Futures Violently Unchanged As Busiest Week Of Earnings Season Begins

In what is shaping up as yet another unchanged open, futures are set up to open violently unchanged after earlier sliding as much as 0.6% following lackluster sentiment in Asia, but a reversal during European trading. Investors are bracing for a barrage of earnings ahead of the busiest reporting weak in Q1 earnings season which sees the likes of MSFT, GOOGL, Meta, AMZN and XOM all set to report amid rising interest rates and economic slowdown worries. S&P 500 contracts fell as much as 0.6% before paring the drop to unchanged as of 7:30 a.m. ET while futures for the tech-heavy Nasdaq 100 benchmark were 0.1% lower.

In premarket trading, Bed Bath & Beyond sank as much as 52% after the home-goods retailer filed for Chapter 11 bankruptcy with plans to liquidate and wind down by the end of June. BuzzFeed fell 6% in US premarket trading, extending a 30% drop last week triggered by the company’s move to shut its news operation. The now defunct Credit Suisse reported $69 billion outflows in the first quarter and a large writedown at its wealth management unit. Coca-Cola is due to report results before the market opens, while Whirlpool and First Republic Bank will update this afternoon. Here are some other notable premarket movers:

• Crinetics Pharmaceuticals is initiated with an overweight rating at Piper Sandler, with the broker saying that the disease acromegaly could be a potential blockbuster market opportunity for the biotech.
• Tremor has been downgraded to hold at Stifel, which says it would like to see the digital advertising firm spending more on research and development to keep up with larger platforms. The brokerage also cut its rating on sector peer Perion to hold from buy.

Investors are bracing for a slew of economic data and big-tech earnings for insights into the damage from higher borrowing costs and slowing economy. Leveraged investors boosted net short positions on 10-year Treasury futures to a record 1.29 million contracts as of April 18, data from the Commodity Futures Trading Commission show. That’s an indication they think the Federal Reserve will keep raising rates to tackle inflation.

A “mild recession” is likely in the US and that’s a reason to be more selective in the equity space, according to Laura Cooper, a senior investment strategist at BlackRock. “We think earnings estimates for the back half of the year in the US remain too optimistic,” she said. “We suspect that a lot of the rate cuts priced in toward the end of the year for the Fed have scope to be priced out.”

Swaps markets continue to see Fed rates peaking in coming weeks before a series of cuts later this year. US GDP data is forecast to reveal slowing growth, while the so-called core PCE deflator, the central bank’s preferred inflation gauge, is expected to show price growth cooled.

“We should take the Fed at face value when they say rates are not going lower this year,” said Kieran Calder, head of equity research for Asia at Union Bancaire Privée in Singapore, on Bloomberg Television. “Inflation, especially core inflation, remains really sticky.”

A rally in US stocks leading up to this earnings season presents a near-term risk to equities given the prospect of further Fed rate hikes and fading profit growth, according to Morgan Stanley’s Michael Wilson. “We think this dynamic poses a near-term risk for stock prices given our more pessimistic outlook for earnings this year, especially as the liquidity picture becomes less accommodative,” Wilson wrote in a note on Monday, repeating his now traditional weekly sermon.

European stocks are little changed as investors await another busy week of corporate earnings. The Stoxx 600 is flat with food & beverages, telecoms and energy the worst performing sectors. Here are the biggest European movers:

