Transcript
Matt Jones
Welcome to "The Long & Short of the Week Ahead", a production of Eurizon SLJ Capital that takes a look at the macro-economic themes of the week ahead and has been recorded for professional investors.
My name is Matt, Head of Distribution for Eurizon SLJ Capital, and I'm joined by Neil Staines, Senior Portfolio Manager.
Welcome back, Neil. It's great to have you here with us again.
Neil Staines
Thank you very much Matt. It's great to be here.
Matt Jones
So we've taken a slight pause at the start of the year. The same can't be said though, from a markets or a macro perspective. So after what has been a busy January so far, what are we looking at next week that's gonna shape our views on the global macroeconomic narrative?
Neil Staines
Absolutely. Yeah. Thanks Matt. It's it's, as you say, been a very interesting start to the year. Next week we will be looking very much at the global data. We get Eurozone, GDP for Q4 after the outperformance of the US that we saw at the back end of this week. And the Eurozone CPI print for January, the flash print for January that will very much shape the narrative around what we saw from the ECB at the back end of this week. We also get the PMI data from China, which will be particularly relevant given the RRR cut and the, some of the targeted stimulus measures that we've seen out of China recently. Perhaps. Too soon to see the implications there, but these data prints will be watched very closely nonetheless.
Matt Jones
After the ECB this week, next week brings us the Bank of England and the Fed. What are we expecting?
Neil Staines
Yes, absolutely. The ECB was very important this week. Lagarde was very clear that we need further progress on the disinflationary journey in the Eurozone. That we are very data-dependent going forward. And there was really some modest pushback against market rate expectations of imminent rate cuts stood by her statement that rate cuts can start in the summer which would be consistent with the new staff projections that we get in April and even the publication of the national accounts for Q1 that won't be available in the April meeting.
However, markets are looking for rate cuts much sooner than that and will be focused on the narrative around the Bank of England and the Fed next week. The Bank of England have seen their inflation rates falling faster than they had anticipated. It's likely that is sufficient to end the dissent on the Monetary Policy Committee in favour of further hikes.
And we may even see the first recorded vote for a rate cut from the Arch Dove Swati Dhingra. That will be very important in the UK this week, a big focus. But the big focus really will be the Fed. Now, they're likely to be unchanged from a policy perspective. The commentary is going to be very important as a focus, particularly the narrative around forward looking implications for growth and inflation.
Key will really be how Powell frames the inflation narrative going forward and thus the risks that policy becomes too restrictive as a function of declining inflation and thus higher real yields. A lot to look out for from the FOMC this week.
Matt Jones
So on the topic of the Fed, there's a lot of US data next week. How does this impact the market's reaction function?
Neil Staines
Absolutely. Yeah. I think whilst the headlines are going to be focused on the FOMC next week, the markets will be much more focused on the data surrounding that. We get jolts, ADP and challenger job cuts ahead of the all important non farm payroll release on Friday.
And it really is this narrative around the progress that we're making, not just on the inflation front, but also on the growth front and how the labor market rebalancing impacts all of that. So really the focus on payrolls and in particular, the private sector payrolls. So taking out of the fact that the stimulus induced.
State and local government jobs that have been pushing the data higher over recent months for a real gauge of the growth trajectory in the U. S. economy will be the big focus of markets next week.
Matt Jones
So on the topic of markets, it's been a really positive start to the year from a risk asset perspective. What are the focal points of the Q4 earnings season next week?
Neil Staines
Yeah, absolutely. Again, it's a huge week for earnings next week. We've seen massive outperformance of equities into the start of this year.
And a lot of that has been driven by some of the big tech names. And next week we get earnings from Microsoft and Google on Tuesday. And from Apple, Meta, Microsoft, and the company formerly known as Twitter on Thursday. So that'll be a big focus alongside the Fed, alongside the global data, alongside the U. S. jobs data for a very busy week next week.
Matt Jones
Thank you, Neil. So I guess the question for next week is, Will X hit the spot? We will wait and see.
Thank you for joining us once again and outlining your thoughts on the week ahead. I look forward to catching up with you again next week.
Neil Staines
Thanks very much, Matt. It's been a pleasure.
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