Things get more complicated!
China started to withdraw its COVID Restrictions, but the conflict in Ukraine got more complicated. Russia cuts the Gas supply for European countries one by one. Add them the latest tensions between the EU and UK about the Brexit deal and the British decision to rewrite the Northern Ireland Protocol. All of this is compounding concerns about economic growth and stagflation. On top of all financial data, after a two-year break caused by Covid, the world's political and business elite will get together in Davos on Tuesday.
1- US New Home Sales - Tuesday
This Tuesday will be a hectic and volatile day, so you must be careful about your trades. US Housing data will be one that. House prices have consistently increased with scarce materials, labor shortage, and high input prices in the past two years. And now, higher mortgage rates, which caused an 11.9% decline in the mortgage applications purchases index, are making that even worse. These higher prices finally ended with an 8.6% decline in March. For May, estimates for new home sales show another drop to a 750K-unit pace from 763K previously. Estimated data should not be positive for the US stock markets.
2- Markit PMIs - Tuesday
On Tuesday, we also have to watch the PMI numbers from the most developed economies closely. Japan, Germany, France, Eurozone, the UK, and the United States all have to publish their Purchasing Manager index. Unfortunately for most of the mentioned economies, it is expected to decline from the previous month, which should not be favorable for any of their stock markets and probably will hold pressure on the Euro.
3- RBNZ Monetary Policy Meeting - Wednesday
After a 50 bps rate hike in April, it is expected to see a hawkish tone again in the statement, with this perspective that inflation will cause another 50 bps rate hike by the Reserve Bank of New Zealand in the May meeting, which would bring the Official Cash Rate to 2.00%. Headline inflation rushing to 6.9% year-over-year from 5.9% in Q4 to prepare all reasons for such a snappy move towards strict policies. Kiwi must get some support after this meeting against its crosses.
4- US Durable Goods order and FOMC Meeting Minutes - Wednesday
While we are expecting to see another unfortunate decline in the orders, FOMC will publish its May meeting minutes. FED chair Powell and other Committee members also will give a speech during the week. It is expected to hear again that lower demand in the following months will help the inflation decline, as they used to say last two weeks after FED May meeting. The US dollar should get more substantial with estimated data, and NASDAQ should withstand more pressure.
5- US GDP - Thursday
Gross Domestic Product as the most critical economic index is always important, especially in the United States. US GDP is expected to shrink by 1.5% in the first quarter. We could see more imports in the first quarter with a higher US dollar rate, resulting in a significant deterioration in the trade balance. With higher inflation and negative GDP numbers, stagflation fears will increase and pressure the US leading indices.
6- US Personal Income & Spending - Friday
Even though the latest CPI numbers had some signs of peaking and softening inflation, it's still so high and already caused a 4% decline in personal income. On the other hand, data shows that the personal saving rate slid to 6.2% in March, which means that increasing retail sales despite the higher prices in last months, probably got to the point of being reversed. For April, spending growth is expedited to fall to 0.7% from 1.1% in March.
