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.
Next week I think we're going to have a big focus on data or more to the point, the interpretation of the data by central banks. So perhaps you can guide us through what you're going to be looking out for in the week ahead.
Absolutely. Yeah. Thanks Matt. It's been another interesting week for financial markets with some important data and central bank action. And at the same time, political and geopolitical risks have added a further layer of uncertainty and complexity to market price action. Now as these themes continue into next week, there are a few areas that are likely to receive acute attention.
Firstly, we get a raft of Central bank speakers. Now, as we discuss in more detail in this week's blog we have likely seen an important watershed in the current global rate cycle more clearly reaching a peak. With the Fed, clearly indicating a desire to pause with important data dependent caveats. Now the ECB reducing the active increment to 25 basis points, though clearly showing some determination to tighten policy further in the months ahead. Perhaps even as far ahead as September and the Bank of England who are somewhere in between with a stronger growth backdrop and lower energy prices countering the inflation impact. The Bank of England clearly hope that they've done enough, a pause if you will, contingent on less inflation persistence. Now this transition in developed markets, central banks likely generates greater focus on the evolution of respective data series and the interpretations thereof. With plenty of Bank of England, Fed and ECB speakers next week, the messaging will be watched and listened to very closely.
Secondly, and perhaps more directly, the data next week will be watched very closely. Tuesday we get the suite of China data, industrial production, retail sales, investment, and unemployment, all for April. Now, recent weakness in the data, especially on the demand side, has caused some concern and equity market under performance. April data will be an important barometer of this. We get ZEW also on Tuesday and is likely to give a similar update on the German economic sentiment. US retail sales may be the biggest focus of the day, however as the Fed assess the impact of higher rates, tighter financial conditions, and even credit tightening on consumer activity. And finally, on Friday we get Japan's CPI whereby if inflation continues above 3% it will certainly keep the debate about monetary normalization from the Bank of Japan alive and kicking. All important readings to watch out for next week.
And then lastly, next week we'll see a continuation of a more heightened political and geopolitical impact on financial market sentiment. General elections in Turkey will be watched for a potential change to the status quo and implications for the region and emerging market sentiment more broadly. The current tensions between South Africa and the US over alleged armed supply to Russia will also be a focus with the favored trading status of South Africa with the US potentially at risk in a more extreme scenario not our central case. US and China diplomatic discussions also have the potential to be market moving and thus will be watched closely. However, perhaps the most pressing issue would be the progress towards a US debt ceiling agreement. Failure to agree would be a globally, historically significant event with treasury funding running dry, perhaps as soon as June the first without an agreement. Then the focus and likely temperature will be raised a little next week.
Absolutely some crucial data and geopolitical events to watch out for in the week ahead. In the meantime, though, aside from the Turkish elections over the weekend, what have you got your eye on?
Absolutely. Yeah. Thanks, Matt. Not a lot really this weekend that stands out, a full premiership schedule as we enter the last few games of the season. Arsenal, Brighton, a big game at the top of the table with Leeds, Forest, Southampton, Everton and Leicester, all in action fighting for survival. West Ham United concealed premiership survival at Brentford after a promising start to the Europa Conference League semi-final this Thursday. And the reason for my slightly gruff voice. No Formula One, although Emilia next week. No golf, although the PGA next week, not even any snooker, but we do have a full schedule of county cricket and with the sun due to come out and make an appearance on Sunday we may even get some play.
What a civilized British tradition. I look forward to that. And also with the sunshine out, perhaps getting into the garden and enjoying the the great outdoors. Thank you once again for joining us, Neil, and outlining your thoughts on the week ahead. I look forward 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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