Amid a relatively light event calendar, matters in the banking sector will continue to set the pace this week where, as DB's Jim Reid notes this morning, "in an age of social media, misinformation can spread like wildfire so you're never sure where the next incredulous story is going to come from alongside the genuine issues." One can see why Reid - who works for Deutsche Bank - may be somewhat concerned.
To be sure, it's not jost employees: investors in financials have also had their confidence knocked by recent events which has allowed those betting against the sector a free run, although we are seeing a bit of a squeeze this morning. If anything, some rampant fear on Friday morning allowed for an examination of the facts and fundamentals of the large banks and buyers stepped back in with European banks well off the lows by the end of Friday's session with the US bank index turning positive (+0.42%) just before the US close. With the worst of the irrational scare stories around European banks seemingly running out of momentum over the weekend, some reappraisals of the facts should continue this week. Indeed Euro Stoxx futures are up +1.1% in Asia trading with S&P and Nasdaq futures up around +0.5%.
Going back to the week's events, looking forward, the banking sector will clearly again set the scene this week as we approach month-end on Thursday. The data will be a bit secondary as it'll be too early to judge any impact from the mini crisis so far, however as Reid notes, there are some important releases with the PCE in the US (Friday), CPIs for Germany (Thursday), the Eurozone and Tokyo (both Friday) keeping inflation data top of mind for investors this week. They’ll probably care a little less than they did before the banking crisis hit though. In addition, an array of consumer and business confidence indicators in the US and Europe are also due and China PMIs on Friday will be important.
Perhaps more interesting with be hearing from a deluge of Fed officials as they were on blackout for the SVB crisis up until last week's FOMC. They are back in force this week and we'll therefore get a better idea of the deliberations around last week's 25bps hike and the future of this hiking cycle. See the day by day week ahead at the end for a list of the speaker and data highlights.
Let's expand on the main events below: we’ll have to wait until the end of the week for the most important datapoint and that’s the Fed's preferred inflation gauge, the PCE, on Friday. DB economists see a +0.36% advance for the core PCE in February (+0.57% in January) and MoM declines for both income (-0.1% vs +0.6% in January) and consumption (-0.6% vs +1.8%). Earlier in the week, a pulse check on the US consumer will come from Conference Board's consumer confidence measure on Wednesday (consensus estimates 101.0 vs 102.9 in February).
Over in Europe, all eyes will be on the preliminary inflation readings across the Eurozone. March data for Germany will be out on Thursday, followed by reports for the Eurozone and France on Friday, among others. In terms of forecasts, DB sees March headline at 7.1% (+1.1% MoM) and core at 5.8% (+1.4% MoM). As a reminder, the latest 5.6% core inflation reading is the highest on record. FWIW, DB's team don't expect it to peak until the 6.0% they expect in July.
Apart from the inflation data, there will be an array of sentiment indicators across the bloc as well, with potential preliminary impact of the banking turmoil in focus. Among the gauges are the Ifo survey (today) and consumer confidence (Wednesday) in Germany, as well as manufacturing (tomorrow) and consumer confidence (Wednesday) in France.
Turning to Asia, this week will be a busy one for Japan as well, with one of the key releases being the Tokyo CPI on Friday. Elsewhere in the region, markets will be closely following China's PMI releases on Friday to assess the speed and magnitude of economic recovery. Current median estimates on Bloomberg are pointing to a slight deceleration in both manufacturing (51.8 vs 52.6 in February) and non-manufacturing (54.3 vs 56.3) indicators.
Courtesy of DB, here is a day-by-day calendar of events
Monday March 27
Tuesday March 28
Wednesday March 29
Thursday March 30
Friday March 31
A somewhat more detailed day-by-day breakdown courtesy of Rabobank:
Monday: Eurozone M3 money supply figures are due out and the ECB’s Schnabel, Elderson and Centeno are speaking, along with the Bundesbank’s Nagel, BOE Governor Bailey and the Fed’s Jefferson. The challenge of balancing the inflation fight with the financial stability imperative is sure to feature prominently. Expect variations of ‘different tools for different challenges’, which points to the rate hikes + QE/acronyms paradigm that my colleague Michael Every has presaged in this Daily many times.
Tuesday: Australia February retail sales will be released with growth of 0.2% m-o-m expected vs 1.9% in January. Along with the monthly CPI figure due on Wednesday, retail sales is one of the four data points that Phil Lowe said the RBA will be watching closely to inform whether or not the RBA pauses in April. The other two were the February employment numbers and consumer confidence, both of which beat expectations.
Wednesday: This ought to be key day of the week. In Australia February monthly CPI figures already mentioned are due out. Expectations are for a y-o-y read of 7.2% vs. 7.4% in January. Crucially, this data does not include the RBA’s preferred trimmed-mean measure. So, while it will be important, it may not be decisive.
Thursday: promises to be more sedate. Key releases are the New Zealand February building permits and business confidence numbers. No survey expectations are published for either, by both will be important inputs for the RBNZ’s thinking on the future path of the OCR.
Friday: will be an important day for Eurozone data. Preliminary March CPI is expected to lift to 1.1% m-o-m after coming in at 0.8% in February. On a y-o-y basis the headline number is expected to fall from 8.5% to 7.1% as March 2022 rolls off while the core reading is expected to lift by 1 tick to 5.7% y-o-y. We also get Eurozone unemployment figures where surveyed analysts expect the rate to fall 1 tick to 6.6%.
Finally, looking at just the US, Goldman writes that the key economic data release this week is the core PCE report on Friday. There are several speaking engagements from Fed officials this week, including congressional testimony by Vice Chair for Supervision Michael Barr on Tuesday and Wednesday and speeches by New York Fed President Williams and Fed Governor Waller on Friday.
Monday, March 27
Tuesday, March 28
Wednesday, March 29
Thursday, March 30
Friday, March 31
Source: DB, Goldman, Rabobank, BofA