in Q1 2024, the softest rate in two years but above market expectations of 3.8%
• Crude oil rose 1.9% to be trading at $83.78 per barrel
• Gold dived 2.5% to $2,331 as geopolitical tensions eased
• Wall Street's gauge of fear, the Volatility (VIX) index, eased to 15.38 from 18.7 prior.

• NZ: ANZ Business Confidence (Tuesday, 30 April at 11:00am AEST)
• AU: Housing Credit (Tuesday, 30 April at 11:30am AEST)
• NZ: Unemployment (Wednesday, 1 May at 8:45am AEST)
• AU: Balance of Trade and Building Permits (Thursday, 2 May at 11:30am AEST)
• AU: Home Loans (Friday, 3 May at 11:30am AEST)

• CN: NBS PMIs (Tuesday, 30 April at 11:30am AEST)
• CN: Caixin Manufacturing PMIs (Tuesday, 30 April at 11:45am AEST)
• JP: BoJ Monetary Policy meeting minutes (Thursday, 2 May at 9:50am AEST)

• US: CB Consumer Confidence (Wednesday, 1 May at 12:00am AEST)
• US: ADP Employment (Wednesday, 1 May at 10:15pm AEST)
• US: ISM manufacturing PMI (Thursday, 2 May at 12:00am AEST)
• US: JOLTS Job Openings (Thursday, 2 May at 12:00am AEST)
• US: FOMC interest rate decision (Thursday, 2 May at 4:00am AEST)
• US: Non-Farm Payrolls (Friday, 3 May at 10:30pm AEST)
• US: ISM Services PMI (Saturday, 4 May at 12:00am AEST)

• GE: Inflation Rate (Monday, 29 April at 10:00pm AEST)
• GE: Q1 GDP (Tuesday, 30 April at 6:00pm AEST)
• EA: Q1 GDP (Tuesday, 30 April at 7:00pm AEST)

• CN

Flash PMI data

Date: Tuesday, 30 April at 11.30pm (AEST)

China’s March official PMI figures have signalled some green shoots in its economy, with manufacturing activities returning to growth territory (50.8) after five consecutive months of contraction. Its non-manufacturing PMI has shown improvement as well, registering its highest level in nine months at 53.0.

Ahead, market participants will be watching if the recovery momentum will be durable, in order to reflect some degree of policy success, and that the improvement is not only driven by seasonal factors. Expectations are for manufacturing activities to edge slightly higher to 51.2. Any fizzling out in growth momentum could like raise calls for policy support into the second half of this year.

China’s NBS manufacturing and non-manufacturing PMI

• EA

Q1 2024 GDP

Date: Tuesday, 30 April at 6.00pm (AEST)

In the last quarter of 2023 (Q4 2023), the Eurozone unexpectedly avoided recession as firmer growth in Italy and Spain offset contraction in Germany, resulting in a growth rate of 0% following a 0.1% contraction in the third quarter.

Anaemic growth in the Eurozone during the second half of 2023 was attributed to elevated interest rates, high inflation, a slowing global economy, and heightened geopolitical tensions.

In recent months, the ECB has acknowledged that inflation is on the right path to converge on its target and has signalled that it is expecting to ease monetary policy as early as June.

The prospect of imminent ECB interest rate cuts and a resilient global economy has resulted in a noticeable improvement in business surveys and PMI in the Eurozone. This improvement is also likely to be reflected in the upcoming GDP release, with the market forecasting a rise of 0.5% QoQ.

Euro Area GDP annual growth rate

• US

FOMC interest rate decision

Date: Thursday, 2 May at 4.00am (AEST)

In March, the FOMC kept the Fed Funds rate unchanged at 5.25%-5.50% for a fifth consecutive meeting. The accompanying statement was nearly identical to the January statement, reiterating that the Fed did not expect to cut interest rates "until it has gained greater confidence that inflation is moving sustainably toward 2%." The Fed's "Dot Plot" showed the median official was still expecting three 25 basis point (bp) rate cuts in 2024.

After the March FOMC meeting, the release of a third consecutive firmer-than-expected inflation report is expected to see the Fed keep rates on hold at 5.25%-5.50% in April and adopt a more hawkish tone in the press conference.

The Fed Chair will likely note the lack of progress on inflation and that the Fed will wait "longer than expected" to cut rates. The message of patience will likely be accompanied by an announcement that Balance Sheet tapering (QT) will begin in June by reducing the maximum monthly redemption cap on maturing securities from $60 billion to $30 billion.

The rates market is already pricing in a more hawkish outcome for the upcoming FOMC meeting, with the first rate cut pushed back until December after the November US election.

Fed funds rate

• US

Non-farm payrolls

Date: Friday, 3 May at 10.30pm (AEST)

In his early-April comments, Fed Chair Jerome Powell has indicated some caution around the timing of rate cuts this year, reiterating that policymakers want to have greater confidence that US inflation is moving sustainably down to the Fed's 2% target. "Recent readings on both job gains and inflation have come in higher than expected”, said Powell.

Upside surprises in recent set of US inflation data have driven market expectations to lean towards having only one 25 basis-point (bp) rate cut from the Fed this year. This is pared down from the three rate cuts being priced just a month ago. Further strength in US labour conditions may likely reinforce views for the Fed to exercise more patience in its policy easing and rates to be kept high for longer.

Current consensus is for US to add 210,000 jobs in April, down from the previous 303,000 in March. With US job numbers pulling ahead of consensus for the past five months, markets will be watching if the trend may continue. Unemployment rate is expected to stay unchanged at 3.8% from March, while average wage growth is expected to stay unchanged as well at 0.3% month-on-month.

US non-farm payrolls: three-month rolling average

• US

Q1 2024 earnings season

The Q1 2024 earnings season continues this week, with companies scheduled to report including PayPal, Coca-Cola, Amazon (previewed here), AMD, Apple, and Coinbase.