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There is a novelty to this Global Week Ahead: This week’s end is the end of the first quarter of 2022 and the end of month too. It also marks that start of the Spring quarter.
As is typical at the end of any month, Friday offers traders a fresh monthly U.S. nonfarm payroll number for March.
Yet the U.S. Federal government does not have much time to prepare this number. So, expect the downstream job addition revisions to be quite large.
And other financial market and geopolitical dynamics are likely going to be trumping that Friday macro print.
You rarely see that.
What has Reuters’ staff written on this week?
As a tumultuous quarter approaches its end, markets will watch U.S. and Eurozone data to gauge just how aggressive central banks might get in their fight against inflation.
Also in focus will be Europe's dilemma whether or not to sanction Russian energy exports, potentially causing further price surges and economic difficulty.
Here are Reuters’ five key global themes, reordered for equity traders.
(1) Q1 ends this week. How was Q1 of 2022 for stocks and other assets?
The first quarter of 2022 was one most investors would prefer to forget.
Except, of course, those trading oil, metals or grains, who would have rejoiced in Brent crude soaring over +50%, and a +30% gain for the CRB commodities index.
It was less rewarding on equities; with a -5% loss, the S&P500 looks set to break a seven-quarter winning streak. Nasdaq Eurozone stocks fared worse while Chinese markets had to cope with renewed COVID-linked lockdowns in many cities.
Bond markets hit milestones unseen, in some cases, for decades. The 140 basis-point rise in two-year U.S. yields is the biggest since mid-1984; the German equivalent will post its largest quarterly rise since 2011.
This is unsurprising, given central bankers' acknowledgement that inflation is not after all transitory and interest rates need to rise. Global inflation will hit 6.3% this quarter, the fastest rise in a quarter century, JPMorgan (JPM - Free Report) estimates.
Finally, pity those who failed to exit Russia investments on time -- with the country being ejected from equity and bond indexes, they will need to mark their holdings to zero.
(2) Sanctions on Russian oil and gas flows are costly
Targeting Russian energy, as the United States and Britain have done, is one of the most powerful levers the European Union could pull to punish Moscow for its invasion of Ukraine. But it remains a divisive choice for the bloc which relies on Russia for 40% of its gas and reeling from a surge in fuel prices.
But as pressure grows to announce a ban, there's been a new twist -- President Vladimir Putin's demand that "unfriendly" countries need to pay for gas in roubles is raising yet more concerns about Europe's energy crunch.
EU leaders could soon agree to buy gas jointly and secure additional U.S. gas supplies. But in the meantime, the debate is causing unease in all kinds of quarters. Oil producing group OPEC, for one, has warned the move could hurt consumers.
(3) Mainland China’s property company woes are making fresh headlines
China's pledge not to roll out a property tax offers only short-term relief to developers, struggling with debt restructuring and access to finance.
Evergrande, the poster child for the sector's difficulties, has revealed new problems at a key subsidiary, and will not publish audited results by the March 31 deadline.
Another embattled developer Kaisa said the same, though others such as China Vanke, Country Garden and Sunac China plan to publish annual results next week.
Developers' shares and Chinese high yield bonds remain under pressure. The property sector woes will remain on investors' must-watch list until some real relief measures emerge.
(4) Nonfarm payrolls for March hit on Friday, April 1st
Is the Federal Reserve's aggressive trajectory for tightening monetary policy too hawkish, or not hawkish enough? Friday's March U.S. jobs report might show.
Economists polled by Reuters expect 450,000 new jobs were created, versus 678,000 in February.
Hiring far above those estimates will strengthen the case for a 50 basis-point interest rate hike in May. After all, Fed Chairman Jerome Powell has signaled readiness to make a big move if needed.
Despite that, the S&P500 has managed to nearly halve its year-to-date losses. But watch the U.S. Treasury yield curve, which is getting close to inversion as investors fret about a Fed-induced recession. The bond market rarely gets it wrong.
(5) Eurozone inflation estimates for March arrive on Friday
When first estimates of March Eurozone inflation emerge on Friday, they may test the European Central Bank's narrative that there's no rush to raise interest rates.
Inflation is already at a record high 5.9% and could hit 7% in the coming months. Given the ECB target of 2%, it's unsurprising that some officials are urging one or even two rate moves this year.
A strong inflation print will strengthen their case. But bond markets too suggest higher rates are coming, having priced five moves of 10 bps each by year-end.
Germany's two-year bond yield is up 30 bps in March, set for its biggest monthly rise since 2011. Having spent years deep in negative yield territory amid ECB bond buying to boost inflation, it is fast approaching 0%. That's significant.
Top Zacks #1 Rank (STRONG BUY) Stocks
There are top Zacks Growth scores accompanying a number of commodity, fertilizer and energy stocks now. These dominate our #1 list at the moment.
