of the week ahead


Matt Jones

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.

Neil Staines

Thank you very much Matt. It's great to be here.

Matt Jones

So we are back after a couple of shorter weeks due to UK bank holidays, and we are staring down the barrel of what will be the first full working week in the UK. For a few weeks now. And we have plenty to be looking forward to in the week ahead. So perhaps you can guide us through the next week and what you're going to be looking at in particular.

Neil Staines

Absolutely. Yeah. Thanks Matt. Another interesting week for financial markets this week. And as the balance of growth and inflation risks continues to dominate sentiment and positioning. But increasingly as we highlight in this week's blog, Fed rhetoric has been dominated by the prospects for growth as banks tighten credit activity in light of recent stresses in maturity transformation as small lenders. This week, we get very little by way of data from the US after the dominant inflation reports and prints this week. But there are a few events that catch our eye.

First up in the UK is a big week for data with the employment report on Tuesday, CPI on Wednesday and retail sales on Friday. This week, chief economist, Huw Pill gave a more concerned analysis of the inflation backdrop after what he described as a material surprise in the February print and suggested that the inflation path may be bumpier than expected. Perhaps most surprisingly, he was that he also noted that a positive demand shock may be emerging. Now we remain much more in the Dhingra, Tenreyro camp whereby we see UK rates as already sufficiently restrictive and thus continue to push back against market pricing. Which has almost another 50 basis points by summer. Against an economy that while so far holding up better than expected facing significant forward looking headwinds. Data this week, it will be closely watched to assess the balance of inflation and growth risks in the UK.

Secondly we get the China suite of data. Industrial production, retail sales, fixed asset investment, and unemployment rate for March. We get Germans ZEW survey for April. And we also get the global flash PMIs for April next week in a more global data sense. We expect to see some further signs of fatigue in global activity and perhaps more so in sentiment as high absolute prices and interest rates begin to bite. However, in China economic activity is likely to remain in a very different cycle, a much more positive as demand emerges, from the COVID lockdowns as the rest of the world slows. This is potentially a very important counterbalance for the global economy and a very interesting focus for the data calendar next week.

Lastly there's little economic data of note for the US next week. Commentary from Fed governors of which there are plenty will be closely watched, particularly with reference once to the impact of credit contraction on the growth in financial conditions forecasts. The other focus in the US is in the corporate space with the start of Q1 earning season. Next week, we get a number of big US banks, as well as Netflix, Tesla, American airlines, AT&T, and IBM, the general tone and forward guidance within those reports will be key. But earnings estimates are very low and we retain a positive outlook for risk assets in general, as inflation and ultimately rates fall and support MPVs, still plenty to keep us occupied next week.

Matt Jones

Absolutely. Lots to keep us occupied. And perhaps it's a good thing that it is a full working week.

Thank you again for joining us and for 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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