• Philips shares gain as much as 10% after an easing in supply chain snarl-ups helped drive a strong 1Q beat for the Dutch medtech. Morgan Stanley expects consensus estimates to rise after the report.
• Software AG shares jump as much as 50% to trade at the €30 level offered by private equity firm Silver Lake Management to acquire the German software company.
• Munters shares jump as much as 9.7% as the Swedish ventilation systems company was upgraded to buy at both Carnegie and Jefferies, with the former seeing early signs of improvement.
• Casino shares rise as much as 6% after Czech investor Daniel Kretinsky proposed a €1.1 billion equity investment in the French grocer.
• Getlink shares advance as much as 4.2% after Goldman Sachs upgraded the transport infrastructure group to buy from neutral on supportive power and carbon-price dynamics.
• Dunelm gains as much as 3% after being raised to buy from hold at Stifel, with the broker seeing an attractive medium-term opportunity in the UK homewares retailer.
• Wizz Air gains as much as 4.1%, outperforming other airline stocks, after Citi upgraded the stock to neutral, saying investors’ focus for short-haul airlines will shift to costs, where Wizz is showing improvement.
• Heineken gains as much as 1.4% after Deutsche Bank raised its price target for the Dutch brewer, saying it offers a “compelling” 10% operating profit growth story for fiscal 2025-2027.
• Avanza shares drop as much as 9.9%, with Citi saying net interest income for the Swedish online stockbroker missed expectations.
• Elmos Semiconductor falls as much as 7.6% after being downgraded to hold from buy at Hauck & Aufhaeuser, as an expected strong first-quarter report appears to be fully priced into shares.

Earlier in the session, Asian stock markets was modestly lower at the start of the busiest week of the earnings season in the region, with shares in China and South Korea among the biggest decliners. The MSCI Asia Pacific Index fell as much as 0.5%, with tech and materials shares weighing the most on the gauge. Chinese stocks posted their biggest two-day loss this year as geopolitical tensions and signs of an uneven recovery spurred traders to pare exposure ahead of the Golden Week holiday. “One part of the reopening of China that we are concerned about is it’s also a reopening of geopolitical risks,” said Kieran Calder, head of equity research for Asia at Union Bancaire Privee. “Issues like this make it much harder to be outright overweight on China,” he told Bloomberg Television. In contrast, benchmarks in Japan and India climbed. The Nikkei 225 rose past its previous 2023 closing high ahead of new Bank of Japan Governor Kazuo Ueda’s debut policy decision on Friday. 

This will be the busiest week in the latest Asian earnings season, with more than 800 companies scheduled to report results, according to data compiled by Bloomberg. China’s largest company Kweichow Moutai, the country’s biggest banks, Korean chipmaker Samsung Electronics and Indonesian ride-hailing firm GoTo Group are among the major companies set to announce earnings. Meanwhile, traders will also keenly watch Big Tech earnings out stateside this week to inform their exposure to the tech sector. “It really is the longer, medium term demand story that we want to get our heads around,” Calder said. The MSCI Asia gauge is down almost 6% from a peak hit in early January, trailing the S&P 500 on a year-to-date basis, as investors assess the outlook for the heavyweight chip sector and a rebound in Chinese consumption. Markets in Indonesia and Malaysia were closed for a holiday

Japanese stocks edged higher in thin trading, as investor sentiment on the global economy was lifted by data showing increased US and European business activity ahead of heavy earnings reporting later this week.  The Topix rose 0.1% to close at 2,037.34, while the Nikkei advanced 0.1% to 28,593.52. Daiichi Sankyo contributed the most to the Topix gain, increasing 1.5%. Out of 2,158 stocks in the index, 1,325 rose and 715 fell, while 118 were unchanged. “There is a lack of direction ahead of corporate earnings announcements and the Bank of Japan’s monetary policy meeting coming up,” said Hitoshi Asaoka, a senior strategist at Asset Management One. The new Bank of Japan Governor Kazuo Ueda will hold his first policy meeting later this week. The central bank is planning to review and inspect policies taken over the past decades as soon as this week’s meeting, Sankei newspaper reported Sunday.

Australian stocks edged lower dragged by materials and energy shares as investors assess quarterly production reports. The S&P/ASX 200 index fell 0.1% to 7,322.00. In New Zealand, the S&P/NZX 50 index rose 0.8% to 12,026.39.

Indian markets advanced for the third consecutive session, led by gains in financials as top lenders continued to report earnings in line with consensus estimates. ICICI Bank and IndusInd Bank were the latest to report March quarter numbers that matched analysts’ expectations, helped by robust demand for loans. Still, the lenders face the challenge of raising deposits to match the credit growth. The S&P BSE Sensex rose 0.7% to 60,056.10 in Mumbai, while the NSE Nifty 50 Index advanced 0.7%. The gauges are up an average of 2% each this month and close to erasing their losses for the year. 