Here are three big stock tickers to follow up on:
(1) Anglo American (NGLOY - Free Report) : Commodities are hot. This is a $66.5B market cap mining stock. I see a Zacks Value score of B, a Zacks Growth score of B and a Zacks Momentum score of C.
(2) Nutrien (NTR - Free Report) : Fertilizer prices are skyrocketing. This is a $59.8B market cap fertilizer stock. I see a Zacks Value score of C, a Zacks Growth score of A and a Zacks Momentum score of F.
(3) Occidental Petroleum (OXY - Free Report) : Oil prices are in triple-digits. This is a $54.8B market cap integrated oil and gas producer. I see a Zacks Value score of C, a Zacks Growth score of A, and a Zacks Momentum score of A.
Key Global Macro
The week’s end on Friday will see a big splash of macro data. This day marks both a month end and a quarter end.
On Monday, Japan’s household unemployment rate is 2.8%. We get a fresh reading. Spoiler alert: It won’t change.
On Tuesday, Australia’s retail sales data for February comes out. I see a +1.0% m/m reading, following a +1.8% m/m print for January. Keep this in mind. This is Omicron-influenced data.
The NY Fed’s Williams gives a speech.
On Wednesday, U.S. private ADP (ADP - Free Report) payrolls should be up +438K in March. They were up +475 in February.
U.S. Q4 GDP should be up +7.1% y/y, after a new updated reading.
The ECB’s LaGarde gives a speech.
On Thursday, China’s NBS manufacturing PMI should be 49.8 in March. The NBS non-manufacturing PMI should be 53.2 for March. It is a surprise to see that strong services PMI reading, given the latest shutdown news there. Is that story overdone? We shall see what the latest data shows.
There is an OPEC meeting.
The Eurozone unemployment rate should be 6.7% in February (lagged data), down -0.1% from 6.8% in the prior month.
On Friday, U.S. nonfarm payrolls should be +475K in March, after a hot +678K the month prior.
Average hourly U.S. earnings should be up +5.5% y/y in March.
The U.S. household unemployment rate should fall to 3.7% in March from 3.8% in April.
The ISM manufacturing PMI for March should be 53.7, after a 52.9 print in February.
Conclusion
The inflation numbers are coming in hot, and the commodity and energy sector prices are booming.
But somehow, the jobs numbers do not reflect any substance to the idea that the price arena is pushing down the level of activity.
Sooner or later, it is bound to show up in the macro data. Just likely not this month.
Stock index prices are holding up well in light of this dynamic too.
Have a great trading week!
Warm regards,
John Blank
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Q1 Ending: Global Week Ahead
There is a novelty to this Global Week Ahead: This week’s end is the end of the first quarter of 2022 and the end of month too. It also marks that start of the Spring quarter.
As is typical at the end of any month, Friday offers traders a fresh monthly U.S. nonfarm payroll number for March.
Yet the U.S. Federal government does not have much time to prepare this number. So, expect the downstream job addition revisions to be quite large.
And other financial market and geopolitical dynamics are likely going to be trumping that Friday macro print.
You rarely see that.
What has Reuters’ staff written on this week?
As a tumultuous quarter approaches its end, markets will watch U.S. and Eurozone data to gauge just how aggressive central banks might get in their fight against inflation.
Also in focus will be Europe's dilemma whether or not to sanction Russian energy exports, potentially causing further price surges and economic difficulty.
Here are Reuters’ five key global themes, reordered for equity traders.
(1) Q1 ends this week. How was Q1 of 2022 for stocks and other assets?
The first quarter of 2022 was one most investors would prefer to forget.
Except, of course, those trading oil, metals or grains, who would have rejoiced in Brent crude soaring over +50%, and a +30% gain for the CRB commodities index.
It was less rewarding on equities; with a -5% loss, the S&P500 looks set to break a seven-quarter winning streak. Nasdaq Eurozone stocks fared worse while Chinese markets had to cope with renewed COVID-linked lockdowns in many cities.
Bond markets hit milestones unseen, in some cases, for decades. The 140 basis-point rise in two-year U.S. yields is the biggest since mid-1984; the German equivalent will post its largest quarterly rise since 2011.
This is unsurprising, given central bankers' acknowledgement that inflation is not after all transitory and interest rates need to rise. Global inflation will hit 6.3% this quarter, the fastest rise in a quarter century, JPMorgan (JPM - Free Report) estimates.
Finally, pity those who failed to exit Russia investments on time -- with the country being ejected from equity and bond indexes, they will need to mark their holdings to zero.
(2) Sanctions on Russian oil and gas flows are costly
Targeting Russian energy, as the United States and Britain have done, is one of the most powerful levers the European Union could pull to punish Moscow for its invasion of Ukraine. But it remains a divisive choice for the bloc which relies on Russia for 40% of its gas and reeling from a surge in fuel prices.
But as pressure grows to announce a ban, there's been a new twist -- President Vladimir Putin's demand that "unfriendly" countries need to pay for gas in roubles is raising yet more concerns about Europe's energy crunch.
