Key Events This Week: PMIs And Powell Trifecta

With the major central bank meetings now out of the way, market attention over the week ahead will likely turn back to the pace of the economic recovery, with a focus on the release of the flash PMIs for March (Wednesday), as well as the potential for increased pandemic restrictions as the global case count has begun to rise again.

As DB’s Jim Reid notes, other events in focus will include Fed Chair Powell and US Treasury Secretary Yellen testifying before congressional committees (Tuesday and Wednesday), Powell speaking at a BIS event today at 9am, as well as an EU leaders’ summit at the end of the week, where the pandemic and the vaccination programme will top the agenda.

This week’s auctions will be a good litmus test of how comfortable markets are with bond market risk at the moment. We have $60 billion 2-year tomorrow, $61 billion 5-year (Wednesday) and $62 billion 7-year notes (Thursday) to at least monitor. The bad 7-year auction at a similar time last month was a bit of a warning sign for demand at the then prevailing levels so this might be one to watch.

In more specific detail on the PMIs, in recent months there’s been a divergence in the indicators, with Europe lagging behind the US, and the services sector lagging manufacturing. Indeed, the Euro Area composite PMI has been beneath the 50- mark for 4 successive months, whereas the US composite PMI rose to 59.5 in February, its highest level since August 2014. With restrictions beginning to tighten in Europe again whilst the stimulus checks arrive in the US, it’ll be interesting to see if this divergence widens further over the coming weeks and months. Also watch out for the Ifo business climate indicator from Germany (Friday).

From central banks, the main highlight will be Fed Chair Powell’s appearance tomorrow and Wednesday before the House Financial Services Committee and the Senate Banking Committee on the CARES Act. He’ll be doing this alongside Treasury Secretary Janet Yellen. Markets will be paying close attention to see if Powell has any further commentary on the Fed’s reaction function, particularly since their dot plot last week showed a majority of the FOMC keeping rates on holding through the end of 2023, even as they projected above-target inflation. Also of interest will be if Powell has any comments on the recent rise in yields, with those on 10yr US Treasuries rising to their highest levels since January 2020 in the week just gone.

Towards the end of the week, EU leaders will be gathering in Brussels for their latest summit, in which Covid-19 is expected to feature heavily on the agenda. The EU have been criticised for the slow pace of their vaccination programme, which has lagged behind the UK and the US, and a number of countries temporarily suspended the AstraZeneca vaccine following reports of blood clots last week. Commission President von der Leyen even refused to rule out using Article 122, which would in theory allow the EU to take control of the production and distribution of vaccines, potentially placing export controls on vaccines that had been destined elsewhere such as the UK. Separately on the pandemic, German Chancellor Merkel will be speaking with state leaders today as they decide their next steps to deal with rising caseloads. The country’s lockdown restrictions currently expire on March 28. Stricter restrictions are predicted with Bloomberg last night suggesting another 4-week extension to April 18th being likely. Across the other side of Atlantic, Massachusetts said that it will be easing restrictions further today with indoor and outdoor stadiums, including Fenway Park, allowed to reopen at 12% capacity, and the numbers allowed at public and private gatherings will also increase.

Courtesy of Deutsche Bank, here is a day by day week ahead calendar:

Monday March 22

• Data: Japan final January leading index, US February Chicago Fed national activity index, existing home sales
• Central Banks: Remarks from Fed Chair Powell, Vice Chair Quarles, and Barkin, Daly and Bowman, ECB’s Knot, Weidmann, Schnabel and Hernandez de Cos

Tuesday March 23

• Data: Japan final February machine tool orders, UK unemployment, US Q4 current account balance, February new home sales, March Richmond Fed manufacturing index, Australia flash March manufacturing, services and composite PMIs (22:00 UK time)
• Central Banks: Remarks from Fed Chair Powell, Bullard, Bostic, Brainard, Williams, ECB’s Villeroy, BoE Governor Bailey, Haldane, Cunliffe
• Politics: Israel holds general election

Wednesday March 24

• Data: Flash March manufacturing, services and composite PMIs from Japan, France, Germany, Euro Area, UK and US, UK February CPI, US preliminary February durable goods orders, Euro Area advance March consumer confidence
• Central Banks: Remarks from Fed Chair Powell, Williams, Daly and Evans

Thursday March 25

• Data: Germany April GfK consumer confidence, France March business confidence, Euro Area February M3 money supply, US weekly initial jobless claims, third estimate Q4 GDP, March Kansas City Fed manufacturing activity
• Central Banks: ECB publishes Economic Bulletin, remarks from Fed Vice Chair Clarida, Williams, Bostic, Evans and Daly, ECB Vice President de Guindos and Schnabel, monetary policy decisions from the Mexican and South African central banks
• Other: EU leaders hold European Council summit in Brussels

Friday March 26

• Data: UK February retail sales, Germany March Ifo business climate indicator, Italy March consumer confidence index, US preliminary February wholesale inventories, February personal income, personal spending, final March University of Michigan consumer sentiment index
• Politics: EU leaders continue European Council summit in Brussels

Finally, looking at just the US, Goldman writes that the key economic data releases this week are the durable goods report on Wednesday, the Q4 GDP revision on Thursday, and core PCE inflation on Friday. There are numerous speaking engagements from Fed officials this week, including Powell’s appearances before the House Financial Services Committee on Tuesday and the Senate Banking Committee on Wednesday.