In FX, The Bloomberg Dollar Spot Index is up 0.1%, reversing an earlier loss. The Swiss franc is the best performer among the G-10 currencies, rising 0.4% versus the greenback. The yen lagged peers. Bank of Japan Governor Kazuo Ueda said at the parliament that the central bank is not at the stage to talk about how to normalize yield curve control. US GDP data is forecast to reveal slowing growth, while the so-called core PCE deflator, the central bank’s preferred inflation gauge, is expected to 0.3% growth on a monthly basis. The Fed is due to decide on its policy rate next week. Data Monday showed Germany’s business outlook unexpectedly improved for a sixth month as the economy gradually recovers from the energy shock. The euro zone probably resumed growth in the first quarter as all four of its biggest economies proved resilient enough to shake off the fallout from war on the region’s frontier.

Treasuries have added to gains seen during Asian trading hours with 10-year yields down 4bps at 3.54%. German 10-year yields are flat while the UK equivalent rises 2bps.

In commodities, crude futures decline with WTI down 0.3% to trade near $77.60. Spot gold gains 0.1% to around $1,985.

Bitcoin is unchanged on the session, towards the lower-end of USD 27.99-27.14k parameters with pertinent macro updates somewhat limited in the European morning.

Finally, turning to commodity markets. After four consecutive weeks of gains, crude oil retreated as data releases earlier in the week highlighted growing headwinds for the US economy. WTI crude fell -5.63% week-on-week, although regained ground on Friday following the PMI beat, climbing +0.75% to $77.87/bbl. Similarly, Brent crude broke its streak to finish down -5.39% week-on-week (+0.69% on Friday) to $81.66/bbl.

On today’s calendar, we get the April Dallas Fed manufacturing activity, and March Chicago Fed national activity index, Germany April ifo survey. A busy week for earnings will include The Cocal Cola Co., First Republic Bank and First Citizens Bank, the acquirer of Silicon Valley Bank. Tech companies will also be in the spotlight with those to report including Microsoft Corp., Meta Platforms Inc. and Amazon.com Inc.

Market Snapshot

• S&P 500 futures down 0.1% to 4,153.50
• STOXX Europe 600 little changed at 468.62
• MXAP down 0.2% to 160.83
• MXAPJ down 0.4% to 516.19
• Nikkei up 0.1% to 28,593.52
• Topix up 0.1% to 2,037.34
• Hang Seng Index down 0.6% to 19,959.94
• Shanghai Composite down 0.8% to 3,275.41
• Sensex up 0.5% to 59,957.80
• Australia S&P/ASX 200 down 0.1% to 7,321.99
• Kospi down 0.8% to 2,523.50
• German 10Y yield little changed at 2.47%
• Euro little changed at $1.0992
• Brent Futures down 0.2% to $81.50/bbl
• Brent Futures down 0.2% to $81.49/bbl
• Gold spot down 0.1% to $1,981.82
• U.S. Dollar Index little changed at 101.74

