Developed Markets
US: From strength to strength
After stellar GDP numbers all eyes falls on the US and its NFP(job numbers). As the economy continues to open it might be worth noting that household cash, checkings and savings have increased $3Trillion since 2019. We are expecting a positive job number that should exceed estimates. We have seen a huge uptick in restaurant dining, traveling and very strong debit and credit card numbers, all of which point to further strength in the recovery. We expect a positive ISM number as well as an indication regarding continued price increase and sustained inflation. Keep an eye on the FOMC and ISM numbers.
Cautious optimism from Bank of England- and some tapering?
We expect a series of upgrades to the Bank of England’s forecasts, including a bigger rebound in 2Q and a lower peak in unemployment. This encouraging outlook potentially means the Bank will take the opportunity next week to taper the pace of its asset purchases. At face value, this should come as no surprise – the BoE has already told us it will be doing this at some point. Policymakers expect to wrap up the remaining amount of gilt purchases around the end of the year, but at the current £4.4bn weekly pace, it will get there months earlier. A cut in the weekly buying pace to roughly £3bn/week from now onwards would allow the Bank to reach its target holdings of £875bn worth of government bonds around the end of the year.
Developing Markets
Turkey central bank expected to keep interest rates unchanged. After facing recent turmoil in its currency. We forecast inflation at 1.7% month-on-month in April, continuing the uptrend to 17.2% year-on-year from 16.2% YoY a month ago. Brazil is expected to continue hiking rates as promised with this a possible sign that South Africa could follow. However, Sunday has shown a worrying increase in new covid cases which could spread fear of a renewed lockdown as we head into winter. This could be disastrous for the economy and the Rand.
Equities and Indices
More than 50% of S&P companies have already reported earnings with strong numbers mostly. Still quite a bit to come with the likes of Pfizer and Moderna out this week. Keep an eye on earnings in the travel industry with companies like Hilton worldwide holdings and Caesars entertsinment. As for indices we have now seen continued rejection of the newly created all-time highs on Nasdaq and S&P indices. All of the highs reached were yearly high estimates by most of the major investment banks and funds. We could start to see some correction on these indices should we see continued dollar strength in the week ahead.
Cryptocurrency
Given the negativity over the last 2 weeks as many cryptos, bitcoin included declined. However last week saw a sharp recovery with continued and renewed optimism of higher pricing. The week ahead could see the Bitcoin price receive a boost as CME(Chicago mercantile exchange) plans to launch Micro BTC Futures on May 3. Unsurprisingly, the SEC delayed its decision on the Bitcoin ETF by extending the deadline up to June 17. BTC shows ambiguity as it could rise to a new all-time high or suffer a steep correction. Ethereum, the second cryptocurrency in terms of capitalization, surged above the $3,000 mark early on Monday after gaining over the weekend. Reuters reported that the European Investment Bank could launch a sale of bods on the Ether blockchain. Reports that Andreessen Horowitz, a renowned venture capital firm is considering a $1 billion crypto fund have added to the broader digital asset space.
Sources: ING
