Positive economic data could rally global markets
Last week, weaker than expected Produce Price Index (PPI), Consumer Price Index (CPI), and Import Price Index data in the U.S. all provided a boost for the markets. The S&P 500 gained 2.41%, the Dow rose 2.34%, the Nasdaq rallied 2.68%, and the Russell 2000 jumped 2.63%.
From an inflation standpoint, the key economic data to watch will be today’s Japanese PPI, Wednesday’s Eurozone CPI, and Friday’s Japanese CPI and German PPI. If the markets are to keep rallying, they will want to see inflation continue to moderate.
From a growth perspective, the key economic data to watch will be Chinese and Eurozone industrial production, as well as German and Eurozone preliminary first-quarter GDP data on Tuesday, in addition to Japanese and U.S. industrial production and Japanese preliminary first-quarter GDP data on Wednesday. The markets would like to see steady to moderate growth. This would imply less pressure on central banks to tighten policy. Conversely, explosive growth would increase tightening concerns.
There are also a slew of central bankers speaking this week. The Fed’s Loretta Mester (FOMC voter), James Bullard (non-voter), Robert Kaplan (non-voter), John Williams (voter), and Neel Kashkari (non-voter) are all making the rounds. The market will want to hear them talk down the chances of hiking rates more than expected, and talk up the possibility of letting inflation overshoot their 2% target.
Globally, the European Central Bank’s (ECB) Mario Draghi, Yves Mersch, Peter Praet, Sabine Lautenschläger, Benoit Cœuré, and Vitor Constâncio, as well as the Bank of England’s Sarah Breeden are also on the docket. Again, the markets will be looking for them to confirm that growth and inflation have moderated, taking some of the teeth out of the argument for accelerated central bank tightening. If the ECB speakers discuss moderating growth, expect them to say it’s temporary. That’s been their modus operandi of late.
So, if we walk away from this week with more data and commentary supporting slow, steady growth and rate hikes, that could once again bode well for global markets. Corporate earnings look to remain solid, and increased buybacks should help to boost yields. Bear in mind, the recent S&P range has been roughly 2600 on the low side and 2800 on the high side. As we near these levels, expect respective buying and selling to increase.
And for daily alerts, trading tips, and actionable recommendations from the Stansberry NewsWire, click here.