Top overnight News from Bloomberg

• Growing concerns that China may be facing a new Covid wave fueled a surge in shares of the nation’s drugmakers Monday as the public fretted over waning immunity. Xinxiang Tuoxin Pharmaceutical Co. jumped as much as 20% in Shenzhen, while Hybio Pharmaceutical Co. rallied 15%. BBG
• Chinese consumers continue to demonstrate a willingness to spend money, w/travel bookings for the May Day holiday exceeding pre-pandemic levels. SCMP
• Ukraine’s state energy company, Naftogaz, is holding talks w/US energy firms like Exxon, Chevron, and Halliburton about dramatically ramping gas production as the country aims to replace Russia as the primary supplier into Europe. FT
• Former Russian president Dmitry Medvedev said on Sunday that if the G7 moved to ban exports to Russia, Moscow would respond by terminating the Black Sea Grain deal that enables vital exports of grain from Ukraine. RTRS
• ECB’s Pierre Wunsch warns that markets are underestimating how high rates will rise in the Eurozone (he said the tightening process will only stop once wage growth begins to fall). FT
• Fed’s index of common inflation expectations fell in Q1 to the lowest level in nearly two years, the latest example of disinflationary forces building throughout the economy. BBG
• The GOP is more serious than people realize about allowing a debt ceiling breach to occur. McCarthy won’t have enough support within the House GOP caucus to pass his debt ceiling bill in the coming week. WaPo / BBG
• Bed Bath & Beyond filed for Chapter 11 bankruptcy and said it would eventually close all its 360 Bed Bath & Beyond and 120 Buybuy Baby locations. WSJ
• Moody’s downgraded 11 regional lenders, suggesting higher interest rates and recent bank failures have ushered in greater instability. The downgrades hit lenders including U.S. Bancorp, Zions Bancorp, Bank of Hawaii, Western Alliance Bancorp, First Republic Bank, Associated Banc-Corp., Comerica Inc., First Hawaiian Inc., Intrust Financial Corp, Washington Federal Inc. and UMB Financial Corp. WSJ
• Homebuilders appear to offer a particularly poor risk/reward. Homebuilding fundamentals have inflected higher from low levels in recent months. The NAHB Homebuilder Index has rebounded from its trough level of 31 in December to 45 in April. Housing starts and building permits have also increased from trough levels. Building material costs, which were a headwind to homebuilders in 2020- 21, have also declined. However, the equity market has already priced an improvement, and GS mortgage strategists forecast that residential mortgage rates – a key variable in housing demand – will finish the year at 6.5%, suggesting valuation downside risks for the group

A more detailed market snapshot courtesy of Newsquawk

APAC stocks were mixed after the lack of macro drivers over the weekend and as participants brace for this week’s key events including big US tech earnings and the first BoJ meeting under Governor Ueda’s leadership. ASX 200 was lacklustre as gains in tech and defensives were offset by underperformance in the mining-related industries  with notable losses in Fortescue Metals and South32 after weaker quarterly output updates. Nikkei 225 eked slight gains after source reports that the BoJ is likely to maintain ultra-loose monetary policy and dovish guidance, while it was also reported the BoJ is considering a comprehensive review of the impact of the monetary easing taken over the longer term and are planning to examine a quarter century of deflation. Hang Seng and Shanghai Comp were subdued despite the PBoC’s liquidity efforts and the announcement of policies to support trade by China’s Vice Commerce Minister who also noted that uncertainty in external demand remains the biggest restraint for China’s trade, while frictions lingered with the US reported to have urged South Korea not to fill China’s shortfalls if Beijing bans Micron chips.

Top Asian News

• PBoC injected CNY 89bln via 7-day reverse repos on Sunday with the rate kept at 2.00% and it injected CNY 115bln via 7-day reverse repos with the rate kept at 2.00% on Monday.
• PBoC official said China’s yuan has a solid foundation to remain stable and the PBoC will improve the floating exchange rate system based on market demand and supply, according to Reuters. One of China’s “big four” banks plans to cut some personal and corporate rates next week, according to sources; products affected include “call deposits” and “agreement deposits”. Sources said the mechanism asked for a roughly 10bps cut to weighted average term deposit rates in the quarter from a year earlier.
• China urges banks to cut deposit rates, according to Reuters sources; message from Chinese regulators is to cut size of structured deposit business, lower rates of “innovative” products;
• Chinese Vice Commerce Minister Wang said uncertainty in external demand remains the biggest restraint for China’s trade and said that China will actively satisfy funding demand from small and medium-sized exporters and importers, as well as support firms to explore diversified markets, according to Reuters.
• Chinese officials and analysts said deflation concerns are unnecessary despite the slower price growth since the start of the year and noted the economy is on a solid recovery track amid pro-growth policies, according to the State Council.
• US urges South Korea not to fill China shortfalls if Beijing bans Micron (MU) chips, according to FT.
• BoJ Governor Ueda said the BoJ must maintain monetary easing as trend inflation is still below 2% but added that if it can be foreseen that trend inflation will reach 2%, the BoJ must head towards policy normalisation. Ueda also said that how to revise YCC will depend on various factors such as economic conditions and the pace of inflation at the time and noted that he cannot say now how specifically the BoJ could tweak YCC.
• BoJ is considering conducting a comprehensive review of the impact of the monetary easing steps taken over the longer term with the central bank planning to examine a quarter century of deflation and could start discussions as early as this week’s policy meeting, according to a Sankei report which didn’t cite any sources.

