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With one eye firmly planted on geopolitics, investors tune in next week for an update on the health of both the US economy and corporate America.
Here’s what to watch in the coming days.
Just days after the US authorised a missile strike on a Syrian air base that was backed by European governments but criticised by the Kremlin as “aggression against a sovereign state in violation of international law”, US secretary of state Rex Tillerson travels to Luzza, Italy for a meeting of foreign ministers of the Group of Seven nations. The two-day meeting kicks off on Monday and the G-7 foreign ministers are expected to hold a news conference at 6am eastern time on Tuesday.
On the monetary policy front, central banks in Canada, Argentina and Brazil are expected to deliver interest rate decisions next week. But all eyes are likely to remain on Federal Reserve chair Janet Yellen, who speaks at the University of Michigan Ford School of Public Policy on Monday, as she takes questions from both the audience and Twitter.
Economists expect the tone of her remarks to be similar to her March press conference and expect it to correspond with the Fed minutes. However, any remarks on balance sheet normalisation are likely to be closely scrutinised.
US earnings season kicks off next week with banks leading the charge. Financials, and banks in particular, had rallied after US president Donald Trump won the election in November, on hopes that his stimulus plans would help accelerate the Fed’s rate rise cycle benefitting banks’ net interest margins and on expectations that he would take a softer stand on regulation.
But that rally has lost some steam in recent weeks on increasing concerns about Mr Trump’s ability to deliver on his campaign promises after his healthcare reform bill was wrecked by a far-right group within his own party.
With the macro picture in doubt, investors will watch to see how JPMorgan, Wells Fargo and Citigroup performed in the first quarter when the lenders report results on Thursday.
The minutes of the Federal Reserve’s March monetary policy meeting showed that most participants anticipated that gradual increases in the federal funds rate would continue as long as the US economy continued to perform “as expected”.
Following a disappointing March jobs report, investors will look for updates on inflation and consumer health next week for clues on whether the economy is performing “as expected”.
Economists estimate consumer prices were flat in March from the previous month, when they rose 0.1 per cent. However, so-called core CPI, which strips out more volatile items like food and energy, is expected to rise 0.2 per cent month-on-month and 2.3 per cent from a year ago.
Meanwhile, headline retail sales are projected to remain unchanged in March, from the previous month, when they rose 0.1 per cent. However, so-called control retail sales that exclude autos, energy and items like building materials, are expected to pick up, rising 0.3 per cent in March from the previous month, when they climbed 0.1 per cent.