Markets Down Due to Inflation Risks Before The Bell

10 Year Vs. S&P 500

Inflation concerns and worries over rising interest rates are likely to be on the rise again this week, even as the FOMC stresses its uber accommodative stance and plays down the threat from cheapening bond yields (see chart). All elements will be in play this week with key data on tap, a plethora of Fedspeak, and Treasury supply.

Key Drivers for the Week of April 12

TIP – This is a 1-minute brief bullet-point summary. It is a tool that gives investors and financial a fast and simple list of what to watch for and talking points for the week.

  • Central banks continue to support global growth while playing down inflation
  • Markets concerned that inflation may force policy tightening sooner than CB’s suggest
  • U.S. CPI, retail sales, Philly Fed, Empire State PMIs awaited
  • Fedspeak from Powell, VC Clarida, Williams, Daly, Bostic, Rosengren, Mester
  • Treasury auctions $120 bln in 3-, 10-, 30-year coupons
  • Earnings season kicks off in earnest Wednesday with JPMorgan, Goldman Sachs
  • Canada digests jobs data, awaits Business Outlook Survey, housing starts
  • China loan data, trade, GDP, retail sales awaited; Japan PPI, core machine orders
  • BoK seen on hold at 0.5% rate; RBNZ seen keeping policy steady at 0.25% rate
  • Near term downside risks for Europe from virus, slow vaccine rollout
  • German ZEW Investor Confidence, HICP; Eurozone CPI, production, trade due
  • UK recovery seen accelerating, but setbacks from AstraZeneca problems
  • UK data on production, trade, GDP, BRC retail sales should reflect an improving economy

Additionally, earnings season begins. CPI (Tuesday) and trade prices (Wednesday) are on the calendar, along with retail sales (Thursday) and production (Thursday) reports, all of which are expected to pop higher on the month.

Concurrently, Fed Chair Powell spoke overnight in a 60 Minutes interview and is slated to speak at the Economics Club of Washington (Wednesday). Meanwhile the Treasury auctions $120 bln in coupons.

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Central banks have helped underpin the global recovery by assuring the ultra-accommodative stance will be here for the duration. But there are still speed bumps ahead. Fed Chair Powell has underscored the incompleteness of the recovery and noted the downside risks of the new virus strains. And though core central banks continue to play down the jump in inflation, the markets are concerned policymakers will be forced to tapering in advance of their current forecasts.

The big question is will inflation and a reduction in accommodation be the speed bumps on the recovery road. In the U.S. attention will be on CPI, retail sales, Fedspeak, earnings, and supply.

Europe will monitor virus developments along with inflation, trade, and production data. Asia’s focus is on China’s Q1 GDP, trade, and retail sales. The BoK and RBNZ meet, but no changes in policy are expected.

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