What will Chinese GDP data reveal about the economic rebound?
Chinese economic growth will take centre stage next week when Beijing releases its first-quarter data on the country’s gross domestic product — and markets are primed for a strong reading.
Customs figures released on Thursday showed Chinese exports rose almost 15 per cent year on year in March, snapping a five-month run of contraction and registering a substantial jump where economists had expected a drop of 7 per cent.
That, combined with decent manufacturing and services sector activity readings, has bolstered expectations of first-quarter GDP, which is slated for publication on Tuesday, beating recent forecasts.
A median forecast from analysts polled by Bloomberg points to expectations of a 3.9 per cent rise compared with a year ago. But some economists have pencilled in a substantially higher figure — such as those at Standard Chartered, who expect growth to clock in at 4.9 per cent.
Markets will also be on alert for higher-than-expected March readings on China’s industrial production and retail sales, which are tipped to clock in year-on-year growth of 4.7 and 8 per cent, respectively.
“Next week’s Q1 GDP data will reflect the extent of China’s reopening rebound,” said Khoon Goh, head of Asia Research at ANZ. Goh added that strong readings from the latest Chinese purchasing managers’ indices “certainly points to upside risk to the Q1 GDP data”. Hudson Lockett
Will UK inflation finally fall significantly?
Economists expect UK inflation to finally decelerate significantly in March, reversing the unexpected acceleration to 10.4 per cent in February and in line with the declining trend seen in other major economies.
Analysts polled by Reuters forecast that headline inflation, released on Wednesday, will have dropped to 9.8 per cent in March. They expect core inflation, which strips out volatile food, energy, alcohol and tobacco prices, to have fallen back to 6 per cent after rising from 5.8 per cent to 6.2 per cent between January and February.
“Following the significant upside surprise in the February numbers, we expect a clear easing back to have taken place in March,” said Sandra Horsfield, economist at Investec. She explained that the fall would be largely due to lower petrol prices, “but lessening supply chain disruptions and lower shipping costs may have led goods price inflation lower too”. This is particularly the case for goods such as clothing and furniture.
In March, inflation slowed to a 13-month low in the eurozone and to the lowest rate in nearly two years in the US.
The Bank of England’s Monetary Policy Committee will also pay close attention to the labour market data, released on Tuesday. Analysts forecast a slight pick-up in the unemployment rate and further slowing in wage growth.
Together the figures will help policymakers decide on interest rates at their next meeting, on May 11. Markets are currently split between the BoE raising the benchmark rate by another quarter point or leaving it at the current level of 4.25 per cent. Valentina Romei
What will bank earnings tell us about the health of the US financial system?
The fallout from the March turmoil for the banking industry — and for the financial system more broadly — should be evident in the coming week as the first-quarter earnings season gathers pace.
It kicked off for the financial industry on Friday with reports from JPMorgan, Citigroup, Wells Fargo and BlackRock, and there is a wider array on the docket for next week. Among other big banks, Bank of America and Goldman Sachs report on Tuesday and Morgan Stanley on Wednesday. Broker and investment group Charles Schwab reports on Monday and super-regional banks such as US Bancorp and Citizens report on Wednesday.
US banks with big consumer businesses, like Bank of America, are expected to show a wave of deposits coming in after the failure of Silicon Valley Bank and Signature led fearful customers to pull out of smaller institutions. But that trend is unlikely to have offset the millions in outflows in the first weeks of the year as customers pulled deposits out of banks and into higher yielding alternatives such as money market funds.
Though big banks benefited from some of the deposit outflows from smaller banks, the move out of bank accounts more broadly has continued, and companies with big money market businesses, like Goldman Sachs, are expected to have benefited from the surge.
Schwab, whose shares have fallen more than 30 per cent since the collapse of SVB on fears it too could face a run on deposits, could recover some territory if it posts strong earnings.
Across all these institutions, investors will be on the lookout for any signs of distress — due to deposit flight or interest rate risk management — or changes to lending or trading businesses. Kate Duguid
Source: Economy - ft.com