European bourses are posting marginal losses in a relatively slow start to the European weak, with mixed Ifo data somewhat overlooked, Euro Stoxx 50 -0.2%. Sectors are mixed and feature outperformance in Financial Services on the back of UBS while Phillips leads the Stoxx 600 after a strong Q1 update. Stateside, futures are pressured but the magnitude of the downside has eased slightly throughout the morning going into a particularly busy US week for earnings and data, ES -0.2%.

Top European News

• UK PM Sunak will hold talks with major UK firms and investors on Monday under the new “Business Connect” forum as the government seeks to fill the void following the scandal and implosion of the CBI business lobby, according to Bloomberg and FT.
• UK government is set to introduce legislation in the approaching days to set up a new regulator to police the increasing dominance of the large technology platforms, according to FT.
• ECB’s Wunsch said they are waiting for wage growth and core inflation to decline, along with headline inflation, before they can arrive at the point where they can pause on rates, according to FT.
• German Interior Minister said public workers agreed on a wage deal with employers, according to Reuters.
• Germany’s Bundesbank says the economy grew in Q1 above expectations, after a rebound in industrial conditions.
• S&P affirmed the UK at AA; Outlook Revised to Stable from Negative, while it affirmed Greece at BB+; Outlook Revised to Positive from Stable and affirmed Italy at BBB; Outlook Stable.

Geopolitics

• EU is set to propose banning many goods from transiting through Russia which would be part of the EU’s eleventh sanctions package, according to Bloomberg.
• Russian Security Council Deputy Chairman Medvedev warned that Moscow will terminate the grain deal if the G7 moved to ban exports to Russia, according to Reuters.
• Russia-installed head of Crimea said air defences had been activated on Saturday although there were no reports of damages or casualties, according to Reuters.
• Germany expelled over 20 Russian diplomats, while Moscow called Berlin’s actions “hostile” and will expel at least 20 German diplomats in a tit-for-tat response, according to Russian state news RIA-Novosti.
• Baltic states were angered by China’s ambassador to France who questioned the legitimacy of countries formerly in the Soviet Union and are planning to summon Chinese diplomats to complain about the remarks, according to FT.
• Chinese Vice Foreign Minister Sun lodged solemn representations with the South Korean ambassador to China about South Korean President Yoon’s ‘erroneous’ Taiwan remarks, according to the Chinese Foreign Ministry cited by Reuters.
• China reportedly lashed out against the US-Philippines alliance with the decision by the Philippines to grant the US access to four military bases near Taiwan said to anger Beijing, according to FT. However, it was separately reported that Chinese Foreign Minister Qin Gang said China is ready to work with the Philippines to implement a consensus between the two countries and the Philippines’ Foreign Minister commented that differences in the South China Sea are not the sum total of relations between the two countries, according to Reuters.
• US senior administration official said North Korea’s human rights situation is likely to come up at next week’s US-South Korea summit and North Korea is now in many ways much more closely aligned with China than it was before.
• US said it is deeply concerned by Azerbaijan establishing a checkpoint on the only land route to the contested Nagorno-Karabakh region, according to Reuters.
• US Secretary of State Blinken said US personnel and their dependents were safely evacuated from the embassy in Sudan. Furthermore, UK PM Sunak said British armed forces completed a rapid evacuation of British diplomats and their families, while the German military also conducted an evacuation of German citizens from Sudan.
• Turkey’s Defence Minister is planning to meet his Russian, Syrian and Iranian counterparts in Moscow on April 25th, via Anadolu news.
• Japan says jet fighters/helicopters took off and landed on the Shandon Chinese carrier within the Pacific Ocean around 280 times between April 17th-23rd.
• EU Council President Michel says EU-China policy will be on the June European Council agenda. Earlier in the session, EU Foreign Representative Borrell says they will discuss how to recalibrate China relations.

