It’s a jam-packed upcoming week full of major risk events. The Fed meeting will grab the headlines but may actually be relatively quiet. Instead, Friday’s monthly US employment report could spark more volatility. Policymakers in the US are not cutting rates any time soon. They are data dependent so the marquee jobs data will be key in directing policy action. We also get Amazon and Apple earnings plus updated eurozone CPI figures to kick off the week.
Currently, markets do not fully price in the first Fed rate cut until December. This is a quite stunning shift from just three months ago when over 165bp of easing was predicted, starting in March. There’s now only around 25bp cut and a half anticipated by money markets, which begs the question as to whether this has swung too far? But inflation continues to run hot, with this week’s data simply confirming an environment in which the Fed will have to defer to US exceptionalism. Any talk at the Fed meeting about the balance of risks in judging rate setters’ reaction function will sway price action. We note there are no new FOMC projections and dot plot until June.
Non-farm payrolls have added to the stream of upbeat data this year. Over 800k new jobs have been created in the three months of 2024, with payrolls well in excess of population growth. That points to a continued tight labour market, even though other measures of employment, like the household survey have only shown limited growth. We also get ISM data next week, with both manufacturing and services sectors currently at levels closer to 0.5% GDP, rather than the current 3% growth levels.
Earnings season continues with two more of the tech titans from the slightly anachronistic “Maginficent Seven”, Amazon and Apple, reporting on Tuesday and Thursday respectively, after the US close. We’ve had mixed performance so far with Tesla, Alphabet and Facebook parent, Meta. Apple’s stock price has tumbled 10% this year with falling China smartphone shipments expected to cause a drop in Q1 revenues. Amazon’s cloud computing business will be under the spotlight along with views on consumer spending, with the stock up 18% in 2024.
Have a great weekend.