EU leaders could soon agree to buy gas jointly and secure additional U.S. gas supplies. But in the meantime, the debate is causing unease in all kinds of quarters. Oil producing group OPEC, for one, has warned the move could hurt consumers.
(3) Mainland China’s property company woes are making fresh headlines
China's pledge not to roll out a property tax offers only short-term relief to developers, struggling with debt restructuring and access to finance.
Evergrande, the poster child for the sector's difficulties, has revealed new problems at a key subsidiary, and will not publish audited results by the March 31 deadline.
Another embattled developer Kaisa said the same, though others such as China Vanke, Country Garden and Sunac China plan to publish annual results next week.
Developers' shares and Chinese high yield bonds remain under pressure. The property sector woes will remain on investors' must-watch list until some real relief measures emerge.
(4) Nonfarm payrolls for March hit on Friday, April 1st
Is the Federal Reserve's aggressive trajectory for tightening monetary policy too hawkish, or not hawkish enough? Friday's March U.S. jobs report might show.
Economists polled by Reuters expect 450,000 new jobs were created, versus 678,000 in February.
Hiring far above those estimates will strengthen the case for a 50 basis-point interest rate hike in May. After all, Fed Chairman Jerome Powell has signaled readiness to make a big move if needed.
Despite that, the S&P500 has managed to nearly halve its year-to-date losses. But watch the U.S. Treasury yield curve, which is getting close to inversion as investors fret about a Fed-induced recession. The bond market rarely gets it wrong.
(5) Eurozone inflation estimates for March arrive on Friday
When first estimates of March Eurozone inflation emerge on Friday, they may test the European Central Bank's narrative that there's no rush to raise interest rates.
Inflation is already at a record high 5.9% and could hit 7% in the coming months. Given the ECB target of 2%, it's unsurprising that some officials are urging one or even two rate moves this year.
A strong inflation print will strengthen their case. But bond markets too suggest higher rates are coming, having priced five moves of 10 bps each by year-end.
Germany's two-year bond yield is up 30 bps in March, set for its biggest monthly rise since 2011. Having spent years deep in negative yield territory amid ECB bond buying to boost inflation, it is fast approaching 0%. That's significant.
Top Zacks #1 Rank (STRONG BUY) Stocks
There are top Zacks Growth scores accompanying a number of commodity, fertilizer and energy stocks now. These dominate our #1 list at the moment.
Here are three big stock tickers to follow up on:
(1) Anglo American (NGLOY - Free Report) : Commodities are hot. This is a $66.5B market cap mining stock. I see a Zacks Value score of B, a Zacks Growth score of B and a Zacks Momentum score of C.
(2) Nutrien (NTR - Free Report) : Fertilizer prices are skyrocketing. This is a $59.8B market cap fertilizer stock. I see a Zacks Value score of C, a Zacks Growth score of A and a Zacks Momentum score of F.
(3) Occidental Petroleum (OXY - Free Report) : Oil prices are in triple-digits. This is a $54.8B market cap integrated oil and gas producer. I see a Zacks Value score of C, a Zacks Growth score of A, and a Zacks Momentum score of A.
Key Global Macro
The week’s end on Friday will see a big splash of macro data. This day marks both a month end and a quarter end.
On Monday, Japan’s household unemployment rate is 2.8%. We get a fresh reading. Spoiler alert: It won’t change.
On Tuesday, Australia’s retail sales data for February comes out. I see a +1.0% m/m reading, following a +1.8% m/m print for January. Keep this in mind. This is Omicron-influenced data.
The NY Fed’s Williams gives a speech.
On Wednesday, U.S. private ADP (ADP - Free Report) payrolls should be up +438K in March. They were up +475 in February.
U.S. Q4 GDP should be up +7.1% y/y, after a new updated reading.
The ECB’s LaGarde gives a speech.
On Thursday, China’s NBS manufacturing PMI should be 49.8 in March. The NBS non-manufacturing PMI should be 53.2 for March. It is a surprise to see that strong services PMI reading, given the latest shutdown news there. Is that story overdone? We shall see what the latest data shows.
There is an OPEC meeting.
The Eurozone unemployment rate should be 6.7% in February (lagged data), down -0.1% from 6.8% in the prior month.
On Friday, U.S. nonfarm payrolls should be +475K in March, after a hot +678K the month prior.
Average hourly U.S. earnings should be up +5.5% y/y in March.
The U.S. household unemployment rate should fall to 3.7% in March from 3.8% in April.
The ISM manufacturing PMI for March should be 53.7, after a 52.9 print in February.
Conclusion
The inflation numbers are coming in hot, and the commodity and energy sector prices are booming.
But somehow, the jobs numbers do not reflect any substance to the idea that the price arena is pushing down the level of activity.
Sooner or later, it is bound to show up in the macro data. Just likely not this month.
Stock index prices are holding up well in light of this dynamic too.
Have a great trading week!
Warm regards,
John Blank