FX

• The Dollar has slipped towards the 101.50 mark from earlier 101.91 best to the mixed fortune of peers.
• CHF outperforms with safe-haven demand factoring amid the general risk tone and as attention on the US debt limit increases, USD/CHF at the lower-end of 0.8883-0.8928 parameters.
• EUR derived marginal and ultimately fleeting upside on the mixed German Ifo release and is now holding comfortably above the 1.10 mark but with ranges thin thus far while several ECB speakers have not impacted.
• Next best is the Kiwi, which is deriving support from AUD/NZD tailwinds rather than the lower RBNZ risk weighting for business growth; NZD above 0.6150 while AUD languishes below 0.67.
• PBoC set USD/CNY mid-point at 6.8835 vs exp. 6.8826 (prev. 6.8752)

Fixed Income

• Gilts lead a broad retreat in debt ahead of UK public finance data as the 10-year bond retreats through 101.00 within a 101.24-100.70 range.
• Bunds off best levels between 134.21-133.68 parameters after a mixed German Ifo survey.
• T-note holds firm near 114-24+ overnight peak vs 114-14+ trough ahead of low-key agenda.
• GGBs have been lagging periphery peers somewhat, despite the outlook revision to positive at S&P as the rating was maintained as expected but disappointing some outside calls for an upgrade.

Commodities

• WTI and Brent are off worst levels but remain softer overall in-line with broader risk sentiment; specifically, WTI is back in proximity to USD 78/bbl while Brent has reclaimed USD 81.50/bbl.
• Iran sets the May Iranian light crude price to Asia at Oman/Dubai +USD 2.80bbl (vs. prev. USD 2.50bbl), according to a Reuters source.
• Central banks reportedly loaded up on gold amid geopolitical tensions whereby reserve managers’ purchases rose 152% last year, while an annual poll of 83 central banks found that more than two-thirds thought their peers would increase gold holdings this year, according to FT.
• Head of Russian Grain Union says the Black Sea grain deal has not brought anything good to Russia so far; Russia could export around 60mln tonnes of grain (inc. 50mln tonnes of wheat) this season.
• Spot gold trades horizontally after finding some resistance around USD 1,985/oz overnight, with the yellow metal sandwiched to a USD 10/oz parameter amid a lack of clear catalysts.
• Base metals are mostly lower, although LME copper remains cushioned despite the broader subdued mood across markets; ING cites disruption to Codelco’s copper operations.

US Event Calendar

• 08:30: March Chicago Fed Nat Activity Index, est. -0.20, prior -0.19
• 10:00: Revisions: Retail Sales, Inventories
• 10:30: April Dallas Fed Manf. Activity, est. -11.0, prior -15.7

DB’s Jim Reid concludes the overnight wrap

Just when we thought it was safe to venture back fully into normal family life after my daughter Maisie’s 2-year plus hip battle we got a minor setback at the weekend. At the end of last week, she had her first dance class (Street Dance) since being out of her wheelchair and in the warmup got overexcited and bashed her hand into a wall. To cut a long story short, after an A&E visit we found that she’s broken a bone in her wrist. Literally 2 minutes into her first dance class back. Fortunately, it’s a relatively minor break and she can ease back into things after the splint is off in three weeks! I really hope she doesn’t inherit my injury record! Although as I tell my wife most high-performance athletes tend to pick up a lot of injuries.

There’s a bit of everything for investors around the world this week. In the US Q1 GDP, the employment cost index (ECI), core PCE, and consumer confidence are the highlights with us now in the Fed blackout period ahead of next week’s FOMC. Meanwhile, we will see inflation and growth data in the Eurozone, and the BoJ’s decision in Japan on Friday where DB has a non-consensus call (see below). Big tech (14% of S&P in 4 names), pharma and oil earnings will fill out a busy earnings week. Watch out for First Republic Bank reporting as well after the closing bell today.

