Macroeconomics: The Day Ahead for 20 April

Written by Marc Ostwald, ADMISI’s Global Strategist & Chief Economist

  • UK labour data the only item of statistical note, as RBA minutes, IEA Annual Energy Review digested and Xi speech at Boao forum digested; J&J and Netflix top busier run of corporate earnings; UK, Finland & Germany auction debt

  • UK labour data somewhat better than expected, but also very historical; litmus test for labour market will be furlough scheme unwind

  • Laschet ostensibly the CDU/CSU chancellor candidate as German politics stares into a black hole, just as deep seated reform needed

EVENTS PREVIEW

Once again the day’s data schedule is very meagre, with nothing other than the UK labour market data, while the events schedule has the overnight RBA minutes and as expected no change in China’s LPR Rates to digest, along with and a dire warning on global warming in the just published the IEA 2021 Annual Energy Review (see here). A busier day for corporate earnings has reports from Johnson & Johnson, Lockheed Martin, Netflix and Procter & Gamble as likely highlights, and the Apple “Spring Loaded” new product unveiling will doubtless also garner plenty of attention. There are government debt auctions in UK (3-yr), Germany (2-yr) and Finland (19-yr). The Boao Forum has the keynote speech by President Xi to digest, which primarily underlined the extent of tensions with the West, and one from PBOC governor Yi on Carbon Neutrality coming up. Markets leitmotif continues to be a push me / pull you exercise as yield and return chasing due to central bank ‘largesse to excess’ runs up skewed positioning in asset classes, above all with a good deal of group think herd mentality, only to be undone by the imbalance in positioning. That was the case with the USD short consensus in Q1, and now with the legacy of short US Treasury positions, both have likely run their short-term course. That currencies are above all sensitive to 10-yr yield spreads should also be very clear, as the EUR regains its composure vs the USD on the back of a narrower yield spread with the US (see various charts attached)

The UK labour data offered few surprises with a small than expected drop in Employment (-73K vs. forecast -150K) and a downward revision to the Claimant Count Rate (unchanged on month at revised 7.3%) the only notable points, but also always likely to be dismissed as too historical given signs of a sharp pick-up in labour demand as lockdown measures are eased. That is in fact also moot given that the big question is how many of the current 4.7 million workers that are ‘furloughed’ will be retained once the scheme ends.

Meanwhile in Germany, the CDU executive committee’s decision to back the unpopular and charisma free Armin Laschet as the CDU/CSU chancellor candidate leaves the outcome of the September federal elections looking even more uncertain, and suggests that Germany is now staring at a post-Merkel political black hole, precisely at the point where the need for fundamental reform to retain a competitive position in the global economy, above all post-pandemic, is so acute. However this may not be the final chapter in this leadership battle, particularly as only 31 of the 46 members of the CDU committee backed Laschet yesterday, after backing him unanimously just 2 weeks ago.

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Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.

ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.                  

A subsidiary of Archer Daniels Midland Company.

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