Monday, March 22

• 09:00 AM Fed Chair Powell (FOMC voter) speaks: Fed Chair Jerome Powell will take part in a virtual panel discussion on central bank innovation in the digital age hosted by the Bank for International Settlements.
• 10:00 AM Existing home sales, February (GS -5.0%, consensus -2.9%, last +0.6%): We estimate that existing home sales declined by 5.0% in February after edging up 0.6% in January. Existing home sales are an input into the brokers’ commissions component of residential investment in the GDP report.
• 10:00 AM Richmond Fed manufacturing index, February (consensus +15, last +14)
• 10:30 AM Richmond Fed President Barkin (FOMC voter) speaks: Richmond Fed President Thomas Barkin will give a speech on anticipating Covid scarring at a virtual conference hosted by the National Association for Business Economics.
• 01:00 PM San Francisco Fed President Daly (FOMC voter) speaks: San Francisco Fed President Mary Daly will host a virtual discussion on the future of education. Prepared text and Q&A are not expected.
• 01:30 PM Fed Vice Chair for Supervision Quarles (FOMC voter) speaks: Fed Vice Chair for Supervision Randal Quarles will speak on the LIBOR transition at a virtual SOFR Symposium. Prepared text is expected. Q&A is not expected.
• 07:15 PM Fed Governor Bowman (FOMC voter) speaks: Fed Governor Michelle Bowman will give a speech on the economic outlook and small businesses to the Oklahoma City Economic Club. Prepared text and Q&A are expected.

Tuesday, March 23

• 09:00 AM St. Louis Fed President Bullard (FOMC non-voter) speaks: St. Louis Fed President James Bullard will discuss monetary policy and the economy at a virtual event hosted by the London School of Economics. Prepared text and audience Q&A are expected.
• 10:00 AM New home sales, February (GS -7.0%, consensus -5.2%, last +4.3%): We estimate that new home sales declined by 7.0% in February after rising 4.3% in January, reflecting a sequential decline in housing starts driven by winter storms.
• 10:00 AM New home sales, February (consensus +15, last +14)
• 10:10 AM Atlanta Fed President Bostic (FOMC voter) speaks: Atlanta Fed President Raphael Bostic will record a podcast on African-American and minority business-driven innovation and successful diversity, equity, and inclusion initiatives.
• 11:00 AM Richmond Fed President Barkin (FOMC voter) speaks: Richmond Fed President Thomas Barkin will take part in a virtual discussion hosted by the Greenville County United Way.
• 12:00 PM Fed Chair Powell (FOMC voter) speaks: Fed Chair Jerome Powell and Treasury Secretary Janet Yellen will appear before the House Financial Services Committee to discuss the CARES Act. Prepared text is expected.
• 01:30 PM Fed Governor Brainard (FOMC voter) speaks: Fed Governor Brainard will give a speech on climate change. Prepared text and moderated Q&A are expected.
• 02:45 PM New York Fed President Williams (FOMC voter) speaks: New York Fed President John Williams will take part in a virtual panel discussion on the central New York economy. Prepared text is not expected. Audience Q&A is expected.
• 03:45 Fed Governor Brainard (FOMC voter) speaks: Fed Governor Lael Brainard will discuss the economic outlook at the annual NABE policy conference. Prepared text and moderated Q&A are expected.