If we start in more detail now with the US, most of the key data is on Thursday and Friday. Before that tomorrow’s new home sales and consumer confidence are also important, especially the latter. The first reading of Q1 GDP is out on Thursday and our US economists expect a +2.2% print, versus +2.6% in the last quarter of 2022 with consumer spending (+3.6% vs. +2.5%) leading the way. However our economists suggest that Friday’s personal consumption and income data for March may well show that the bulk of the consumer boom in Q1 was in January and February due to warm weather. Within that report on Friday, the latest core PCE deflator will be a key report alongside the ECI. These will be the last big inflationary datapoints ahead of the FOMC.

In Europe, growth and inflation data is due for key economies on Friday. These include GDP and CPI releases for Germany and France and GDP for the Eurozone. There will also be a plenty of sentiment gauges for the bloc. These include the Ifo survey for Germany today, consumer confidence for Germany and France on Wednesday and a list of metrics for Italy and the Eurozone on Thursday.

Over in Asia, all eyes will be on Japan with both the BoJ decision and lots of key data including Tokyo CPI, labour market, retail sales and industrial production indicators all due on Friday. Our Chief Japan economist previews the central bank meeting, the first one for the new Governor Kazuo Ueda, here. Against the market consensus, he expects the BoJ to undergo a policy revision on the back of inflation risks, with potential outcomes including the termination of YCC, strengthening of forward guidance on short-term rates, and greater flexibility of JGB purchasing operations. For data releases, our economist expects unchanged unemployment and Tokyo CPI and a -0.4% MoM fall in industrial production (see full preview here).

Earnings season continues apace this week, with Big Tech reporters taking centre stage. Comprising almost 14% of the S&P 500 by market cap, Microsoft and Alphabet tomorrow, Meta on Wednesday, and Amazon on Thursday will be among the most anticipated reports. The only one missing from the pack is Apple, which will report on May 4th. Other notable tech earnings this week include Texas Instruments (tomorrow), SK Hynix (Wednesday), Intel (Thursday) and Sony (Friday).

In Europe the focus will be on key banks, including Credit Suisse (today) and UBS (tomorrow). The former will clearly be interesting given all that went on in Q1. Outflows will be worth watching just to see how serious the situation was at the time. In Asia, a number of Chinese banks report throughout the week. Meanwhile in the US, investors will be laser focussed on First Republic which report today. After trading in a 120-150 range in the first 2 and a bit months of the year, they have been in a 12-15 range over the last month. So they haven’t broken back out of their depressed range but haven’t deteriorated further. So these results could be important to the company and wider sentiment as this has been the perceived next weakest link.

There are also some pharma heavyweights reporting, including Novartis (tomorrow), AstraZeneca and Sanofi (Thursday) in Europe. In the US, we’ll hear from Eli Lilly, AbbVie, Merck and Bristol-Myers Squibb (Thursday), among others.

Consumer demand will be gauged from an array of earnings from companies including McDonald’s, Chipotle, PepsiCo (Tuesday), Coca-Cola (today), Domino’s, Mondelez (Thursday) and Hilton (Wednesday). In autos, the focus will be on BYD (Thursday), Mercedes-Benz (Friday) and GM (Tuesday). Investors will be particularly interested in EV rollouts and pricing. Among other economically-sensitive bellwether stocks, industrials reporting include UPS, Raytheon, General Electric (Tuesday), Honeywell, Caterpillar, Northrop Grumman (Thursday) and Boeing (Wednesday).

After the volatility in energy markets this year, attention will turn to some of the largest players by end of next week. Big Oil reporters including Exxon, Chevron and Eni on Friday and TotalEnergies on Thursday. Pioneer, Hess, EQT (Wednesday) and Valero (Thursday) will also report. Elsewhere, notable names in utilities include NextEra (Tuesday) and Iberdrola (Wednesday) and Linde, BASF (Thursday), Vale (Wednesday), Dow Inc (Tuesday) and Newmont (Thursday) in materials. The focus will likely be on supply plans and Chinese demand for metals players in particular.

The full day-by-day data, earnings and central bank speaker calendar is at the end as usual.

