Week Ahead: Quiet calendar puts focus on weak stocks and strong dollar
April 18,2022 01:06:00It’s a much quieter time on the calendar with a bank holiday kicking off the week in the UK. Policy tightening by numerous central banks has grabbed the headlines. Global and US bond yields continue to rise, and this is particularly hurting growth and tech stocks.
The dollar has benefitted as it looks to extend its bullish breakout from the start of the month. The DXY top posted last week during the ECB meeting at 100.76 is the next target for bulls. The soft weekly close in EUR/USD around 1.0805 may point to more losses.
We’ve seen skittish behaviour in equity markets endure, but whether there’s outright selling as monetary policy continues to tighten is a crucial question. Investors still seem to be flipping between growth stocks that benefit from the comfort of low interest rates and value sectors like banking and energy which prosper in inflationary environments.
Fund managers remain overweight stocks even as the monthly Bank of America survey shows that 71% of investors are expecting a weaker economy over the next 12 months. That’s the most pessimistic reading ever recorded and worse than the pandemic and GFC 2008 prints.
Major risk events of the week
18 April 2022, Monday:
-China GDP: Analysts say the full impact of the lockdown in Shanghai is unlikely to be reflected in this March data. Industrial production and retail sales are also set for release. The latter is set to contract on an annual basis.
20 April, Wednesday:
–Canada CPI: March inflation is set to rise to multi-decade highs. All three core measures grew in February with broad based gains. Last month’s print is set to be the 12th straight month above the Bank of Canada’s 1% to 3% control range. Policymakers expect CPI to average 6% through the first half of the year.
22 April 2022, Friday:
– UK Retail Sales: The drop in the February figures is likely to be seen last month as well. Consumers are being hit by increases in fuel, food and household energy costs. Confidence is falling and is now not far off the pandemic lows of March 2020.
–Eurozone PMIs: Figures for services and manufacturing are expected to fall as the war in Ukraine hurts sentiment. Investor confidence has plunged to its lowest level since the start of the pandemic. Analysts say that new restrictions in China will also add further disruptions in supply chains.
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