Investors will look at the Federal Open Market Committee (FOMC) minutes to see the likelihood of a steeper increase in short term interest rates. With the Yield Curve already inverted, the FED looks like they are caught between a rock and a weird place. Raising Rates, inverts the yield Curve but keeps inflation in check. Keeping rates lower, inflation runs, but the yield curve will not invert as much. In the past, an Inverted yield curve serves as a precursor for a recession. Since 1956, every recession was preceded by an inverted yield curve. A yield curve is the relationship between short-term and long-term interest rates of fixed income securities, like bonds. a healthy bond market shows interest rates on longer term bonds are more than short term bonds. When this reverses, it indicates that there is more risk in the economy. Remember though, an inverted yield curve is not the catalyst, just an indication. A red flag so to speak.
The ISM Service Index for March comes out this week and should remain consistent with moderate growth in the near term. Jobless claims will undergo its annual benchmark revision. The revision should not change the picture of the tight labor market we are experiencing right now.
Happy Monday. Good Luck out there this week.
Global Spotlight
Kenya unveils its 2022-23 budget. The Kenyan treasury secretary will present the national budget for the 2022-2023 fiscal year to parliament on April 7. As Kenya faces a mounting debt burden and struggles to repay its short-term, high interest loans, the International Monetary Fund has tasked the country with reining in public spending.
Hungary and Serbia hold elections. Hungary will hold a parliamentary election on April 3 in which, according to opinion polls, nationalist Prime Minister Viktor Orban will win a fourth consecutive mandate. Should the pro-EU opposition win, Budapest’s relations with Brussels are likely to improve after years of tensions.
Russia focuses its war efforts on eastern Ukraine. Russia will continue to withdraw forces from and shorten its lines in northern Ukraine around the cities of Kyiv and Chernigiv. This will reinforce the Russian military’s attempts to rapidly secure the eastern administrative borders of the Donbas region (where many of Ukraine’s best-trained and -equipped formations are located), and encircle or destroy as many Ukrainian forces there as possible.
China mulls COVID-19 restrictions in Shanghai. Shanghai’s two-phase COVID-19 lockdown is supposed to end on April 5, but reports of measures for phase one (for eastern Shanghai) being extended suggest that phase two may also be extended.
Costa Rica holds the second round of presidential elections. An April 3 runoff vote will see centrist former President Jose Maria Figueres and center-right former Finance Minister Rodrigo Chaves compete for Costa Rica’s presidency. The next president will have to tackle issues like high external debt, high unemployment levels and corruption within the public sector. Additionally, the new president has the opportunity to become a regional leader, as other Central American countries struggle with authoritarian tendencies.
Stratfor.com
Economic Calendar
Briefing.com has a good U.S. economic calendar for the week. Here are the main U.S. releases.
Briefing.com
Last Weeks Numbers
- Nonfarm payrolls rose by 431,000 – less than expected but with upward revisions to January and February (a 562,000 monthly average in 1Q22).
- The unemployment rate fell to 3.6%, which is where it was before the pandemic.
- Personal income rose 0.5% in the initial estimate for February (+6.0%), led by a 0.9% gain in private-sector wages and salaries (+12.6% y/y).
- Inflation-adjusted disposable income fell 0.4% (-1.6%)
- Personal spending rose 0.2% (-0.4% adjusting for inflation)
- The PCE Price Index rose 0.6% (+6.4% y/y, well above the Fed’s 2% goal).
Review Last weeks numbers here.
Earnings
Source I/B/E/S data from Refinitiv
Aggregate Estimates and Revisions
- 22Q1 Y/Y earnings are expected to be 6.4%. Excluding the energy sector, the Y/Y earnings estimate is 1.0%.
- Of the 17 companies in the S&P 500 that have reported earnings to date for 22Q1, 70.6% have reported earnings above analyst estimates. This compares to a long-term average of 66% and prior four quarter average of 83.1%.
- During the week of Apr. 4, 4 S&P 500 companies are expected to report quarterly earnings.
Macro Market
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