| ON DECK FOR MONDAY, APRIL 8 |
KEY POINTS:
- Monday’s markets look like Friday’s
- Bonds continue to sell off on post-nonfarm reaction
- Oil prices are volatile as Israel moves troops, Iran threatens
- Mixed German data was ignored
- Japanese real wages fell again but don’t include this year’s Shunto gains
- Chile’s CPI, Israel’s central bank on tap
- Global Week Ahead reminder
As a reminder, please see the Global Week Ahead—Hawks to Prey on Doves in full publication format here and the summary slide deck of just the charts drawn from it is in subscribers’ inboxes. This issue primarily focuses upon the dovish and hawkish cases for this week’s BoC communications and where I stand.
It’s a very light start to the week. Most of the calendar-based action will be packed into Wednesday with US CPI, the BoC, FOMC minutes and then Chinese inflation. Geopolitical developments are dominating oil volatility.
This morning’s global markets are picking up where they left off on Friday. Bonds continue to sell off as Asia reacts to Friday’s US payrolls and the initial overnight drop in oil prices is being scaled back. Stocks are mixed with Europe and Asia mostly higher outside of mainland China while N.A. futures are flat. Markets have scaled back June Fed cut pricing from about 19bps pre-nonfarm to about half of a quarter-point cut. June cut pricing looks too high for the BoC.
Oil was initially about US$2 lower overnight but has since clawed back over half of that. The catalyst is uncertainty toward developments in the Middle East. Did Israel’s troop pullback from a city in Gaza signal a change of intent under wavering US support? Was it to consolidate forces for renewed action? Or was it to solidify defences elsewhere and with Iran threatening retaliation against Israel for its attack on Iran’s consulate in Syria that could escalate matters?
Japanese real wages continue to fall. Real earnings were down 1.3% y/y in February. That’s despite last year’s large Shunto wage gain but before this year’s gain can be incorporated.
German data was mixed and nobody really paid much attention to it. Industrial output was up 2.1% m/m in February (0.5% consensus) and built upon the prior month’s upwardly revised 1.3% rise, but exports fell 2% m/m that same month (-0.5% consensus) following a large gain of over 6% the prior month.
Very little is expected into the N.A. session. Chile updates CPI (8amET). Speaking of Israel, consensus is roughly divided between a hold and a 25bps cut this morning (9amET). Inflation has been falling from the peak in early 2023 but the war raises risks to the inflation outlook.
Canada’s calendar is clear today. US developments will only include the NY Fed’s 1-year measure of inflation expectations (11amET) and another radio appearance by the Chicago Fed’s Goolsbee (1pmET).
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