Welcome to "The Long & Short of the Week Ahead", a production of Eurizon SLJ Capital that takes a look at the macro-economic themes of the week ahead and has been recorded for professional investors.
My name is Matt Jones, Head of Distribution for Eurizon SLJ Capital, and I'm joined by Neil Staines, Senior Portfolio Manager.
Welcome back, Neil. It's great to have you here with us again.
Thank you very much Matt. It's great to be here.
We survived the first full working week after the bank holidays. And it feels that things are beginning to build up, with more activity next week from across the globe. So perhaps you can guide us through what you're going to be, keeping an eye on in the week ahead.
Absolutely. Yeah. Thanks very much, Matt. After another very quiet week from the standpoint of top tier data and or events next week season incremental pace of data return. At the very least an important increase in the economic releases ahead of the crescendo of the FOMC and ECB meetings in the first week of May. We have a few key focal points for the week ahead.
Firstly, to get us in the mood for central bank activity, next week culminates with the bank of Japan policy meeting, notably the first meeting to be held under the leadership of new bank of Japan, governor. Market focus in this meeting is centered around the policy decision in relation to the yield curve control target tool. Aimed at capping market implied interest rates at the 10-year part of the yield curve. Due to the nature of the policy's direct impact on market rates it is not possible for the Bank of Japan to pre-announce any intention to remove and or amend the yield cap, and thus speculation has become inherent. That a surprised removal of yield curve control is possible at any time. Including Ueda's first meeting in charge. We disagree. We believe it is important that yield curve control. It is an unhelpful and burdensome instrument, and that the current juncture is removed. At some point, it is also likely important that it's done in the right way, likely when inflation is lower and thus speculation and pressure on the caps removal is also lower. And by extension market impact is significantly smaller. Nevertheless, the bank of Japan meeting will be keenly watched in order to get to know the new governor. And gain further insight into the economic projections and direct policy starts of the new bank of Japan. After all Ueda could be imposed for another 10 years.
Secondly, we take a look at the Q1 2023 from two different perspectives. Firstly the release of US and Eurozone, Q1 GDP, first estimates. Market impact is likely to be modest here due to the retrospective nature of the data. But they form an important base for the growth in 2023 as a whole. And will thus be closely watched. Secondly after US earning season for the banking sector reaches its conclusion early next week with mixed results so far. Earnings focused in the US turns to tech. We get Microsoft, Google, eBay, Metta, Intel, Amazon, and Snap, all reporting next week for Q1 and further ahead. Huge importance to equity market sentiment as a whole and NASDAQ in particular, with a very positive performance so far this year and an analyst market that is almost uniformly negative from here. We are at the opposite, more positive end of the expectation spectrum here in terms of broad risk assets.
Then lastly next week is a chance to look ahead at the FOMC meeting on the 3rd of May. The blackout period implies a lack of Fed speaker commentary. Next week market sentiment will be closely watched and mirrored by front end rates. We maintain our view that inflation risks are to the downside. And that given our inflation expectations, real rates are already sufficiently restrictive. At the same time, the assumption of excess demand or the the positive demand and supply imbalance, is in our view transient at best. Given the downside risks to growth and upside risks to further supply normalization. We discussed this topic further in this week's blog, but from a Fed speaker perspective, we'll be listening very carefully. To the sound of silence next week.
Thank you, Neil. Plenty to be looking out for in the week ahead. In the meantime we have the weekend.
We do indeed. Yes. There are plenty to keep an eye on this weekend. Matthew it's semifinals weekend, Manchester city versus Sheffield United and Brighton versus Manchester United, can Manchaster United get over the disappointment of European football this week. Sundays premiership clashes, Bournemouth versus Westham, the pick of the bunch and Westham on the back of a spectacular win this week. The reason for my slightly gruff voice today, the pick of the action for me. And with no Formula One until Azerbaijan on the 30th of April, it's snooker and county cricket this week to pass the time on a slightly slower paced weekend and judging by the weather forecast. The cricket could be very slow. Indeed.
Absolutely. And perhaps a chance to rest your voice before next week. Absolutely. Thank you very much. Great. Thank you for joining us and for outlining your thoughts on the week ahead, I look forward as ever to catching up with you again next week.
Thank you for joining us for "The Long and Short of the Week Ahead". Further insights are available on our website eurizonsljcapital.com/insights. We look forward to you joining us again next week for more insights into macro-economic events and "The Long and Short of the Week Ahead".
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