Wednesday, March 24

• 08:30 AM Durable goods orders, February preliminary (GS -1.0%, consensus +0.7%, last +3.4%); Durable goods orders ex-transportation, February preliminary (GS -0.5%, consensus +0.6%, last +1.3%); Core capital goods orders, February preliminary (GS -0.3%, consensus +0.5%, last +0.4%); Core capital goods shipments, February preliminary (GS -1.1%, consensus -0.8%, last +1.8%): We estimate durable goods orders fell 1.0% in the preliminary February report, reflecting slower net orders for commercial aircraft and a potential pullback in defense orders. We estimate a 0.3% decline in core capital orders and a 1.1% decline in core capital goods shipments. Despite continued industrial-sector resilience, we believe the pullback in business equipment production, the impact of the Texas storms, and a drag from the relatively late Chinese New Year are likely to weigh on the details of this week’s report.
• 08:50 AM Richmond Fed President Barkin (FOMC voter) speaks: Richmond Fed President Thomas Barkin will take part in a virtual discussion hosted by the Charlotte Regional Business Alliance.
• 09:45 AM Markit Flash US manufacturing PMI, February preliminary (consensus 59.5, last 58.6)
• 09:45 AM Markit Flash US services PMI, February preliminary (consensus 60.1, last 59.8)
• 10:00 AM Fed Chair Powell (FOMC voter) speaks: Fed Chair Jerome Powell and Treasury Secretary Janet Yellen will take part in a remote hearing before the Senate Banking Committee on the quarterly CARES Act report to Congress.
• 01:35 PM New York Fed President Williams (FOMC voter) speaks: New York Fed President John Williams will take part in a virtual moderated discussion hosted by Syracuse University and Onondaga Community College. Prepared text is not expected. Audience Q&A is expected.
• 03:00 PM San Francisco Fed President Daly (FOMC voter) speaks: San Francisco Fed President Mary Daly will discuss her research on equitable growth at a virtual economic policy forum. Prepared text is not expected. Media Q&A is expected.
• 07:00 PM Chicago Fed President Evans (FOMC voter) speaks: Chicago Fed President Charles Evans will discuss the economic outlook in a virtual moderated Q&A hosted by the Japan America Society of Chicago. Prepared text is not expected. Audience Q&A is expected.

Thursday, March 25

• 05:00 AM New York Fed President Williams (FOMC voter) speaks: New York Fed President John Williams will make brief remarks on central bank innovation via pre-recorded video at the BIS Innovation Summit. Prepared text is not expected.
• 08:30 AM GDP (third), Q4 (GS +4.1%, consensus +4.1%, last +4.1%); Personal consumption, Q4 (GS +2.4%, consensus +2.4%, last +2.4%): We expect no revision on net in the third vintage of the Q4 GDP report (previously reported at +4.1% qoq saar).
• 08:30 AM Initial jobless claims, week ended March 20 (GS 745k, consensus 730k, last 770k): Continuing jobless claims, week ended March 13 (consensus 4,025k, last 4,124k); We estimate initial jobless claims increased to 745k in the week ended March 20.
• 11:00 AM Kansas City Fed manufacturing index, February (consensus +26, last +24)
• 12:00 PM Atlanta Fed President Bostic (FOMC voter) speaks: Atlanta Fed President Raphael Bostic will give a speech on measuring the economy in the time of Covid to the Economic Club of New York. Prepared text and Q&A are expected.
• 01:00 PM Chicago Fed President Evans (FOMC voter) speaks: Chicago Fed President Charles Evans will discuss the economic outlook in a virtual Women in Housing and Finance Public Policy Luncheon. Prepared text is not expected. Audience and media Q&A are expected.
• 03:45 PM Fed Vice Chair Clarida (FOMC voter) speaks: Fed Vice Chair Richard Clarida will give a speech on the economic and monetary policy outlook to a virtual event hosted by the Institute of International Finance. Prepared text and moderated Q&A are expected.
• 07:00 PM San Francisco Fed President Daly (FOMC voter) speaks: San Francisco Fed President Mary Daly will discuss monetary policy in the Covid era. Prepared text and Q&A with media are not expected.

Friday, March 26

• 08:30 AM Personal income, February (GS -7.5%, consensus -7.2%, last +10.0%): Personal spending, February (GS -0.7% consensus -0.8%, last +2.4%); PCE price index, February (GS +0.24%, consensus +0.3%, last +0.3%): Core PCE price index, February (GS +0.10%, consensus +0.1, last +0.3%); PCE price index (yoy), February (GS +1.61%, consensus +1.6%, last +1.5%): Core PCE price index (yoy), February (GS +1.48%, consensus +1.5%, last +1.5%): Based on details in the PPI, CPI, and import price reports, we forecast that the core PCE price index rose by 0.10% month-over-month in February, corresponding to a 1.48% increase from a year earlier. Additionally, we expect that the headline PCE price index increased by 0.24% in February, corresponding to a 1.61% increase from a year earlier. We expect a 7.5% decrease in personal income and a 0.7% decrease in personal spending in February.
• 08:30 AM Advance goods trade balance, February (GS -$86.9bn, consensus -$86.0bn, last -$85.4bn): We estimate that the goods trade deficit increased by $1.5bn to $86.9bn in February compared to the final January report, reflecting increased imports.
• 08:30 AM Wholesale inventories, February preliminary (consensus +1.2%, last +1.3%); Retail inventories, February (last -0.6%)
• 10:00 AM University of Michigan consumer sentiment, March Final (GS 83.2, consensus 83.6, last 83.0): We expect the University of Michigan consumer sentiment index to increase by 0.2pt to 83.2, reflecting further improvement in other consumer sentiment measures.

Source: Deutsche Bank, Goldman, BofA