Asian equity markets are mostly trading lower as we start the week. As I check my screens, the KOSPI (-0.88%) is the biggest underperformer across the region with the Hang Seng (-0.61%), the CSI (-0.45%) and the Shanghai Composite (-0.15%) also losing ground in early trade. Elsewhere, the Nikkei (+0.29%) is bucking the regional trend. In overnight trading, US stock futures are seeing losses with contracts on the S&P 500 and NASDAQ 100 both around -0.30% lower. Meanwhile, yields on 10yr USTs (-1.14bps) have edged lower, trading at 3.56% as we go to press.

In a speech, the Bank of Japan Governor (BOJ) Kazuo Ueda indicated that consumer prices are likely nearing its peak, highlighting that he is “seeing it slowing ahead” while reiterating the need of keeping monetary policy expansionary ahead. Meanwhile, the BOJ Chief declined to specify how the central might phase out YCC, ahead of a two-day policy meeting that kicks off later this week. His overall comments don’t suggest a root and branch review for Friday but there still might be some changes that we highlighted above.

Elsewhere as we go to print, ECB governing council member Wunsch (from Belgium) has told the FT that he will only agree to halt rate hikes once wage growth starts to fall and that he wouldn’t be surprised if rates go to 4%. So a hawkish start to the week on that front.

In terms of recapping last week now, it was a relatively quiet week with risk off trying to dominate but with risk repeatedly making decent comebacks. Overall the S&P 500 retreated a very modest -0.1%, whilst 10yr Treasury yields gained +5.9bps over the week.

On Friday, the US composite flash PMI for April came in above expectations to sit firmly in expansionary territory at 53.5 (vs 51.2 expected), driven by a significant beat in the services component (53.7 vs 51.5 expected), as well as a more modest upside surprise in manufacturing (50.4 vs 49.0 expected). Digging into the weeds of the print, we can see prices charged for goods and services in April rose at their sharpest level since September 2022, with an upturn in demand renewing price pressures. The release went against the stream relative to the softer US data published earlier in the week, with this sample featuring greater exposure to smaller and more domestically oriented firms.

With the strong release highlighting real economy resilience despite the Fed’s historic hiking cycle, the probability of a 25bps hike in May priced in by the fed futures rose to 90.2%, up +8.9 percentage points week-on-week. Off the back of this, there was a small sell-off in US 10yr Treasuries, as yields rose +4.0bps on Friday, and +5.90bps week-on-week. The interest-rate sensitive 2yr yield climbed +3.9bps on Friday (and +8.3bps on the week).

Europe saw a similar reaction earlier on Friday, with the composite PMI likewise beating expectations to land at 54.4 (vs 53.7 expected), although the manufacturing component fell back to 45.5 (vs 48 expected). The 10yr bund yield gained +3.6bps on Friday, and +4.2bps on the week.

Against this backdrop, the S&P 500 traded largely flat on Friday, finishing just slightly higher (+0.09%). The index traded in a tight range over course of the week with the 5-day trading range just 55pts or 1.3%, with the index finishing the week just -0.10% lower overall. The lack of realized volatility was reflected in short-term implied volatility falling to its lowest levels in over 17 months, as the VIX volatility index finished Friday at its lowest weekly close (16.77pts) since November 2021. The cyclical sectors of consumer discretionary and staples outperformed following the release, up +1.20% and +0.75% on Friday respectively. On the flip side, the metals and mining sector slid -2.39% on the week as iron fell ore (-4.34% week-on-week and -3.24% on Friday) to its lowest level since December 2022. The STOXX 600 finished up a modest +0.34% on Friday (and +0.45% week-on-week).

Finally, turning to commodity markets. After four consecutive weeks of gains, crude oil retreated as data releases earlier in the week highlighted growing headwinds for the US economy. WTI crude fell -5.63% week-on-week, although regained ground on Friday following the PMI beat, climbing +0.75% to $77.87/bbl. Similarly, Brent crude broke its streak to finish down -5.39% week-on-week (+0.69% on Friday) to $81.66/bbl.