This Week: Markets eye NFP and Tech gains

It seems markets have moved on from two huge bank collapses on either side of the Atlantic, and are turning their attentions back to the usual programming of macroeconomic data and the next policy moves by major central banks.

Here are the scheduled economic data and events that could move markets this week:

 

Monday, April 3

• CNH: China March Caixin manufacturing PMI
• EUR: Eurozone March manufacturing PMI
• GBP: UK March manufacturing PMI (final)
• USD: US March ISM manufacturing

 

Tuesday, April 4

• AUD: Reserve Bank of Australia rate decision
• GBP: Bank of England Chief Economist Huw Pill speech
• USD: Cleveland Fed President Loretta Mester speech

 

Wednesday, April 5

• AUD: RBA Governor Philip Lowe speech
• EUR: Germany February factory orders; Eurozone composite and services PMIs (final); speech by ECB chief economist Phillip Lane

 

Thursday, April 6

• AUD: Australia February trade balance
• CNH: China March composite and services PMIs
• EUR: Germany February industrial production
• CAD: Canada March unemployment
• USD: US weekly initial jobless claims; speech by St. Louis Fed President James Bullard

 

Friday, April 7

• USD: US March nonfarm payrolls (NFP)
• US and UK stock markets closed for Good Friday

 

Markets appear much happier about the prospects of a lower interest rate path for monetary policy going forward.

Nowhere has this been more evident than in the US Nasdaq stock index which closed out its best quarter since 2020.

 

The tech-laden market has been buoyed from bets on megacap companies, which has also boosted the broader S&P500 index by 7% over the past three months.

Investors are now convinced that the Fed will not keep raising rates to fight inflation, lifting shares in large growth stocks which are heavily weighted in benchmark indices.

Lower interest rates increase the appeal of companies that promise long-term growth.

Huge tech giants like Apple and Microsoft are also seen as less exposed to any potential downturn in bank lending if troubles in the regional banking sector continue.

We note that the small-cap index in the US, the Russell 2000, has declined in the past two months, and that an equal-weighted S&P500 would also have been in the red. But tighter lending conditions and a weakening housing market are concerning many economists who think the risks of a hard landing are rising. 

Markets believe US rates are very close to peaking with now a 64% chance of one more 25bp rate rise.

 

This pricing and general feelgood mood will be put to the test with the release of the US monthly non-farm payrolls data on Friday.

A buoyant labour market report is on the cards with surveys still signalling a fast pace of job growth while unemployment benefits remain historically low.

A headline print above 200k might tip the odds in favour of at least one more rate hike. Wage growth will also be key with a soft print again indicating a possible “goldilocks” economy which could keep the dollar steady.