The US economy is expected to slow down to an annualized quarterly growth rate of 2% in Q1 2023.
On Friday, Wall Street indices closed slightly up, with the Nasdaq up 0.11%, the S&P 500 up 0.09%, and the Dow Jones up 0.07% on a daily basis.
The Dollar Index (DXY) closed last week at 101.7 with a 0.3% weekly increase.
The 10-year US Treasury yield closed last week with a 6 basis point increase, at 3.57%.
The 2-year Treasury yield, which is more sensitive to developments in monetary policy, closed last week at 4.19%, up 8 basis points.
Tech giants Microsoft, Meta, and Amazon, as well as First Republic Bank and Credit Suisse, will be releasing their Q1 2023 earnings this week.
In April, US manufacturing PMI rose from 49.2 to 50.4, moving from a contraction to a growth zone below the threshold for the first time in five months, while the services PMI increased from 52.6 to 53.7, indicating an acceleration in growth in the services sector and marking the third consecutive month of growth.
Housing market data shows that existing home sales in the US in March of 2023 declined more than expected, with a monthly drop of 2.4% indicating a slowdown in the housing market.
Looking at the economic data calendar for this week in the US, the Conference Board consumer confidence index for April will be followed on Tuesday while the final University of Michigan consumer sentiment index will be followed on Friday.
The preliminary University of Michigan consumer sentiment index for April rose from 62 to 63.5, against expectations of remaining flat.
In addition, data from the housing market will be monitored, with the S&P/Case-Shiller Home Price Index for February and new home sales data for March to be released on Tuesday, and pending home sales data for March, which shows the number of home sales contracts signed but not yet closed, to be released on Thursday.
The S&P/Case-Shiller Home Price Index for January fell for the seventh consecutive month, declining 0.6% on a monthly basis and slowing down its annual growth rate from 4.6% to 2.5%.
It is expected that the decline in house prices will continue, especially with the Fed continuing to focus on reducing inflation and indicating that mortgage interest rates will remain high in the near term.
In addition, Thursday’s weekly new jobless claims data from the employment market will be watched closely. The latest weekly new jobless claims data rose slightly above expectations from 240,000 to 245,000, marking the highest level in the past month but still maintaining a low trend, indicating a tight labor market.
On Wednesday, the preliminary durable goods orders in the US for March will be released. Durable goods orders fell 1% in February, marking the second consecutive month of decline. Specifically, the significant decline in orders for defense aircraft and parts (down 11.1%), non-defense aircraft and parts (down 6.6%), and ships (down 15.2%) was a determining factor in the decline in durable goods orders.
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In addition, the annualized quarterly GDP growth rate for the first quarter of this year will be released on Thursday. The US economy recorded a growth rate of 2.1% throughout 2022. In the first quarter of this year, the US economy is expected to slow down to an annualized quarterly growth rate of 2%.
On Thursday, the preliminary data for the Personal Consumption Expenditures (PCE) price index for the first quarter of this year, which is an important inflation indicator monitored by the Fed, will be released.
On an annualized quarterly basis, the PCE price index decreased from 4.3% to 3.7% in the last quarter of 2022, while the core PCE price index slowed down from 4.7% to 4.4%, indicating a moderation in price pressures.
On Friday, the PCE deflator in the US for March, which the Fed especially follows for monthly price developments, as well as personal income and spending data for March, will be released.
The April PMI data indicated that economic activity in the Euro Area was quite uneven and largely driven by the service sector
In April, the leading PMI data for the manufacturing and service sectors from Hamburg Commercial Bank (HCOB) provided insights into the recent economic outlook across Europe. The April PMI data indicated that economic activity in the Euro Area was quite uneven and largely driven by the service sector, with differences in demand conditions between the manufacturing and service sectors and an acceleration in the contraction of the manufacturing sector due to falling demand.
In April, the manufacturing PMIs in Germany, France, the Euro Area, and the UK declined, indicating an acceleration in the contraction of the manufacturing sector. Expectations were that the April manufacturing PMIs would indicate a slight slowdown in the contraction rate in the manufacturing sector with slight increases in the region.
Accordingly, in April, the manufacturing PMIs fell from 44.7 to 44 in Germany, from 47.3 to 45.5 in France, from 47.3 to 45.5 in the Euro Area, and from 47.9 to 46.6 in the UK.
In contrast, the April service PMIs recorded growth in the service sector, indicating an acceleration in growth in the region and continuing their growth trend above the threshold level.
Expectations were that the service PMIs would show a slight decrease in Germany, France, and the Euro Area, indicating a slight slowdown in growth in the service sector, and a flat trend in the UK compared to the previous month, indicating the continuation of growth momentum.
Accordingly, in April, the service PMIs rose from 53.7 to 55.7 in Germany, from 53.9 to 56.3 in France, from 55 to 56.6 in the Euro Area, and from 52.9 to 54.9 in the UK.
The minutes of the ECB’s meeting on March 15-16 have been released. The minutes indicate that the Bank evaluated inflation risks as being upward and some members argued that the probability of the CPI returning to low levels as projected in March is very low.
The producer price inflation in Germany fell by 2.6% on a monthly basis in March, driven by the decline in energy prices, extending its decline for the sixth consecutive month. The annual producer inflation in Germany decreased from 15.8% to 7.5%, reaching its lowest level in 22 months.
The external trade in the Euro Area for February was released. Following a trade deficit of EUR 31.6 billion in January, the region recorded a trade surplus of EUR 4.6 billion on a monthly basis in February, marking the first trade surplus since July 2021.
On Monday, Germany IFO Business Climate Index for April will be released, reflecting the evaluations of firms operating in the manufacturing, construction, wholesale, and retail sectors in Germany for the current and next 6-month period.
Additionally, consumer confidence indicators will be monitored, with Germany’s GfK Consumer Confidence Index for May on Wednesday and the final Consumer Confidence Index in the Euro Area for April on Thursday.
On Friday, the German Harmonized Inflation data for April will be released, which will also influence the ECB’s monetary policy. Furthermore, on Friday, preliminary GDP growth figures for Q1 2023 will be announced for Germany, France, Italy, and the Euro Area.
In addition, speeches by ECB members throughout the week, including ECB President Lagarde on Friday and ECB Vice President Guindos on Wednesday, will also be closely monitored for possible new signals regarding the Bank’s monetary policy.
The interest rate decision of the Swedish Central Bank (Riksbank) will be closely monitored on Wednesday. In this context, it is expected that the Central Bank of Sweden will raise its policy interest rate by 50 basis points to 3.50% at this week’s meeting.
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The industrial sector profits in China will be released for March.
In Asia, the interest rate decision of the Bank of Japan (BOJ) will be followed on Friday. In March, the BOJ continued its loose monetary policy stance by keeping the policy interest rate at -0.10%.
In addition, on Thursday, the industrial sector profit data for March will be released in China.
On Friday, the interest rate decision of the Central Bank of Russia will be followed. The Bank kept its policy interest rate at 7.5% in line with expectations at the last meeting and thus maintained the current interest rate level for the last four meetings.