Week of 29 April

European PMIs proved better than expected, redirecting last week's focus to the US Q1 GDP and the BOJ's interest rate decision. This coming week will likely centre around Eurozone inflation, the Fed's policy and US employment numbers.

Week in Review

US first-quarter GDP growth surprised to the downside, printing at an annualised 1.6% rate - less than half the prior period and below forecasts of 2.3%. While this is preliminary data subject to revision, the S&P manufacturing PMI dipped into contraction. Still, the index gained over 2% in the week after receiving rejection at the 21-week SMA. Around a third of S&P 500 constituents reported mixed results throughout the week. However, US durable goods orders also exceeded expectations.

The BOJ's meeting proceeded as largely expected, with no policy adjustment in the unanimous decision. Quarterly projections offered a mixed outlook, lifting its inflation outlook but lowering GDP growth.

Global flash PMIs beat forecasts, with Japan nearing expansion and the Eurozone outperforming ahead of next week's expected rebound in first-quarter GDP data. ECB Vice President Luis de Guindos stated that an interest rate cut at the June meeting was highly probable. Nearby, BOE Chief Economist Huw Pill said rate cuts remain "some way off".

Middle Eastern tensions appeared to ease as Iran downplayed an alleged Israeli attack while Israel did not comment. Despite WTI falling early in the week, it recorded gains, leaving behind chances of a decline to $80 a barrel.

Indonesia unexpectedly raised rates despite on-target inflation, seen as an early response by an emerging market central bank to US dollar strength.

Biggest Market Movers

• Gold lost over 4% throughout the week but recoiled some of the earlier losses to $2350 per ounce.
• The FTSE 100 hit a record high after rising over 2% and remained upbeat, outperforming other European indices.
• The USDJPY approached 157 after the BOJ's unchanged decision, marking a 7-week series of gains.
• Copper prices reached a two-year high amid sector merger speculation, boosting bullish sentiment.
• GBPJPY retested a 10-year resistance, threatening to break higher to pre-GFC levels past 200.

Top Events in the Week Ahead

Data releases from the US are expected to dominate again next week. Several European and Asian countries will observe holidays in the middle of the week, resulting in some delayed economic reports.

FOMC and NFP Back Into Focus

The key event attracting significant market attention will be the conclusion of the FOMC meeting on Wednesday. There is a unanimous consensus that the Fed will make no changes in policy. However, investors will closely analyse signals around the timing of future easing by scrutinising the latest projections in the so-called "dot plot" matrix. Two days later, the NFP report will be released, with forecasts predicting a moderation of 190,000 new jobs added compared to the unexpectedly high growth of 303,000 last month and steady unemployment at 3.8%. Gold might move in both instances, with notable support below $2300 and resistance above $2400 an ounce.

European Inflation and GDP on Track

Tuesday brings primary data outside of the US with the release of Eurozone CPI and GDP figures. Inflation in the Eurozone economy is expected to stay stable at 2.4% while the core continues its gradual decline to 2.8% from 2.9% prior. Eurostat will also provide an initial assessment of the bloc's GDP growth in the first quarter, with projections of a pickup in quarterly activity of 0.2% from the previous flat print. However, both reports may already be priced in based on earlier French and German economic indicators. Upbeat figures could witness an attempt at $1.0835 in EURUSD unless bears reclaim $1.065, opening the door below $1.06.

PMIs to Reinforce Positive Momentum

Last week's preliminary PMI readings came in better than forecast, and this upward trend may carry through the coming week's final figures. First, official and private Chinese manufacturing PMIs are expected to advance further into expansion territory. Then, a holiday break will precede the release of the final improved PMI surveys from European economies on Thursday.

Other Events, Earnings

Other releases include German and Spanish inflation on Monday. Japan's industrial production and Canadian GDP are slated for Tuesday. New Zealand employment is on Wednesday. Thursday holds Australian and Canadian trade balances and UK house prices. Eurozone unemployment follows on Friday.

Earnings reporting passes halfway, featuring WellTower, Amazon, Eli Lilly, MasterCard, Pfizer, GSK, Apple Shell, Amgen and Berkshire Hathaway, amongst others.
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